Historic Volatility Measures as of 10/31/2016
|Bloomberg Barclays U.S. GNMA Bond Index||0.97||1.07|
|Bloomberg Barclays U.S. Aggregate Bond Index||—||—|
*R-squared and beta are calculated from trailing 36-month fund returns relative to the associated benchmark.
|Risks Associated with Conservative to Moderate Funds
Vanguard funds classified as moderate to conservative are subject to low-to-moderate fluctuations in share prices. In general, such funds are appropriate for investors with medium-term investment horizons (four to ten years), for those seeking an investment that emphasizes income rather than growth, and for investors who have a low tolerance for the risk of short-term price fluctuations.
|Plain Talk About Risk
The portfolio’s share price and total return will fluctuate, along with returns for the overall high yield bond market, within a wide range, so an investor could lose money over short or even long periods. The portfolio is also subject to:
- Prepayment risk: The chance that during periods of falling interest rates, homeowners will refinance their mortgages before their maturity dates, resulting in prepayment of mortgage-backed securities held by the fund. The fund would then lose any price appreciation above the mortgage’s principal and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income. Prepayment risk is high for the fund.
- Income risk: The chance that the fund’s income will decline because of falling interest rates.
- Interest rate risk: The chance that bond prices will decline because of rising interest rates.
- Manager risk: The chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.