Vanguard Interest Accumulation Portfolio
Risk Attributes

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: The chance 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: The chance that falling interest rates will cause an underlying fund’s income to decline.
  • Manager risk: The chance that poor security selection will cause an underlying fund to underperform other funds with a similar investment objective.
  • Industry concentration risk: The chance 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:  The chance that investments in derivatives may involve risks different from, and possibly greater than, those of investments in the underlying securities, assets, or market indexes. 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.

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