Historic Volatility Measures as of 05/31/2016
|Variable Insurance Balanced Composite Index||0.98||0.99|
|Dow Jones U.S. Total Stock Market Index||—||—|
*R-squared and beta are calculated from trailing 36-month fund returns relative to the associated benchmark.
|Risks Associated with Moderate Funds
Vanguard funds classified as moderate are subject to a moderate degree of fluctuations in share prices. This price volatility may be due to one of several factors: 1) a fund may hold longer-term bonds, which are subject to wide swings in value as interest rates rise and fall; 2) a fund may hold income-oriented common stocks; and 3) a fund may hold a balance of both stocks and bonds. In general, such funds are appropriate for investors who have a relatively long investment horizon (more than five years), are able to tolerate moderate-to-high short-term fluctuations in price, and wish to achieve some combination of current income and modest growth potential.
|Plain Talk About Risk
The portfolio’s total return, like the prices of stocks and bonds generally, will fluctuate within a wide range, so an investor could lose money over short or even long periods. The portfolio is also subject to:
- Stock market risk: The chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising stock prices and periods of falling stock prices.
- Investment style risk: The chance that returns from mid- and large-capitalization stocks will trail returns from the overall stock market. Historically, mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Mid-cap stocks tend to have greater volatility than large-cap stocks because, among other things, medium-size companies are more sensitive to changing economic conditions.
- Interest rate risk: The chance that bond prices will decline because of rising interest rates.
- Credit risk: The chance that a bond issuer will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. Credit risk should be low for the fund because it purchases only bonds that are of investment-grade quality.
- Manager risk: The chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.