Personal Investors

Strategy and policy

Investment strategy

The fund invests in Vanguard mutual funds using an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2055 (the target year). The fund’s asset allocation will become more conservative over time. Within seven years after 2055, the fund’s asset allocation should resemble that of the Target Retirement Income Fund. The underlying funds are: Vanguard Total Stock Market Index Fund, Vanguard Total Bond Market II Index Fund, Vanguard Total International Bond Index Fund, and Vanguard Total International Stock Index Fund.

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

Investment policy

  • Because the fund 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 funds will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
  • Each fund’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, each fund bears its proportionate share of the at-cost expenses of the CMT fund in which it invests.
  • To put cash flow to work as soon as possible, and thereby capture as much of the market’s return as possible, each fund reserves the right to invest in shares of Vanguard Total Stock Market ETF, Vanguard Total International Stock Market ETF, and Vanguard Total Bond Market ETF (each provides returns similar to the returns of its corresponding market segment). The funds’ advisor may purchase ETF Shares when large cash inflows come into a fund too late in the day to invest the cash, on a same-day basis, in shares of the underlying Vanguard funds that serve as the fund’s primary investments. These cash-flow situations will arise infrequently, and the period of holding the ETF Shares will be short—in most cases, one day. (Vanguard does not receive duplicate management fees when fund assets are invested in ETF Shares.)

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