Investment Strategy
The Conservative Growth Portfolio invests in two Vanguard® bond index funds and two Vanguard stock index funds in approximately the following proportions:
Vanguard Total Stock Market Index Fund 15%
Vanguard Total International Stock Index Fund 10%
Vanguard Total Bond Market II Index Fund 52.5%
Vanguard Total International Bond Index Fund 22.5%
Through its investment in Vanguard Total Bond Market II Index Fund, the Portfolio indirectly invests in a broadly diversified collection of securities that, in the aggregate, approximates the Bloomberg Barclays U.S. Aggregate Float Adjusted Index in terms of key risk factors and other characteristics. This Index measures a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than one year. The Fund maintains a dollar-weighted average maturity consistent with that of the Index, which generally ranges between five and ten years.
Through its investment in Vanguard Total International Bond Index Fund, the Portfolio indirectly invests in government, government agency, corporate and securitized non-U.S. investment-grade fixed income investments, all issued in currencies other than the U.S. dollar and with maturities of more than one year. To minimize the currency risk associated with investments in bonds denominated in currencies other than the U.S. dollar, the Fund attempts to hedge its currency exposures.
Through its investment in Vanguard Total Stock Market Index Fund, the Portfolio indirectly invests in primarily large-capitalization U.S. stocks and, to a lesser extent, mid-, small-, and micro-capitalization U.S. stocks. The Fund's target index represents approximately 100% of the investable U.S. stock market.
Through its investment in Vanguard Total International Stock Index Fund, the Portfolio indirectly invests in international stocks. The Fund is designed to track the performance of the FTSE Global All Cap ex US Index, a free-float-adjusted, market-capitalization-weighted index designed to measure equity market performance in of companies located in developed and emerging markets, excluding the United States. The Index includes more than 5,500 stocks of companies located in 46 countries.
Investment Risks
Because it invests mainly in bond funds, the Portfolio primarily is subject to moderate levels of interest rate risk, income risk, call risk, prepayment risk, and extension risk. Through its stock fund holdings, the Portfolio is subject to stock market risk. The Portfolio also has low levels of credit risk, currency hedging risk, nondiversification risk, country/regional risk, currency risk, emerging markets risk, index sampling risk, and derivatives risk.