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Authorized by Vanguard Investments Canada Inc. for investor use.

Vanguard’s principles for investing success

2Authorized by Vanguard Investments Canada Inc. for investor use.

About Vanguard

The Vanguard Group, Inc.

• Founded: 1975

• Corporate headquarters: Valley Forge,

Pennsylvania, United States

• Total assets: $5.7 trillion worldwide

• Number of products: More than 350

mutual funds and ETFs worldwide

Vanguard Investments Canada Inc.

• Founded: December 2011

• Headquarters: Toronto, Ontario, Canada

• Total assets: $11.0 billion

• Number of products: 33 ETFs listed on

Toronto Stock Exchange

Source: The Vanguard Group, Inc. as of March 31, 2017.

Note: All assets are in CAD.


Our core purpose:

To take a stand for all investors, to treat them fairly

and to give them the best chance for investment success.

What makes us different

Long-term

thinking

Client

focus

Low-cost

investing


Vanguard’s principles for investment success

Goals Balance

Cost Discipline


• Recognizing constraints is essential to developing an investment plan

• A basic plan will include specific, attainable expectations about

contribution rates and monitoring

• Discouraging results often come from chasing market returns, an

unsound strategy that can seduce investors who lack well-grounded

plans for achieving their goals

• Without a plan, investors can be tempted to build a portfolio based on

transitory factors such as fund ratings—something that can amount to a

“buy high, sell low” strategy

Create clear, appropriate investment goals


Example of a basic framework for an investment plan

Define the goal and constraints

Objective Save $1,000,000 for retirement, adjusted for inflation

Constraints 30-year horizon

Moderate tolerance for market volatility and loss; no tolerance for nontraditional risk

Current portfolio value $50,000

Monthly net income of $4,000; Monthly expenses of $3,000

Consider impact of taxes on portfolio allocations and returns

Saving or spending target Ability to contribute $5,000 in first year

Intention to raise contribution by $500 per year, to a maximum of $10,000 annually

Asset allocation target 70% allocated to diversified stock funds; 30% allocated to diversified bond funds

Rebalancing methodology Rebalance annually

Monitoring and evaluation Periodically evaluate current portfolio value relative to savings target, return expectations and

long-term objective

Adjust as needed

This example is completely hypothetical. It does not represent any real investor and should not be taken as a guide. Depending on an actual investor’s circumstances, such a plan or

investment policy statement could be expanded or consolidated. For example, many financial advisors or institutions may find value in outlining the investment strategy, i.e. specifying

whether tactical asset allocation will be employed, whether actively or passively managed funds will be used and the like.

Source: Vanguard.


Investors tend to buy highly rated funds even as they underperform

Without a plan, many invest bottom up

Median performance of funds versus style benchmarks

over the 36 months following a Morningstar rating

Cash flows for Morningstar-rated funds in periods after the ratings

were posted

Notes: Data cover the period from January 2002 to December 31, 2016. Morningstar changed its rating methodology during this period, but there was no material

impact on our analysis. The analysis includes all share classes of Canadian equity funds, both live and obsolete. To be included, a fund had to have a Morningstar

Rating and 36 months of continuous performance following the rating date. Fund returns are net of expenses, but not of any loads. The results are relative to the

funds’ category benchmark as defined by Russell, however similar results were achieved relative to MSCI and Standard and Poor’s indexes as well.

Sources: Data on cash flows, fund returns and ratings were provided by Morningstar. Index data to compute relative excess returns were provided by Thomson

Reuters Datastream. More information is available in the Vanguard research paper Mutual Fund Ratings and Future Performance (Philips and Kinniry, 2010).

5-star

4-star

3-star

2-star

1-star

-0.7%

-0.9%

-1.0%

-1.6%

-2.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

5-star 4-star 3-star 2-star 1-star

Annualiz

ed 3

6-m

onth

fund p

erf

orm

ance

rela

tive to b

enchm

ark

-15

-10

-5

0

5

10

1Yr 3Yr 5Yr

Cum

mula

tive c

ash flo

ws (

$ b

illio

ns)

5-star 4-star 3-star 2-star 1-star


• Define goals clearly

• Approach planning with a level head

• Create a detailed, specific plan

Key takeaways


• A diversified portfolio’s proportions of stocks, bonds and other

investment types determine most of its return as well as its volatility

• Attempting to escape volatility and near-term losses by minimizing

stock investments exposes investors to other types of risk, including

the risks of failing to outpace inflation or falling short of an objective

• Realistic return assumptions—not hopes—are essential in choosing

an allocation

• Leadership among market segments changes constantly and

rapidly, so investors must diversify both to mitigate losses and to

participate in gains

Develop a suitable asset allocation using broadly diversified funds


Returns for the 95th and 5th percentiles and on average for various equity/fixed income allocations, 1901–2016

The mixture of assets defines the spectrum of returns

For illustrative purposes only. The hypothetical portfolios do not represent the return on any particular investment.

Notes: Equities are represented by the DMS Canada Equity Index from 1901 to 1984, and the S&P/TSX Composite Index thereafter. Fixed income is represented by the DMS Canada

Bond Index from 1900 to 1984, the Citigroup World Government Bond Index from 1985 through 2001 and the Bloomberg Barclays Canadian Issues 300MM Index thereafter. Data are

through December 31, 2016.

Sources: Vanguard, using data from Morningstar, Inc. and Barclays.

19.3% 17.6% 16.4% 17.5% 19.3% 21.3%23.7%

26.8%29.9%

33.0%36.1%

4.7% 5.3% 5.8% 6.3% 6.8% 7.2% 7.6% 8.0% 8.3% 8.7% 8.9%

-4.5% -3.7%-4.5% -5.2% -6.7% -7.3%

-9.7% -11.3%-13.6%

-16.4%-19.1%

-30%

-20%

-10%

0%

10%

20%

30%

40%

100%

0%

90%

10%

80%

20%

70%

30%

60%

40%

50%

50%

40%

60%

30%

70%

20%

80%

10%

90%

0%

100%

Portfolio allocation

Annual returns

Fixed income

Equity

Average


Investment outcomes are largely determined by the long-term mixture of assets in a portfolio

The importance of asset allocation

Note: Calculations are based on monthly returns for 303 Canadian funds from January 1990 to September 2015. For details of the methodology, see the Vanguard research paper The

global case for strategic asset allocation and an examination of home bias (Scott et al., 2016).

Sources: Vanguard calculations, using data from Morningstar, Inc.

86% Asset allocation

14% Security selection and market timing

Percent of a portfolio's movements over time explained by:


The ten worst and best stocks in the S&P/TSX Index in 2008

Diversification can protect against catastrophic loss

Worst performers Return (%) Best performers Return (%)

Nortel Networks Corp. -89.99 Fording Candadian Coal Trust 135.77

Uranium One Inc. -88.45 Eldorado Gold Corp. 65.52

Teck Resources Ltd. -82.83 Celestica Inc. 51.64

Nova Chemicals Corporation -81.53 Metro Inc. 43.06

Lundin Mining Corp. -81.13 Fairfax Financial Holdings Ltd. 38.25

Opti Canada Inc. -80.66 Kinross Gold Corp. 23.46

First Quantum Minerals Ltd. -79.09 Agnico-Eagle Mines Ltd. 15.63

Sherritt International Corp. -75.70 Goldcorp Inc. 14.21

Inmet Mining Corp. -75.53 George Weston Ltd. 13.89

Ivanhoe Mines Ltd. -69.72 Open Text Corp. 13.13

Sources: FactSet and Vanguard as of December 31, 2008.

For illustrative purposes only. Please note that this example reflects the financial crisis and, in particular, the fact that the majority

of the decline in stock prices occurred in 2008.

Examples of underlying securities mentioned in this material should not be construed as a recommendation to buy, sell or hold the securities.


• A portfolio’s asset allocation is responsible for its risk and return

• Stocks have the greatest expected return and risk

• Avoiding stocks and their volatility means assuming additional risks

• Diversification can protect against catastrophic loss

Key takeaways


Sub-asset allocation

What

Remain diversified

over broad market

but overweight

or underweight

market segment

Why

May add value

When

Suitable for less

risk-averse

investors

who are comfortable

with additional

sector risk but

who do not want to

deviate significantly

from a market-cap-

weighted equity

portfolio

Risks

Possible

underperformance


Sub-asset allocation case study

Background

An investor’s

U.S. equity portfolio

has a risk profile similar

to that of the broad

U.S. stock market

Goal

Investor believes that

a bias toward value

or small-cap stocks

can enhance

long-term returns

Solution

Overweight the desired

sector using value,

small-cap and/or

small-cap value ETFs

Want small-cap value tilt Buy small-cap value ETFMarket-like portfolio


Asset classes

Stocks

Stocks represent

shares of ownership in

a company. Canada

stock funds have

historically provided the

highest long-term

returns – typically an

average of about 8.4%

per year.

Bonds

In essence, bonds are

loans to a government

or a company. Over the

long term, Canada

bond funds have

provided average

annual returns of about

7.6% and have

generally been less

volatile than stocks.*

Cash

Guaranteed Investment

Certificates (GICs),

treasury bills and

money market funds

are all considered cash

investments. All, or

nearly all, of the returns

from cash investments

come from interest.

* Source: Stocks are represented by the S&P/TSX Composite Index. Bonds are represented by the Citigroup World Government Bond Index from 1985 through 2001and the

Barclays Canadian Issues 300MM Index thereafter. Data are from December 31, 1985, through December 31, 2013.


• The attempt to escape market risk by investing in stable, lower-

returning assets can expose a portfolio to other longer-term risks

• Cash or short-term bonds can come with opportunity cost or

“shortfall risk”

• Over a 30-year horizon a 3% inflation rate reduces a portfolio’s real

value by 50%

• For investors with longer horizons, inflation risk may outweigh

market risk, often necessitating a sizable allocation to investments

such as stocks

Stocks are risky—and so is avoiding them


Annual returns for various investment categories ranked by performance, best to worst: 2006-2016

Diversify to manage risk

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

41.46% 18.55% 12.00% 62.38% 35.10% 10.00% 28.53% 31.57% 23.73% 21.47% 38.48%

32.08% 9.83% 7.10% 52.03% 17.61% 9.62% 16.00% 12.99% 14.20% 20.24% 21.08%

26.38% 5.02% 6.63% 35.05% 12.97% 9.54% 15.33% 8.54% 10.55% 19.46% 7.90%

17.26% 4.51% 5.73% 14.72% 12.39% 6.33% 15.28% 7.60% 9.03% 3.71% 7.74%

11.61% 3.96% -19.51% 13.99% 10.73% -6.15% 7.19% 4.29% 8.59% 3.65% 6.08%

9.54% 0.90% -28.78% 12.49% 6.95% -8.71% 6.55% 2.31% 7.46% 2.42% 3.73%

4.01% -1.43% -33.00% 5.04% 6.88% -9.55% 3.27% 0.62% 7.03% 1.61% 1.44%

3.54% -5.33% -36.55% 3.62% 6.18% -11.17% 2.19% -1.59% 4.12% -8.32% -0.34%

2.58% -10.81% -41.44% 0.98% 5.04% -16.15% -2.23% -2.28% -2.34% -9.64% -0.40%

1.68% -17.48% -45.49% -1.71% 2.56% -16.43% -3.25% -3.45% -9.53% -13.31% -2.00%

Notes: Benchmarks reflect the following asset classes—for large-capitalization Canadian equity, the S&P/TSX Composite Index; for small-cap Canadian equity, the S&P/TSX

SmallCap Index; for developed international equity markets, the MSCI EAFE Index, for emerging markets, the MSCI Emerging Markets Index; for commodities, the Bloomberg

Commodity Index; for real estate, the MSCI ACWI Real Estate Index; for Canadian government fixed income, the Citigroup WGBI Canada All Maturities; for Canadian investment-

grade fixed income, the Bloomberg Barclays Canadian 300MM Index; for international fixed income, the Bloomberg Barclays Global Aggregate Bond Index (CAD-hedged); and for

emerging market fixed income, the Bloomberg Barclays Emerging Market USD Aggregate Bond Index.

Source: Vanguard illustration using data from Standard & Poor’s, MSCI, Bloomberg and Citi.

Canadian equity

S&P/TSX

Composite Index

S&P/TSX

SmallCap Index

Non-Canadian equity

MSCI EAFE Index

MSCI Emerging

Markets Index

MSCI ACWI Real

Estate Index

Canadian fixed

income

Bloomberg

Barclays Canadian

300MM Index

Citigroup WGBI

Canada All

Maturities

Non-Canadian fixed

income

Bloomberg Barclays

Emerging Market

USD Aggregate

Bond Index

Bloomberg Global

Aggregate Bond

Index (CAD-hedged)

Other

Bloomberg

Commodity Index


Home bias


Most country investors are far away from lowest risk equity portfolioRisk and returns for various equity portfolios (January 1, 1988–December 31, 2011)

Home bias—we all have it

4%

5%

6%

7%

8%

9%

10%

10% 11% 12% 13% 14% 15% 16% 17% 18% 19%

Avera

ge a

nnua

l re

turn

Average annual standard deviation

100% U.K.

100% World ex-U.K.

100% U.S.

100% World ex-U.S.100% World ex-AUS

100% AUS

100% CAN

100% World ex-CAN

70% ex-Canadian assets

Source: Vanguard calculations using Thomson Reuters Datastream.

Note: Domestic returns are represented by the MSCI USA Index, MSCI UK Index, MSCI Australia Index, and MSCI Canada Index. Foreign ex domestic returns are represented by

MSCI All Country World Ex-Country Indices for the US, UK and Australia. Because a comprehensive index for global equities ex Canada is not available from Thomson Reuters, we

spliced the MSCI EAFE index (CAD) with the MSCI Emerging Markets Index (CAD) and the MSCI USA Index (CAD). All returns denominated in domestic currencies.


Bond correlation over time is less than one

Correlation of the monthly change in each country's 10-year government bond yield to that of Canada, Jan 1998–Nov 2013

Bonds: Why go global?

0.5

0.40.4

0.6

0.1

0.3

0.5

0.1

0.3

0.50.6

0.6

0.00

0.25

0.50

0.75

1.00

Australia Belgium France Germany Italy Japan Netherlands SouthKorea

Spain Sweden UK US

Source: Vanguard, based on data from Thomson Reuters Datastream.


Rank Country 12/31/2012 2/28/2014 Change

1 United States 45.05 49.06 4.01

2 United Kingdom 8.05 7.95 –0.10

3 Japan 6.90 7.64 0.74

4 Canada 4.26 3.58 –0.68

5 France 3.54 3.44 –0.10

6 Germany 3.03 3.27 0.24

7 Switzerland 2.93 3.17 0.24

8 Australia 3.32 2.71 –0.61

9 China 2.38 1.92 –0.46

10 Korea 2.20 1.59 –0.61

Canadian equities account for only 4% of world capitalizationBut Canada’s stock market ranks No. 4 compared with its GDP (No. 11) and population (No. 35)

Country stock market as a percentage of world market cap

Source: Vanguard – MSCI country weights in Total World Stock Market Index.


23%

39%

54%

67%

-10%

0%

10%

20%

30%

40%

50%

60%

0% 25% 50% 75% 100%

Weig

ht in

glo

bal m

ark

et

Domestic allocation to domestic equities

Market

proportional

allocationLocal

market

overweight

52%

53%

85%

84%

-10%

0%

10%

20%

30%

40%

0% 25% 50% 75% 100%

Weig

ht in

glo

bal m

ark

et

Domestic allocation to domestic fixed income

Local market

overweightMarket

proportional

allocation

Home bias in domestic fixed income marketsHome bias in domestic equity markets

Home bias in stocks and bonds

Source: International Monetary Fund Coordinated Portfolio Investment Survey, Dec. 31, 2012, Barclays and Thomson Reuters Datastream.

Note: The IMF Coordinated Portfolio Investment Survey was used in conjunction with market capitalization information to determine domestic and foreign investment. The MSCI All

World All Country index is used to represent the world equity market portfolio. Country weights for domestic equities are represented by the MSCI USA Investable Market Index, the

MSCI UK Investable Market Index, the MSCI Australia Investable Market Index and the MSCI Canada Investable Market Index. The fixed income market capitalization for the world

and each individual country is provided by the Bank for International Settlements (BIS). We use market-cap data from the BIS because the data is generally more comprehensive and

covers all domestic and foreign issuances whereas data from index providers such as Barclays generally cover only the investable portions of the market. Central bank holdings of

domestic bonds were excluded from our calculations as they represent closely held or unavailable securities. The investment holdings data for a given country can be categorized as

either “foreign investment by domestic investors” or “domestic investment by domestic investors”. The sum of these equals “total investment by domestic investors”. The percentage

allocated to domestic securities divides “domestic allocation by domestic investors” by the “total investment by domestic investors”.

US Equities UK Equities

Canadian Equities Australian Equities

US Equities UK Equities

Canadian Equities Australian Equities


Factors affecting the foreign asset allocation decision

How much should go outside the home market?

Favour

LocalMarket

Favour

GlobalMarket

0%

international

Market

proportional

Historical risk/return

allocation to international

No deviation High deviationDomestic sector variation from

world market

Diverse Highly concentratedDomestic issuer concentration

Low HighDomestic transaction costs

High PoorDomestic liquidity

Advantages DisadvantagesDomestic asset taxes

No Impact Significant risksOther domestic risk factors?

Additional considerations

Regulatory limits and liability matching systems


Canada has some major differences in sector exposure

Sector differences are large relative to the global economy

Sector differences vs. MSCI ACWI IMI

Sectors MSCI USA IMI MSCI UK IMI MSCI Australia IMI MSCI Canada IMI

Consumer Discretionary 0.8 –2.6 –8.8 –6.6

Consumer Staples –0.4 5.2 –0.8 –5.7

Energy 0.4 6.1 –3.3 16.5

Financials –4.5 –0.1 25.8 13.7

Health Care 2.6 –2.4 –5.4 –6.8

Industrials –0.4 –2.9 –5.5 –3.8

Information Technology 5.7 –10.3 –11.8 10.9

Materials –2.6 2.5 12.6 6.3

Telecommunication Services –1.6 3.8 –1.6 –1.3

Utilities –0.1 0.7 –1.4 –1.4

Sum of absolute deviations 19.1 36.6 76.8 72.9

Yellow shading denotes deviations between 5% and 9.99%.

Red shading denotes deviations 10% or greater.

Source: Vanguard calculations based on FactSet data. Note: Data as of 12/31/2013


Home bias is significant in Canada

and everywhere else too

What to do about it?

Diversify globally, based on local factors

Home bias exists in bonds too

Hedging is key to bringing bond volatility down

In conclusion


• Higher costs can significantly depress a portfolio’s growth over long periods

• Costs create an inevitable gap between what the markets return and what investors

actually earn—but keeping expenses down can help to narrow that gap

• Lower-cost mutual funds have tended to perform better than higher-cost funds over time

• Indexed investments can be a useful tool for cost control

Minimize cost


100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

5 10 15 20 25 30

Port

folio

valu

e,

$

Years

The long-term impact of investment costs on portfolio balances

Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested

Why cost matters

Note: The portfolio balances shown are hypothetical and do not reflect any particular investment. The final account balances do not reflect any taxes or penalties that might be due

upon distribution. The Management Expense Ratoio (MER) is used for the expense ratio. MER is the sum of the management expenses incurred by the fund expressed as a

percentage of the average net assets throughout the year.

Source: Vanguard calculations using data from Morningstar.

$532,899 0.25% annual cost

$574,349 No costs

$378,923 1.40% annual cost


Average annual returns over the ten years through 2016

Reduce cost to help improve return

Notes: All Canada-domiciled mutual funds in each Morningstar category were ranked by their expense ratios as of December 31, 2016. They were then divided into four equal groups,

from the lowest-cost to the highest-cost funds. The chart shows the ten-year annualized returns for the median funds in the lowest-cost and highest-cost quartiles. Returns are net of

expenses, excluding loads and taxes. Both actively managed and index funds are included, as are all classes with at least ten years of returns.

Source: Vanguard calculations, using data from Morningstar, Inc.

0

1

2

3

4

5

6

7

8

9

10

Large-cap Mid-cap U.S. equity Intermediate-term Short-term

Avera

ge a

nnual re

turn

for

ten y

ears

thro

ugh 2

016

Equity Fixed income

Median fund in lowest-cost quartile

Median fund in highest-cost quartile


Asset-weighted expense ratios of active and indexed investments

Indexing can help minimize cost

Notes: “Asset-weighted” means that the averages are based on the expenses incurred by each invested dollar. Thus, a fund with sizable assets will have a greater impact on the

average than a smaller fund. Analysis includes all share classes of funds available for sale in Canada.

Source: Vanguard calculations, using data from Morningstar, Inc.

Average expense ratio as of December 31, 2016

Actively managed funds Index funds Difference

Canadian equity 1.10% 0.26% 0.84

International equity 1.11% 0.42% 0.69

U.S. equity 1.37% 0.34% 1.03

Canadian fixed income 0.59% 0.33% 0.26


22%

44% 42%

28%32%

8%

22% 20%16% 16%

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Large-cap blend Small-cap blend International equity:Developed markts

International equity:Emerging markets

Diversified U.S. fixedincome

Percentage of active funds outperforming the average return of low-cost index funds over the ten years through 2016

Low-cost indexing can improve returns

Notes: Data cover the ten years ended December 31, 2016. The actively managed funds are those listed in the respective Morningstar categories.

Sources: Morningstar and Vanguard.

Based on funds surviving after ten years

Based on survivors plus funds closed or merged

Morningstar category


• Investors cannot control markets, but they can control what they pay to invest

• The lower your costs, the greater your share of an investment’s return

• Lower-cost investments have tended to outperform higher-cost alternatives

Key takeaways


• Enforcing an asset allocation through periodic rebalancing can help

manage a portfolio’s risk

• Spontaneous departures from such an allocation can be costly

• Attempts to outguess the market rarely pay

• Chasing winners often leads to a dead end

• Simply contributing more money toward an investment goal can be a

surprisingly powerful tool

Maintain perspective and long-term discipline


Market timing versus a market benchmark: A spotty record

Performance of flexible-allocation funds compared with a 60% stock/40% bond benchmark, January 1997-December 2016

Ignore the temptation to alter allocations

Notes: The balanced benchmark consists of the MSCI US Broad Market Index (42%), the MSCI All Country World Index ex USA (18%) and the Barclays U.S. Aggregate Bond Index

(40%). Flexible-allocation funds are those defined by Morningstar as having “a largely unconstrained mandate to invest in a range of asset types.”

Source: Vanguard, using data from Morningstar.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Bull Market 1/1/97 -8/31/00

Bear Market 9/1/00 -2/28/2003

Bull Market 3/1/03 -10/31/07

Bear Market 11/1/07 -2/28/2009

Bull Market 3/1/09 -12/31/16


40%

45%

50%

55%

60%

65%

70%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Allo

cation t

o s

tocks

The importance of maintaining discipline: Failure to rebalance can increase an investor’s exposure to risk

Changes in equity exposure for a rebalanced portfolio and a “drifting portfolio,” 2006–2016

The case for discipline

Target Allocation

Equity Allocation: Semi-annual Rebalance Portfolio

Equity Allocation: “Set and Forget Portfolio

Notes: The initial allocation for both portfolios is 30% Canadian equities, 30% international equities and 40% Canadian fixed income. The rebalanced portfolio is returned to this

allocation at the end of each June and December. Returns for the Canadian equity allocation are based on the S&P/TSX Composite Index. Returns for the international equity

allocation are based on the MSCI EAFE, MSCI USA and MSCI Emerging Markets Indexes allocated at their historic market weights. Returns for the fixed income allocation are based

on the Citigroup World Government Bond Index—Canada All Maturities. This hypothetical illustration does not represent the results of any particular investment.

Source: Vanguard, using data provided by Thomson Reuters Datastream.

Year


Fund leadership is quick to change

Ignore the temptation to chase last year’s winner

270 funds

81% (218) underperformed 19% (52) outperformed

71% (37) underperformed29% (15) out-

performed

January 1, 2003

December 31, 2007

December 31, 2012

Note: The chart is based on a ranking of all actively managed Canadian equity funds covered by Morningstar traditional style categories according to their excess returns versus their

stated benchmarks as reported by Morningstar during the five years through 2007.

Sources: Vanguard and Morningstar.


How investors’ returns lagged their funds’ returns 2002-2016

Market timing and performance chasing can be a drag on returns

Notes: The average difference is calculated based on Morningstar data for investor returns and fund returns. Morningstar Investor Return™ assumes that the change in a fund’s total

net assets during a given period is driven by both market returns and investor cash flow. To calculate investor return, the change in net assets is discounted by the fund’s investment

return to isolate the amount of the change driven by cash flow; then a proprietary model is used to calculate the rate of return that links the beginning net assets and the cash flow to

the ending net assets.

Sources: Morningstar and Vanguard calculations. Data cover the period from January 1, 2002, through December 31, 2016.

-0.33-0.44 -0.47

-0.61 -0.62 -0.62

-1.1 -1.12 -1.15 -1.17

-1.43

-2.14

-2.61

-3

-2.5

-2

-1.5

-1

-0.5

0Balanced International Equity U.S. Equity

DiversifiedEmerging Markets Commodities

Foreign small-cap/mid-cap blend Global Real Estate Alternative Taxable Bond Sector Equity Municipal Bond High Yield Bond

Emerging MarketsBond

Ave

rag

e a

nu

al d

iffe

ren

ce

be

twe

en

in

ve

sto

r re

turn

an

d

fun

d r

etu

rn (

%)


• Because investing evokes emotion, even sophisticated investors should

maintain long-term discipline

• Abandoning a planned investment strategy can be costly

• Often, the most significant derailer is behaviour—failure to rebalance,

the allure of market timing and the temptation to chase performance

Key takeaways


Commissions, management fees, and expenses all may be associated with investments in a Vanguard ETF®. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard ETFs® are managed by Vanguard Investments Canada Inc., an indirect wholly owned subsidiary of The Vanguard Group, Inc.

Date of publication: May 25, 2017.

The opinions expressed in this presentation are those of the individual representative and do not necessarily reflect the opinions of Vanguard Investments Canada Inc. No implied or express recommendation, offer, or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy is made in this material. This presentation is not research, investment and/or tax advice and it is not tailored to the needs or circumstances of any individual investor.

Information, figures and charts are summarized for illustrative purposes only and are subject to change without notice. While this information has been compiled from sources believed to be reliable, Vanguard Investments Canada Inc. does not guarantee the accuracy, completeness, timeliness or reliability of this information or any results from its use. Information regarding third-party investment fund managers is solely for educational purposes.

All investments, including those that seek to track indexes, are subject to risk, including the possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market. While Vanguard ETFs are designed to be as diversified as the original indexes they seek to track and can provide greater diversification than an individual investor may achieve independently, any given ETF may not be a diversified investment.

In this presentation, references to "Vanguard" are provided for convenience only and may refer to, where applicable, only The Vanguard Group, Inc., and/or may include its affiliates, including Vanguard Investments Canada Inc.

No part of this presentation may be reproduced, distributed, disseminated or referred to, in whole or in part, in any form, including to any investor, without prior written and express permission by Vanguard Investments Canada Inc. By participating in this presentation or by accepting any copy of the slides presented, you agree to be bound by these terms and conditions.

© 2017 Vanguard Investments Canada Inc. All rights reserved.

Important information


*Vanguard Investments Canada Inc. is a wholly owned indirect subsidiary of The Vanguard Group, Inc.

Appendix: Vanguard structure

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