All investing is subject to risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.
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.
About the Vanguard Capital Markets Model:
The VCMM projections are based on a statistical analysis of historical data. Futurereturns may behave differently from the historical patterns captured in the VCMM. Moreimportant, the VCMM may be underestimating extreme negative scenarios unobserved inthe historical period on which the model estimation is based.
The Vanguard Capital Markets Model® is a proprietary financial simulation tool developedand maintained by Vanguard’s Investment Strategy Group. The model forecastsdistributions of future returns for a wide array of broad asset classes. Those asset classesinclude U.S. and international equity markets, several maturities of the U.S. Treasury andcorporate fixed income markets, international fixed income markets, U.S. money markets,commodities, and certain alternative investment strategies. The theoretical and empiricalfoundation for the Vanguard Capital Markets Model is that the returns of various assetclasses reflect the compensation investors require for bearing different types ofsystematic risk (beta). At the core of the model are estimates of the dynamic statisticalrelationship between risk factors and asset returns, obtained from statistical analysisbased on available monthly financial and economic data. Using a system of estimatedequations, the model then applies a Monte Carlo simulation method to project theestimated interrelationships among risk factors and asset classes as well as uncertaintyand randomness over time. The model generates a large set of simulated outcomes foreach asset class over several time horizons. Forecasts are obtained by computingmeasures of central tendency in these simulations. Results produced by the tool will varywith each use and over time.
The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes arehypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.
Indexes used in Vanguard Capital Markets Model simulations
The long-term returns of our hypothetical portfolios are based on data for theappropriate market indexes through May 31, 2021. We chose these benchmarks to provide the most complete history possible, and we apportioned the global allocations to align with Vanguard's guidance inconstructing diversified portfolios. Asset classes and their representative forecast indexesare as follows:
U.S. equities: MSCI US Broad Market Index.
Global ex-U.S. equities: MSCI All Country World ex USA Index.
U.S. aggregate bonds: Bloomberg Barclays U.S. Aggregate Bond Index.
Global ex-U.S. bonds: Bloomberg Barclays Global Aggregate ex-USD Index.
Euro-area equities: MSCI European Economic and Monetary Union (EMU) Index.
Global ex-euro-area equities: MSCI AC World ex EMU Index.
Euro-area aggregate bonds: Bloomberg Barclays Euro-Aggregate Bond Index.
Global ex-euro-area bonds: Bloomberg Barclays Global Aggregate ex Euro Index.
U.K. equities: Bloomberg Barclays Equity Gilt Study from 1900 through 1964; Thomson Reuters Datastream UK Market Index from 1965 through 1969; MSCI UK Index thereafter.
Global ex-U.K. equities: Standard & Poor’s 90 Index from January 1926 through March 4, 1957; S&P 500 Index from March 4, 1957, through 1969; MSCI World ex UK Index from 1970 through 1987; MSCI AC World Index ex UK thereafter.
U.K. aggregate bonds: Bloomberg Barclays Sterling Aggregate Bond Index.
Global ex-U.K. bonds: S&P High Grade Corporate Index from 1926 through 1968; Citigroup High Grade Index from 1969 through 1972; Lehman Brothers US Long Credit AA Index from 1973 through 1975; Bloomberg Barclays US Aggregate Bond Index from 1976 to 1990; Bloomberg Barclays Global Aggregate Index from 1990 through 2001; Bloomberg Barclays Global Aggregate ex GBP Index thereafter.
Chinese equities: MSCI China A Onshore Index.
Global equities ex-China: MSCI All Country World ex China Index.
Chinese aggregate bonds: ChinaBond Aggregate Index.
Australian equities: MSCI Australia Index.
Global ex-Australia equities: MSCI All Country World ex-Australia Index.
Australian bonds: Bloomberg Barclays Australian Aggregate Bond Index.
Global ex-Australia bonds: Bloomberg Barclays Global Aggregate ex-AUS Bond Index.
Canadian equities: MSCI Canada Total Return Index.
Global ex-Canada equities: MSCI All Country World Index ex-Canada in CAD.
Canadian aggregate bonds: Bloomberg Barclays Canadian Issues 300MM Index.
Global ex-Canada bonds: Bloomberg Barclays Global Aggregate ex-Canada Index (CAD Hedged).
Mexican equities: MSCI Mexico Index.
Global ex-U.S. developed-market equities: MSCI World ex US Index.
Mexican sovereign bonds: S&P/BMV Sovereign MBONOS Bond Index.
Global bonds ex-Mexico: Bloomberg Barclays Global Aggregate Index.