Vanguard funds delivered competitive results in uncertain times
July 31, 2013
The 12 months ended June 30 were marked by uncertainty in the global financial markets. At the beginning of the period, concerns over Europe's debt crisis and China's slowed economic growth were at the forefront of investors' minds. At the close, investors faced questions about when the Federal Reserve might scale back its bond-buying and saw signs of a weakening Chinese economy.
Despite the challenges both at home and abroad, stocks worldwide posted robust returns. The broad U.S. stock market returned 21.46% for the 12 months, outpacing international equities, which returned 14.14% for the period. Bond returns, which sputtered along through most of the period, turned negative in May and retreated further in June. The broad U.S. taxable bond market returned –0.69% for the 12 months, as concerns about the Fed's plans roiled fixed income investors even more than their counterparts in equities.
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Vanguard funds fared better than the majority of competitor funds in this investment environment. For the 12-month period, 65% of Vanguard funds outperformed the average returns of their respective peer groups. (This is based on data from Vanguard and Lipper Inc., an independent fund research company.)
A long-term, balanced portfolio is key
Volatility and uncertainty in the financial markets can tempt investors to deviate from their investment plans. In the mutual fund industry, for example, the recent rise in bond yields has led to withdrawals from bond funds as investors try to sidestep losses that might arise from a sustained climb in interest rates.
It's important to keep in mind, however, that although interest rates remain low, nobody is certain what their next move will be—much less how financial markets will react to the change. In fact, it's precisely because short-term market movements are unpredictable that trying to time the markets often fails, as Vanguard and other researchers have found.
"Don't allow market noise to push you to act. If you listen to the talking heads too much and you hear the panic—whether it's about a looming fiscal crisis or that China's headed for a hard landing or that things are looking grim in Europe—you might feel compelled to do something," said Tim Buckley, Vanguard's chief investment officer. "But none of those things should drive you to change your long-term goals or to modify your investments."
Instead, we continue to believe that sticking to a well-diversified portfolio of stocks, bonds, and money market instruments over the long haul—rather than making impulsive changes to try to avoid potential losses or capitalize on perceived opportunities—gives you the best chance of meeting your investment goals.
Vanguard funds continue to outperform over the long term
Vanguard funds have produced strong relative results over longer time periods. As the table below illustrates, over the past 5- and 10-year periods, 83% and 90% of our funds, respectively, have outperformed the average return of their competitors. The table also shows the percentage of Vanguard funds in each major asset category that exceeded the average returns of their competing fund peer groups (as determined by Lipper Inc.) over the 1-, 3-, 5-, and 10-year periods ended June 30, 2013.
Vanguard funds that outperformed their peers
(Periods ended June 30, 2013)
|1 year||3 years||5 years||10 years|
|All Vanguard funds:||65%
(226 of 349 Vanguard funds outperformed their peers; 18,878 funds in peer category for this period)
(232 of 290 Vanguard funds outperformed their peers; 16,115 funds in peer category for this period)
(222 of 267 Vanguard funds outperformed their peers; 13,491 funds in peer category for this period)
(149 of 165 Vanguard funds outperformed their peers; 7,359 funds in peer category for this period)
|Money market funds:||100%
(10 of 10 Vanguard funds; 946 funds in peer category)
(10 of 10 Vanguard funds; 910 funds in peer category)
(10 of 10 Vanguard funds; 843 funds in peer category)
(10 of 10 Vanguard funds; 646 funds in peer category)
(150 of 219 Vanguard funds; 11,108 funds in peer category)
(146 of 171 Vanguard funds; 9,292 funds in peer category)
(143 of 165 Vanguard funds; 8,091 funds in peer category)
(80 of 90 Vanguard funds; 4,435 funds in peer category)
(46 of 91 Vanguard funds; 3,703 funds in peer category)
(52 of 82 Vanguard funds; 3,219 funds in peer category)
(46 of 65 Vanguard funds; 2,367 funds in peer category)
(47 of 52 Vanguard funds; 1,698 funds in peer category)
(20 of 29 Vanguard funds; 3,121 funds in peer category)
(24 of 27 Vanguard funds; 2,694 funds in peer category)
(23 of 27 Vanguard funds; 2,190 funds in peer category)
(12 of 13 Vanguard funds; 580 funds in peer category)
- All investing is subject to risk, including the possible loss of the money you invest.
- Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.
- An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.
- Diversification does not ensure a profit or protect against a loss.
- Foreign investing involves additional risks, including currency fluctuations and political uncertainty. Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries.
- The competitive performance data shown represent past performance, which is not a guarantee of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
- Market data source: Vanguard, based on market benchmarks. U.S. stocks represented by the Dow Jones U.S. Total Stock Market Float Adjusted Index. International stocks represented by the FTSE Global All Cap ex US Index. Bonds represented by the Barclays U.S. Aggregate Bond Index.
- For the 1-year period ended June 30, 2013, 10 of 10 Vanguard money market funds, 46 of 91 Vanguard bond funds, 20 of 29 Vanguard balanced funds, 150 of 219 Vanguard stock funds, or 226 of 349 Vanguard funds outperformed their Lipper averages. For the 3-year period ended June 30, 2013, 10 of 10 Vanguard money market funds, 52 of 82 Vanguard bond funds, 24 of 27 Vanguard balanced funds, 146 of 171 Vanguard stock funds, or 232 of 290 Vanguard funds outperformed their Lipper averages. For the 5-year period ended June 30, 2013, 10 of 10 Vanguard money market funds, 46 of 65 Vanguard bond funds, 23 of 27 Vanguard balanced funds, 143 of 165 Vanguard stock funds, or 222 of 267 Vanguard funds outperformed their Lipper averages. For the 10-year period ended June 30, 2013, 10 of 10 Vanguard money market funds, 47 of 52 Vanguard bond funds, 12 of 13 Vanguard balanced funds, 80 of 90 Vanguard stock funds, or 149 of 165 Vanguard funds outperformed their Lipper averages. Results will vary for other time periods. Only funds with a minimum 1-, 3-, 5-, or 10-year history, respectively, were included in the comparison. (Source: Lipper Inc.) Note that the competitive performance data shown represent past performance, which is not a guarantee of future results and that all investments are subject to risks. For the most recent performance, visit our website at vanguard.com/performance.