About Mutual Funds

Will Vanguard Introduce a Hedge Fund?

2010-02-07T12:04:31Z

Morningstar has reported that Vanguard has filed "...an exemptive relief application with the SEC seeking the OK to launch an absolute return fund..."

I won't rehash Morningstar's article for you, but it's worth a read if you are a Vanguard investor�-- or so-called "Bogle Head." �I have a mixed reaction to the possibility of the new fund (which would use traditional securities such as stocks and bonds, but which could also venture into futures contracts, currencies and other derivatives and non-traditional mutual fund strategies).�

My initial reaction (particularly due to Morningstar's headline mentioning "Vanguard" and "hedge fund" in the same sentence) was that Vanguard filed for the fund as pressure to introduce sexier products to its mix of passively and actively managed funds (I tend to like the ho-hum, conservative fund strategies).

Maybe they were chasing hot dollars that might migrate from the traditional relative return products to absolute return products; maybe Vanguard was attempting to broaden their investor base to more aggressive investors.�

After putting Morningstar's article aside, I decided to read Vanguard's exemptive relief application. Here comes the mixed reaction (the application didn't necessarily offer new information that Morningstar didn't report, but going straight to the source is always helpful). It appears Vanguard is brainstorming on how to build (and improve upon existing products) a more "endowment-like" strategy that may solve the income needs of retirees�-- which is not only a huge market opportunity for fund companies, but a much needed product for investors.

�In other words, Vanguard is looking to add an additional strategy to their already existing Managed Payout Funds (look for more coverage on this product in a future article and blog post). This hedge fund we are mentioning would be owned across the three Managed Payout Funds (up to 20% of the Managed Payout Funds) as well as other private, high net worth investors.

Moving back to the Morningstar article, they quote Vanguard CEO Bill McNabb as saying, "We have been doing a ton of work to see whether it's something we can deliver in a consistent manner, and the jury is very much out at this point. It's not something we're going to do until we feel really great about it."

So, after spilling my initial reactions, I would sum it up as a plus that Vanguard is attempting to improve upon their line-up of products, meet investor needs and take it slow (referring to Bill McNabb's comments).

�Related�Blog Post:

Be Cautious of Absolute-Return Funds

Will Vanguard Introduce a Hedge Fund? originally appeared on About.com Mutual Funds on Sunday, February 7th, 2010 at 12:04:31.

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Guns and Gambling and Beers. Oh, My.

2010-01-20T06:00:25Z

Last month, I highlighted a fund that made me go, "Huh?"� This month, I highlight a fund that makes me go, "Oh, my."

Before you read on, if you are a socially responsible investor, I will kindly direct you to About.com's Socially Responsible Investing site.

As for the rest of us, if you want to invest in your vices, or, uh umm, invest in other people's vices, there's a fund for you. As the name suggests, the Vice Fund (VICEX) invests in sin stocks. �

Directly from the summary prospectus, the Vice Fund will invest "...a significant portion of their revenues from alcoholic beverages, tobacco, gaming, and defense/aerospace. " �The majority of the fund's holdings will naturally end up in the consumer goods sector, but narrowly focused at that.

Why would any fund company create a fund such as the Vice Fund? Is it as odd, or interesting, as it may seem? Not really. It's not a novel idea. �It has been a long-held belief that sin stocks are recession proof. Why? Well, the thematic investors (investors looking to invest under a particular theme) will say that when the economy goes through a rough patch, people will turn to their vices�-- creating a good investment opportunity for those who want to profit.

A combination of the sector concentration and the focus on sin stocks made me say, "Guns and gambling and beers. Oh, my."

And since the line that came to my head was taken from The Wizard of Oz, let's take another line from the movie. The Scarecrow said, "Come along Dorothy. You don't want any of those apples."

Guns and Gambling and Beers. Oh, My. originally appeared on About.com Mutual Funds on Wednesday, January 20th, 2010 at 06:00:25.

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How to Save 42,000 Trees

2010-01-18T11:54:03Z

I have been told by many investors that the mutual fund prospectus is a colossal waste of trees. Others think that the prospectus is a waste of mailbox space, has a massive amount of difficult to understand information, and is, simply, something that is immediately tossed in the circular file.

Now, as of January 1, 2010, we will have relief of these unnecessarily long, complex statutory prospectuses. Mutual funds will now give investors a printed, short-form summary prospectus, written in plain English, along with the traditional full-length prospectus, available online.

So, rather than receiving three full-length prospectus for that Vanguard 500 fund that you own in three different accounts, you will have the option of receiving email notifications that the prospectus is available online.

Aite Group has estimated that these new rules may save 42,000 trees, and more that $65 million in printing and postage. �The summary prospectus will satisfy the confused readers of the traditional prospectuses, the penny pinchers, and the environmentally aware.

The Summary Prospectus

A Prospectus: The Owner's Manual to Your Mutual Fund

How to Save 42,000 Trees originally appeared on About.com Mutual Funds on Monday, January 18th, 2010 at 11:54:03.

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The Top Post of 2009

2010-01-08T19:21:42Z

In a previous blog post, I asked�what you thought was the most popular blog post of 2009.��As you can see below, posts with Vanguard in the title got the top two spots.

The biggest surprise to me was the post that generated the fifth most interest on the blog. �Maybe I can creatively link the last movie I watched to mutual fund investing? Then again, it may be more difficult to find the same inspiration from Alvin and the Chipmunks: The Squeakquel.

1. Vanguard Raises the Yellow Flag

2. Vanguard's New Funds -- Not for You

3. Game On: Mutual Funds vs. ETFs

4. Looking for Yield?

5. The Curious Case of Benjamin Button

The Top Post of 2009 originally appeared on About.com Mutual Funds on Friday, January 8th, 2010 at 19:21:42.

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Contango Anyone?

2010-01-03T20:23:08Z

Contango might sound like the next bop on Dancing with the Stars, but it's more closely related to mutual funds and investing�than it is to song and dance.

As I have studied the CFA curriculum over the past several years, there were more than a few concepts that were less than interesting to me�-- and a plethora of concepts that I thought were not pertinent to my day job. I have to admit that�understanding more about contango and related concepts and calculations than I already knew, was simply something that I thought I could do without. �

But over the past year, fund managers (both mutual funds and ETFs) have been discussing a subtle risk for their funds. This risk is known as contango.

This week you might want to get your arms around the definition of contango (the boiled down version vs. the in-depth version) and over the next few weeks I will highlight why the concept should be of interest to mutual fund investors -- particularly investors who appreciate diversification.

Contango Anyone? originally appeared on About.com Mutual Funds on Sunday, January 3rd, 2010 at 20:23:08.

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My 2010 About.com Goals

2010-01-02T13:52:09Z

Last week, I highlighted 10 New Year's Resolutions for Mutual Fund Investors. So, this week, I will share my 2010 resolutions and goals for the About.com Mutual Funds site. After all, the best way to reach your goals is to write them down, share them with others, and hold yourself accountable. Let me know what you think.

In addition to writing a weekly article, posting regularly to the mutual funds blog and sending a weekly newsletter, I plan to:

1.��Interview fund experts including fund managers and strategists -- It's in the works. Look for an interview with a Vanguard TIPS portfolio manager in the next couple of weeks and a top gold mutual fund manager shortly thereafter.

2.� Add a financial/investment book review section and review at least four books.

3.� Add a 10 part daily newsletter course covering basic to advanced investment topics.

4.��Write and highlight a glossary term of the week in my weekly newsletter.

5.� Add at least two mutual fund quizzes (advanced and basic).

6. Twitter. Yes, Twitter. I can mark this off of my list. As of January 1, you can follow me on Twitter.

and, finally,

7.��If you subscribe to�the free newsletter, you know it's time to follow through on adding my picture.�

Okay. So I've written down my goals. Now it's time to act. Come back this time next year and we will see what I accomplished in 2010.

My 2010 About.com Goals originally appeared on About.com Mutual Funds on Saturday, January 2nd, 2010 at 13:52:09.

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2009 Top Blog Posts

2009-12-31T20:39:13Z

My first year as Guide of the About.com mutual fund site has been a learning experience on several fronts.

On the writing front I had to ask myself:� What articles would I�write first? Should I cover all the basics before the intermediate and advanced? Should I cover news stories on the blog or simply personal experiences and opinions?

What would work on the blog might have been my biggest question. Since my first calendar year as Guide �has come to a close, I have some answers. Can you guess what worked on the blog?

I have copied links to the�five most viewed blog posts of 2009 below. Can you guess the most popular post of the top viewed posts?� Take the poll and�I will�provide the answer next week.

Game On: Mutual Funds vs. ETFs

Vanguard Raises the Yellow Flag

Looking for Yield?

The Curious Case of Benjamin Button

Vanguard's New Funds -- Not for You

2009 Top Blog Posts originally appeared on About.com Mutual Funds on Thursday, December 31st, 2009 at 20:39:13.

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10 New Year�s Resolutions

2009-12-27T16:39:50Z

Yes, it's hard to believe it's that time to start thinking about New Year's resolutions. If you are like me, your New Year's resolutions don't change much from year to year. It's the same old resolutions that I keep for a few weeks and then forget about. But this year will be different, right?

I have perused the About.com Business and Finance channel for topics and articles that mutual fund investors might consider as a New Year's resolution. So, here is my list of 10 New Year's resolutions for mutual fund investors accompanied by articles from the About.com Business and Finance Guides:

10 New Year's Resolutions for Mutual Fund�Investors

10 New Year�s Resolutions originally appeared on About.com Mutual Funds on Sunday, December 27th, 2009 at 16:39:50.

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Funds that Make You Go, �Huh?�

2009-12-20T18:54:10Z

The Congressional Effect Fund? Yes. You read it correctly. There is a mutual fund called the Congressional Effect Fund.

When I first came across this fund, I said to myself, "Huh?" Is there really a fund that is in or out of the market based on whether Congress is in session or not. Yes. There most certainly is.

I'm not here to recommend or promote particular mutual funds or other investments, but over the past few weeks I have seen a few funds that follow interesting (or, maybe, entertaining) investment strategies. I'll let someone else decide if they are worthy investments.

In the meantime, read more about the Congressional Effect Fund. I'll highlight several more of these funds over the next couple of months.

Funds that Make You Go, �Huh?� originally appeared on About.com Mutual Funds on Sunday, December 20th, 2009 at 18:54:10.

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Year-End Tax Tips

2009-12-15T20:51:19Z

While a mutual funds site (like this one) is about building wealth, developing a grasp of the tax code can help preserve some of the wealth that you accumulate. I suggest you take a look at�the About.com�Tax Planning�site.

Whether you are a professional�tax preparer or you file your own taxes, William Perez, the Guide to Tax Planning at About.com,�can help you. His latest piece on year-end tax tips is a must read.

Year-End Tax Tips originally appeared on About.com Mutual Funds on Tuesday, December 15th, 2009 at 20:51:19.

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