Vanguard Moderate Growth Portfolio
Risk Attributes

Historic Volatility Measures as of 10/31/2017

BenchmarkR-squared* Beta*
Vanguard 529 Moderate Growth Composite1.000.97
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 stock prices generally, will fluctuate within a wide range, so an investor could lose money over short or even long periods. The portfolio’s underlying fund 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. An underlying fund’s target index may, at times, become focused in stocks of a particular market sector, which would subject the Underlying Fund to proportionately higher exposure to the risks of that sector. An underlying fund’s investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
  • Country/Regional risk: The chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value or liquidity of securities issued by companies in foreign countries or regions. Country/regional risk is especially high in emerging markets.
  • Currency Risk: The chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets.
  • Interest rate risk: The chance that bond prices overall will decline because of rising interest rates. Interest rate risk should be low for short-term bond funds, moderate for intermediate-term bond funds, and high for long-term bond funds.
  • Credit risk: The chance that an issuer of a bond owned by an underlying fund 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.
  • Income risk: The chance that falling interest rates will cause an underlying fund’s income to decline.
  • Call risk: The chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupons or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund’s income. Such redemptions and subsequent reinvestments would also increase the underlying fund’s portfolio turnover rate.
  • 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 an underlying fund. The underlying 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 Underlying Fund’s income. Such prepayments and subsequent reinvestments would also increase the underlying fund’s portfolio turnover rate.
  • Extension risk: The chance that during periods of rising interest rates, certain debt securities will be paid off substantially more slowly than originally anticipated, and the value of those securities may fall. For underlying funds that invest in mortgage-backed securities, extension risk is the chance that during periods of rising interest rates, homeowners will prepay their mortgages at slower rates.
  • Currency hedging risk: The chance that the currency hedging transactions entered into by an underlying fund may not perfectly offset the underlying fund’s foreign currency exposures.
  • Nondiversification risk: The chance that an underlying fund’s performance may be hurt disproportionately by the poor performance of bonds issued by just a few or even a single issuer. Vanguard Total International Bond Index Fund is considered nondiversified, which means that it may invest a significant percentage of its assets in bonds issued by a small number of issuers.
  • Index sampling risk: The chance that the securities selected for an underlying funds that uses the sampling method of indexing will not, in the aggregate, provide investment performance matching that of the index.
  • Derivatives risk: Each of the underlying funds may invest, to a limited extent, in derivatives. Generally speaking, a derivative if a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), a market index (such as the S&P 500 Index), or a reference rate (such as LIBOR). Investments in derivatives may subject the underlying funds to risks different from, and possibly greater than, those of investments directly in the underlying securities or assets. The underlying funds will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.


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