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Vanguard - Investment strategy and policy
Personal Investors

Strategy and policy

Investment strategy

The portfolio employs an indexing investment approach designed to track the performance of the MSCI US REIT Index. The index is composed of stocks of publicly traded equity real estate investment trusts (known as REITs). The portfolio attempts to replicate the index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

Investment policy

  • The portfolio reserves the right to substitute a different index for the index it currently tracks if the current index is discontinued, if the portfolio’s agreement with the sponsor of its target index is terminated, or for any other reason determined in good faith by the portfolio’s board of trustees. In any such instance, the substitute index would measure the same market segment as the current index.
  • The portfolio may invest in derivatives. In general, derivatives may involve risks different from, and possibly greater than, those of a portfolio’s other investments. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the portfolio to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes.
  • The portfolio may invest, to a limited extent, in futures and options contracts, which are types of derivatives. The portfolio will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
  • The portfolio’s daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the portfolio bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
  • The portfolio may temporarily depart from its normal investment policies and strategies when doing so is believed to be in the portfolio’s best interest, so long as the alternative is consistent with the fund’s investment objective.
  • For instance, the fund may invest beyond the normal limits in derivatives or ETFs that are consistent with the fund’s objective when those instruments are more favorably priced or provide needed liquidity, as might be the case when the fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.

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