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Vanguard - Investment strategy and policy
Personal Investors

Strategy and policy

Investment strategy

The fund does not buy stocks directly; instead, it invests in three other Vanguard mutual funds: the European Stock Index Fund, Pacific Stock Index Fund, and Emerging Markets Stock Index Fund. This gives the Total International Stock Index Fund exposure to stocks from more than 30 countries. The three underlying funds, in turn, seek to match the investment results of the unmanaged MSCI Europe Index, the unmanaged MSCI Pacific Index, and the unmanaged MSCI Emerging Markets Index, respectively. The Total International Stock Index Fund apportions its assets among the three other funds based on each region’s weight within a composite index made up of the MSCI Europe, Australasia, Far East Index and the MSCI Emerging Markets Index.

Investment policy

  • The portfolio may purchase the depositary receipts of securities in addition to investing directly in common stocks. The portfolio may make other kinds of investments to achieve its objectives.
  • The portfolio reserves the right to substitute a different index for the index it currently tracks if the current index is discontinued, if a 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, to a limited extent, in derivatives.  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 will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
  • The portfolio may enter into forward foreign currency exchange contracts, which are types of derivative contracts, in order to maintain the same currency exposure as its respective index. The contract does not prevent a portfolio’s securities from falling in value during foreign market downswings. The portfolio may use these contracts to gain currency exposure when investing in stock index futures and to settle trades in a foreign currency.
  • 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 is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.

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