Personal Investors

Learn more about asset allocation

Choosing an appropriate mix of assets for a specific financial goal is an important part of the investing process. Long-term performance is primarily determined by asset allocation. Factors to be considered include your goals, time horizon, risk tolerance, and financial condition.

View an interactive presentation on asset allocation

How we determine your asset allocation

The assets you're analyzing are categorized using the major asset classes below. Vanguard funds are categorized using the long-term target allocation of the fund, not actual fund holdings at a point in time. This is consistent with our long-term perspective because we believe investors should not make asset allocation decisions based on temporary variances in fund holdings. For Vanguard funds-of-funds, we use the target allocation of each fund component.

For non-Vanguard funds, we use allocation data as of the most recent month-end supplied by Morningstar. Subject to certain exceptions, non-Vanguard funds are usually displayed as allocated only among stock, bond and cash holdings. Accordingly, any holdings in a fund classified as “other” by Morningstar are proportionally recharacterized among the remaining stock, bond and cash holdings displayed for that security. Further, any stock, bond or cash holdings that comprise less than 10% of the entire fund allocation are proportionally recharacterized between the remaining holdings. This approach is consistent with Vanguard’s philosophy of investing for the long-term. In the context of a diversified portfolio, investors should view mutual funds as relatively constant single holdings that serve defined subasset allocation roles, and should base investment decisions on the funds' ongoing appropriateness for those roles—not on minor changes in the underlying portfolios. In some instances, the fund-level allocation results may vary from those displayed through other portfolio analysis tools or information channels.

The following describes how we allocate particular types of investments among the stock, bond and cash categories:

Stocks

  • Vanguard stock and convertible securities funds.
  • Stock portion of Vanguard balanced funds.*
  • Stock portion of Vanguard Variable Annuity Portfolios.
  • U.S. stock, international stock, and convertible securities portion of non-Vanguard funds.**
  • Individual stocks, options, rights, warrants, exchange-traded stock funds, closed-end mutual funds, Vanguard ETF® Shares, and Real Estate Investment Trusts (REITs) held through Vanguard Brokerage Services® (VBS®).
  • Outside holdings you classified as stocks.

Bonds

  • Vanguard bond and preferred stock funds.
  • Bond portion of Vanguard balanced funds.*
  • Bond portion of Vanguard Variable Annuity Portfolios.
  • U.S. bond, international bond, and preferred stock portion of non-Vanguard funds.**
  • Individual bonds, notes, and bills held through VBS.
  • Outside holdings you classified as bonds.
  • Vanguard Fixed Annuities.
  • Stable value funds.

Short-term reserves

  • Vanguard money market funds.
  • Money market and short-term reserve portions of Vanguard balanced funds.*
  • Money market and short-term reserve portions of Vanguard Variable Annuity Portfolios.
  • Short-term reserve portion of non-Vanguard balanced funds.**
  • Cash positions held with VBS.
  • Outside holdings you classified as short-term reserves.

Other

  • Money market funds that end with "XX" will be categorized as other investments.
  • Non-Vanguard funds we're unable to categorize due to insufficient data.
  • Miscellaneous investments held through VBS, including unit investment trusts, precious metals, limited partnerships, and non-Vanguard annuities.
  • Outside holdings you classified as "other."

In creating your more detailed allocation, we further break down your stock holdings as follows:

Domestic large-, mid-, and small-capitalization

Vanguard funds are categorized based on their long-term target allocation, not their actual holdings at a point in time. The holdings of the Vanguard Total Stock Market Index Fund, Vanguard Extended Market Index Fund, Vanguard Balanced Index Fund, Vanguard Tax Managed Capital Appreciation Fund, are divided into component parts by market capitalization. Allocation data for non-Vanguard funds is the actual fund allocation on a specific date as supplied by Morningstar.

For non-Vanguard funds, we generally use the style-box classification assigned by Morningstar.

International stocks

  • Vanguard international stock funds, as well as the target international stock portion of Vanguard balanced funds and the international stock portion of Vanguard global funds, and the Vanguard Variable Annuity—International Portfolio.
  • The international stock portion of non-Vanguard funds as provided by Morningstar.
  • Individual stock holdings classified by Morningstar as non-U.S. stocks.

Other stocks

  • Stocks and stock fund assets we're unable to categorize due to insufficient data.
  • Closed-end mutual funds.

For Vanguard funds and brokerage holdings, prices and shares used to compute your current account value are as of the previous business day. For investments you entered in Outside Investments, prices may be from today's close, especially if you're viewing them after the market close, which is generally 4 p.m., Eastern time.

*Vanguard funds are categorized based on their long-term target allocation, not their actual holdings at a point in time.

**Allocation data for non-Vanguard funds are based on the fund allocations as of the most recent month-end as supplied by Morningstar.

Benchmarks and performance data

The historical performance provided is for illustrative purposes only. The performance is based on benchmark returns and does not reflect the actual performance of the recommended funds. The returns shown include the reinvestment of income dividends; they do not reflect the effects of investment expenses and taxes. Past performance is not a guarantee of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

For U.S. stock market returns, we use the Standard & Poor’s 90 Index from 1926 through March 3, 1957; the S&P 500 Index from March 4, 1957, through 1974; the Wilshire 5000 Index from 1975 through April 22, 2005; the MSCI US Broad Market Index from April 23, 2005, through June 2, 2013; and the CRSP US Total Market Index thereafter.

For U.S. bond market returns, we use the S&P High Grade Corporate Index from 1926 through 1968; the Citigroup High Grade Index from 1969 through 1972; the Lehman Brothers U.S. Long Credit AA Index from 1973 through 1975; the Barclays U.S. Aggregate Bond Index from 1976 through 2009; and the Spliced Barclays U.S. Aggregate Float Adjusted Bond Index thereafter.

For U.S. short-term reserve returns, we use the Ibbotson 1-Month Treasury Bill Index from 1926 through 1977 and the FTSE 3-Month Treasury Bill Index thereafter.

Morningstar, Inc., provided some of the information in this section.

Vanguard is not responsible for the accuracy of data provided by third parties.

Additional information

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

Investments are subject to market risk. Bond funds contain interest rate risk, the risk of issuer default, and inflation risk. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Foreign investing involves additional risks including currency fluctuations and political uncertainty.

Vanguard Brokerage Services is a division of Vanguard Marketing Corporation, member FINRA.

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