|Risks Associated with Conservative Funds
Vanguard funds are classified as conservative if their share prices are expected to remain stable or to fluctuate only slightly. Keep in mind that investments that offer stability of principal typically are the most vulnerable to income risk—the possibility that the income from the investment will fluctuate over brief periods—and tend to produce lower long-term returns than riskier assets. Such funds are appropriate for the short-term reserves portion of a long-term investment portfolio, for investors with short-term investment horizons (no longer than three years), and for investors whose tolerance for share-price fluctuations is very low or whose employment or financial situation is precarious.
|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:
- Credit risk. This is the risk that the issuer of a bond will default by failing to make timely payments of principal and interest, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline.
Note: Funding agreements are backed by the financial strength of the insurance companies that issue the contracts. Every effort is made to select very high-quality insurance companies. However, the portfolio may lose value if an insurance company is unable to make interest or principal payments when due.
- Income risk. This is the risk that falling interest rates will cause an underlying fund’s income to decline.
- Manager risk. This is the risk that poor security selection will cause an underlying fund to underperform other funds with a similar investment objective.
- Industry concentration risk. This is the risk that there will be overall problems affecting a particular industry in which an underlying fund has a large investment. Because the Interest Accumulation Portfolio invests in an underlying fund that invests more than 25% of its assets in securities of companies in the financial services industry, the portfolio’s performance will depend to a greater extent on the overall condition of that industry.
- Derivatives risk. Each underlying fund in which the portfolio invests may, to a limited extent, invest in futures and options contracts, straddles, warrants, convertible securities, and swap agreements, all of which are types of derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a traditional security (such as a stock or bond), an asset (such as a commodity like gold), or a market index (such as the S&P 500). Investments in derivatives may subject the underlying fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The underlying fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
For more information about The Vanguard 529 College Savings Plan, download a Program Description or request one by calling 866-734-4530. The Program Description includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor and Underwriter. Please note: Before investing in any 529 plan, you should consider whether your or the beneficiary's home state offers a 529 plan that provides its taxpayers with favorable state tax and other benefits that are only available through investment in the home state's 529 plan. You also should consult your financial, tax, or other adviser to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state's 529 plan[s], or any other 529 plan, to learn more about those plans' features, benefits, and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.
The Vanguard 529 College Savings Plan is a Nevada Trust administered by the Board of Trustees of the College Savings Plans of Nevada, chaired by the Nevada State Treasurer.
The Vanguard Group, Inc., serves as the Investment Manager and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Ascensus Broker Dealer Services, Inc., serves as Program Manager and has overall responsibility for the day-to-day operations. The Plan’s portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed and you could lose money by investing in the Plan.