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Vanguard - Investment strategy and policy
Personal Investors

Strategy and policy

Investment strategy

The fund invests in other Vanguard mutual funds according to a fixed formula that over time should reflect an allocation of approximately 80% of the fund’s assets to bonds and 20% to common stocks. The targeted percentages of the fund’s assets allocated to each of the underlying funds are: Vanguard Total Bond Market II Index Fund 64%, Vanguard Total International Bond Index Fund 16%, Vanguard Total Stock Market Index Fund 14%, and Vanguard Total International Stock Index Fund 6%.

The fund’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 fund’s indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks.

Investment policy

  • Because the portfolio invests in several Vanguard funds, it follows the investment policies of those underlying funds.
  • Each underlying fund may invest, to a limited extent, in derivatives. Investments in derivatives may subject the fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The fund 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.

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