The portfolio invests in a diversified group of Vanguard index mutual funds. The portfolio follows a balanced approach by allocating approximately 60% of its assets to common stocks and 40% to bonds. The portfolio’s indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks. The portfolio’s indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds; mortgage-backed and asset-backed securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize currency exposures).
- The portfolio may invest in derivatives, which may involve risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes.
- 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 portfolio’s investment objective. For instance, the portfolio may invest beyond the normal limits in derivatives or ETFs that are consistent with the portfolio’s objective when those instruments are more favorably priced or provide needed liquidity, as might be the case when the portfolio receives large cash flows that it cannot prudently invest immediately.
- The portfolio may take temporary defensive positions that are inconsistent with its normal investment policies and strategies—for instance, by allocating substantial assets to cash, commercial paper, or other less volatile instruments—in response to adverse or unusual market, economic, political, or other conditions. In doing so, the portfolio may succeed in avoiding losses but may otherwise fail to achieve its investment objective. Each underlying fund of the portfolio, in determining its net asset value, will, when appropriate, use fair-value pricing, which may reduce or eliminate the profitability of certain frequent-trading strategies.
- The portfolio indirectly bears a proportionate share of the expenses of the underlying funds in which it invests. However, its direct expenses are expected to be very low or zero.