Rigorous primary research

In this paper, Vanguard analysts quantify the frequency, duration, and magnitude of underperformance experienced by equity factor tilts and outperforming traditional active managers. The findings show that nearly all outperforming active strategies have frequent periods of underperformance, some of which are long in duration and large in magnitude.

For many families, planning for college costs is a top financial priority. A Byzantine landscape of consumer choices, loans, tuition discounting, and public and private aid, however, makes it difficult to answer key questions like "How much will this cost us?” This is especially so for young families, for whom future spending needs are necessarily vague. Vanguard researchers explore how understanding the dynamics of financial aid and net pricing can help parents set a realistic savings target early on and shape a savings plan that evolves with them. 

A number of factors have fueled the growth of index investing around the world. “The case for low-cost index-fund investing,” a newly revised research paper from Vanguard’s Investment Strategy Group, explores these factors. The paper discusses why the authors expect that index investing will continue to be effective over the long term. 

A new research paper in Vanguard’s Megatrends series examines the possible economic effects of climate change. Our research considers the direct physical impact of higher temperatures, the effect of stricter policies aimed at curbing greenhouse gas emissions, and the economic boost from “green investment.”

The past few decades were a good time for spending from a retirement portfolio. What about the next 30 years? The apparent shifts in capital market conditions seen since the start of 2022 led us to examine sustainable withdrawal rates. Looking at historical return environments our authors developed three scenarios, with rates from 2.8% to 3.3%.

Vanguard believes private corporate pension plans should consider a liability-driven investing (LDI) program in the fixed income portion of their portfolio. Based on our analysis, a customized mix of U.S. investment-grade credit bonds and Treasuries aligns well with that liability. Such a mix has historically helped plan sponsors mitigate risk.

Personalized indexing (PI) is a flexible portfolio management solution that can track a personalized index and harvest capital losses for tax-saving purposes. This paper presents a portfolio construction plan using PI, touching on how to optimally implement tax-loss harvesting and allocate to PI in the presence of other assets.

Investors typically decide whether to convert to a Roth IRA from a traditional IRA by comparing their current and expected future marginal tax rates. The traditional wisdom has been that higher future tax rates make conversion more desirable and lower ones make it less so. Vanguard researchers describe a break-even tax rate (BETR) that yields a more accurate view of what future tax rate would make an investor indifferent to a conversion.

New Vanguard research indicates that investors are frequently using non-total market index funds to build portfolios with active exposures, according to “How investors use passive for active,” a paper authored by Vanguard’s Jan-Carl Plagge, Haifeng Wang, and Jim Rowley. The paper was published in The Journal of Beta Investment Strategies.

Investors prefer some aspects of human advice over digital but perceive value in all advice services. Technology can help human advisors scale their businesses while strengthening their uniquely human value proposition.

Vanguard shares our current views on best practices for U.S. private-sector pension plan asset allocation. We highlight the value of identifying three targets—the return-seeking asset allocation, interest rate hedge ratio, and credit spread hedge ratio—that can be the foundation for a robust, customized portfolio construction process.

Retirees often eschew investing for total returns, relying instead on dividends and interest from high-income-producing assets to support spending from ad hoc portfolios. We introduce a method for building high-income portfolios that maximize the investor’s utility of wealth based on total returns while accounting for yield preferences.

Our annual forecast explains why we expect the global economy to slow, leaving full-year 2022 growth, in our base case, of 4.8%. It also explains why our 10-year market outlook is guarded, as reflected in the low-single-digit range of expected returns for a globally diversified, 60% stock/40% bond portfolio.

Tax-loss harvesting (TLH) has been promoted as a “free lunch” for increasing investment returns. Vanguard researchers explore the potential for TLH and demonstrate how to customize a TLH strategy for optimal benefits. A case study is also featured that illustrates how the benefits of TLH can vary considerably from investor to investor.

We expect the exceptional levels of monetary and fiscal support to gradually be removed into 2022. The removal of policy support poses a new challenge for policymakers and a new risk to financial markets.

While progress has been made in combatting COVID-19, the prolonged re-opening of the U.S. economy has fueled uncertainty. Vanguard economists assess the economy and examine the key questions facing the markets: What will the next phase of the recovery look like and will it prompt earlier-than-expected policy rate action from the Federal Reserve.

Historically low yields on most global fixed income investments are likely to result in low returns over the next decade, leading some investors to question the allocation to bonds in multi-asset portfolios. In this paper, Vanguard researchers demonstrate the value of bonds as “shock absorbers” for portfolios when equity markets are under stress.

This paper examines the effect of automatic escalation on defined contribution plan contribution rates and provides insights into plan designs that maximize participants’ chance of savings at rates necessary for a secure retirement. The motivations of participants to override automatic deferral rates and annual increases are also explored.

This study explores how factoring in health care cost uncertainty can benefit retirement planning by enabling the development of more customized plans. Vanguard researchers employ a stochastic health care model to offer more realistic insights into how longevity and health care-related risks affect the viability of spending plans in retirement.

Growth in pension liabilities, along with new disclosure requirements and market-based accounting standards, have led defined benefit pension plan sponsors to consider corporate finances as they manage their plans. This paper discusses how pension plan risk can affect corporate finances and the strategies sponsors can use to mitigate that risk.

Parents and students face distinct challenges when financing higher education expenses. This research paper discusses financial aid options, tax credits, and 529 savings plans and other savings vehicles, as well as the need to plan strategically and understand how college spending decisions affect one's broader financial situation.

With interest rates and inflation expected to rise, the negative stock/bond correlation that supports the diversification properties of a balanced portfolio could also be at risk. In this paper, researchers find that negative correlation will continue and the diversification benefits of a 60% stock/40% bond portfolio will persist.

Vanguard’s Megatrends series examines fundamental shifts in the global economic landscape that are likely to affect the financial services industry and broader society. In this edition, Vanguard researchers explore China’s future as an economic powerhouse and its broad implications for global growth, geopolitics, and financial markets.

Vanguard’s Megatrends series examines fundamental shifts in the global economic landscape that are likely to affect the financial services industry and broader society. In this paper, Vanguard economists examine global trade growth and conclude that growth will likely slow, as it has since the global financial crisis, but not decline.

Vanguard researchers classify the economic and market environment into five states: recession, recovery, expansion, slowdown, and high inflation. This paper discusses the characteristics, valuations, and return expectations of each and concludes that investors willing to take on active risk should adopt a dynamic, state-dependent approach.

Amid a backdrop of highly accommodative monetary and fiscal policies, how likely are persistently higher rates of inflation in the United States for 2022 and beyond? In this paper, Vanguard researchers present the findings of Vanguard’s state-of-the-art forecasting model to project core inflation over the next two years.

Employing machine-learning, Vanguard researchers found that government bonds have historically acted as a counterbalance in an equity/bond portfolio during low-rate periods. Although in some months both equities and bonds fall, the analysis suggests that this can be thought of as market noise and distinctly different from typical outcomes.

Most target-date fund series offer a single post-retirement asset allocation designed to help retirees replace a reasonable portion of pre-retirement income. In this paper, Vanguard researchers offer a framework demonstrating that adding a second asset allocation could support additional goals for those with the resources and desire to pursue them.

A Vanguard survey shows that most investors underestimate the risk of mild cognitive impairment. In addition, while most respondents had some plans to mitigate the effects of cognitive decline, they were less likely to focus on the transfer of control of their finances, the timing of which can have significant implications for financial well-being.

This paper examines developments in the fixed income markets before and during the liquidity event precipitated by the coronavirus pandemic and the accompanying economic shock to the global financial markets. Vanguard calls for fixed income market participants and policymakers to make recommendations to improve market resiliency in the future.

This research looks at the withdrawal patterns, rates, and frequencies of more than two million Vanguard retail households at or near retirement age. It finds that only 52% took at least one withdrawal during the three-year study period.

Vanguard researchers examine the range of frequencies, durations, and magnitudes of underperformance experienced by active fixed income funds. The findings: Nearly all outperforming active fixed income funds experience periods of underperformance, although significant drawdowns over long periods are less likely than they are for active equity funds.

This paper explores the relationship of the number of fixed income holdings in a fund to systemic risk and alpha.

Vanguard researchers analyze the results of a survey of Vanguard investors' expectations for U.S. stock returns throughout the COVID market crisis. The results indicate that expectations follow market activity in close lockstep, shifting in tandem with recent performance rather than rising and falling in a more rational or contrary manner.

The Financial Independence, Retire Early (F.I.R.E.) movement relies on the 4% rule to determine withdrawals over 40 to 50 years in retirement. But that rule was designed for a 30-year horizon. This paper illustrates how F.I.R.E. investors can improve their chances of financing an early retirement by employing Vanguard’s investing principles.

Many pension plan sponsors are taking on funding status risk significantly above their risk tolerance. In this paper, Vanguard experts describe the primary risk factors and the tools available to manage them. Vanguard advocates following a defined risk-management process to align the competing goals of managing risk and pursuing solid returns.

This paper presents a framework, developed by Vanguard and Mercer, to forecast health care costs for U.S. retirees. Vanguard researchers outline key health care cost factors and personal considerations and frame expenses as an annual cost rather than a lifetime lump sum, enabling retirees to plan accordingly during their retirement years.

This supplement to How America Saves delves deeper into defined contribution plan landscape, combining comprehensive data on plan design and participant behavior with practical advice and insights from Vanguard's leading retirement plan experts to offer recommendations to improve plan efficacy and employee participation.

"How America Saves" is the industry's definitive report on American's retirement savings habits. The 2021 edition details how automatic plan features and target-date funds helped millions of defined contribution plans participants adhere to their financial goals, even amid severe market volatility resulting from the coronavirus pandemic.

While the global economy recovers from the pandemic, central bank policy rates are expected to lift off starting in 2023 as quantitative easing unwinds. But how will that affect bond yields? Vanguard's model suggests that long-term government bond yields will increase only modestly as ultra-accommodative monetary policy normalizes.

Patience in investing is the capacity to endure periods of underperformance in hopes of achieving an investment objective. In this piece from The Journal for Investing, Vanguard researchers quantify the frequency, duration, and magnitude of underperformance that both equity factor tilts and outperforming traditional active managers experience.

Critical to constructing a portfolio for a specific goal is selecting a combination of assets that offers the best chance of meeting that objective. This paper reviews the decisions investors face when constructing a globally diversified portfolio and discusses the importance of broad asset allocation and diversification within sub-asset classes.

Although one-third of participants in Vanguard defined contribution plans had access to a self-directed brokerage option in 2020, only 1 percent of those participants chose to use it. On average, brokerage participants invest half of their account balance in the brokerage option.

Investors can diversify their portfolios through equity allocations to markets outside their home market. This research paper explores the potential benefits, and the factors to assess in determining portfolio allocations.

The past ten years have been tremendous for growth stocks, but we do not expect that trend to continue. This research presents the results of our fair value model for the ratio of value to growth stocks. These results suggest that value will outperform growth over the next ten years by as much as the equity risk premium.

Researchers and policymakers have suggested that annuities can help retirees manage the risk of outliving their assets. Vanguard research finds, however, that most retirees are reluctant to annuitize and decide against exchanging liquid wealth for guaranteed income in order to retain future financial flexibility.

Retirees and other income-reliant investors face challenges in this low-yield environment. This paper explains how total-return investing can support spending through both portfolio income and capital appreciation. This approach can help investors minimize portfolio risks, increase portfolio longevity, and meet their spending goals.

Retirement planning is a complex process based on an individual's unique circumstances and objectives. In this paper, Vanguard offers a retirement planning framework to help investors prioritize goals, understand risks, assess available financial resources, and develop a sound plan to achieve financial security.

In 2020, 54% of Vanguard defined contribution plan participants were invested in a single target-date fund (TDF). TDFs will continue to grow because of 1) their simplified portfolio construction, 2) automatic enrollment, and 3) their designation as a qualified default investment alternative under the Pension Protection Act.

The Vanguard Life-Cycle Investing Model is a proprietary model for glide-path construction that can assist in the creation of custom investment portfolios for retirement and nonretirement goals. This paper describes the model, the benefits of a customizable, goals-based approach, and practical applications in product design and advice methodology.

In this paper, Vanguard researchers present an accessible method for determining the “clonability” of active fixed income managers. They offer a framework to help investors evaluate current and prospective managers and to ensure that existing portfolio managers are adding unique value and that their style of investing is true-to-label.

Automatic enrollment is a pivotal strategy to improve participant outcomes in retirement plans around the world. This paper underscores how default decisions made by plan sponsors have a powerful influence on saving and investment behavior, including increasing participation rates, deferral rates, and usage of default investment options.

In this comprehensive annual outlook, Vanguard’s leading economists and investment strategists analyze the short- and long-term effects of the COVID-19 pandemic on the global economy and discuss both challenges and opportunities for fixed income and equity market returns over the coming years.

Using data from more than 800,000 affluent households, Vanguard researchers offer the industry's most comprehensive analysis of retail investor behavior. The report focuses on portfolio construction, sentiment, and trading behavior from 2015 through 2019 and provides a glimpse of investor reaction to the sharp market decline at the outset of 2020.

Vanguard researchers examine the use of company stock in defined contribution plans, finding that the number of plans offering company stock has fallen 36% and participant stock ownership has decreased nearly 66%. The paper notes that sponsors seeking to reduce concentrated stock ownership should consider making employee contributions in cash.

U.S. equities strongly outperformed their international peers over the ten years ended December 2019. Using the Vanguard Capital Markets Model, researchers examine the drivers of that outperformance—including valuation expansion, earnings growth, and dollar appreciation—and find that continued long-term outperformance is unlikely.

In this research in The Journal of Index Investing, the authors analyze the relationship between the time of day and bid-ask spreads for U.S. fixed income ETFs. The findings: Spreads generally flatten throughout the day, offering a different lens to the argument that investors should systemically avoid trading these assets near market close.

This research note shows advisors how they can help clients create a retirement-portfolio withdrawal strategy that will enable them to navigate market volatility.

This paper discusses how Treasury futures can be a tool for pension plan sponsors who want to manage interest rate and market risk.

What is the value of tax-loss harvesting? Examining more than 80,000 investors, Vanguard analysts demonstrate that outcomes of equity-based tax-loss harvesting vary significantly across investor characteristics and market environments. The expected results range from no benefit or even negative returns to gains of more than 1% annually.

Investor interest in private equity is on the rise. This research paper examines the role private equity can play in a strategic, long-term portfolio and introduces a new portfolio construction framework that accounts for private equity's unique risk and return characteristics.

Health Savings Accounts (HSAs) represent a unique—and frequently underappreciated—opportunity for individuals to save for retirement and other long-term goals. Vanguard experts examine HSAs and their benefits and explain how to best utilize them based on personal circumstances and behavioral considerations.

This paper describes the glide-path construction methodology derived from Vanguard’s Life-Cycle Investing Model that underlies the target enrollment portfolios in Vanguard 529 plans. The conclusion: Portfolios grounded in traditional, broad-based, market-proportional asset classes can serve as a prudent foundation for an education savings program.

Can active equity managers be cloned using factor funds? Professional investors assessing the “clonability” of active managers may find that a manager hired to generate alpha has merely been providing a fairly consistent tilt toward one or more factors. This paper presents an accessible method for determining the clonability of a manager.

In an article in The Journal of Impact & ESG Investing, Vanguard analysts clarify environmental, social, and governance (ESG) terms and trends and provide an objective, practical framework for establishing goals, evaluating options, and deciding on an ESG investing approach based on personal criteria and trade-off considerations.

The unfolding global coronavirus pandemic precipitated unusual and considerable stock market volatility during the first half of 2020. In this paper, Vanguard researchers find that, of the small set of U.S. investors who abandoned equities and moved the proceeds to cash, 80% would have been better off if they had simply “stayed the course.”

Digital attention and online behavior during the coronavirus outbreak are the focus of a new research note from Vanguard. The study examines how web-registered Vanguard investors reacted during a period of great market volatility.

The COVID-19 pandemic caused the sharpest and deepest short-term economic contraction in modern history. In this comprehensive outlook, economists address the interrelated dynamics of this shock, discuss an expected two-phase economic recovery, and offer a sanguine investment outlook

This paper explores the effects of “sequence-of-return” risk on retirees who depend on a financial portfolio to generate income. Vanguard researchers find that retirees receiving a concentrated series of poor returns are 31% more likely to outlive their wealth, possess 11% lower retirement income streams, and leave 37% smaller bequests.

Understanding the uneven effect of the pandemic on economic growth across sectors and regions requires inspecting both traditional economic data and higher-frequency indicators. Vanguard economists estimate that China will achieve full economic recovery more quickly than the U.S., the euro area, and the U.K.

In this paper, Vanguard espouses four simple and enduring principles to help investors achieve long-term success. Goals: Create clear, appropriate investment goals. Balance: Develop a suitable asset allocation using broadly diversified funds. Cost: Minimize cost. Discipline: Maintain perspective and long-term discipline.

"How America Saves" is the industry's definitive report on Americans' retirement savings habits. The 19^th edition reveals trends from 2019, including automatic enrollment and the growing influence of target-date funds, that simplify decision-making for participants and lead to better saving habits for millions of people.

The authors of this Journal of Index Investing paper posit that further ETF innovation will expand investors’ opportunity set, reduce costs, and improve risk-adjusted returns. They present a framework for evaluating innovation and assessing its contribution toward enabling investors to build portfolios that better reflect their preferences.

Do men and women exhibit different investing behavior? Vanguard research finds gender differences are minimal in terms of portfolio risk but more pronounced in fund holdings, digital attention, and trading behavior. The differences are magnified for households in which only one member is a Vanguard client compared to dual-member households.

Examining U.S. household wealth during the first quarter of 2020 over one- and three-year perspectives, Vanguard finds that wealth declined for the quarter but increased or stayed the same over one year and increased over three years. This suggests investors are maintaining a long-term perspective and not overreacting to declines.

An updated Vanguard research paper presents a framework for a retirement spending strategy that can help investors maximize their chances of achieving their financial goals. Our dynamic spending rule allows retirees to turn an investment portfolio into a sustainable and relatively constant level of income while also planning for other goals.

Vanguard analysis shows a slightly elevated level of trading among Vanguard U.S. self-directed individual investors in reaction to the substantial market decline induced by the COVID pandemic. About 8% made at least one trade between February 19 and March 20, 2020. More than 90%, however, did not trade during this period.

How should investors prioritize cash flows? This paper introduces a framework for evaluating the best use of an individual’s next discretionary dollar. It concludes that any strategy must balance generating greater potential returns with an investor's behavior, risk tolerance, and liquidity needs over time.

In this Bernstein Fabozzi/Jacobs Levy award-winning paper from The Journal of Portfolio Management, Vanguard researchers present a quantitative asset allocation framework incorporating active, passive, and factor strategies and propose a utility optimization model that allocates assets among investments in those categories.

This paper reviews survey results of investor expectations for stock returns, GDP growth rates, and bond returns from 2017 to 2019. The findings: Responses were muted and consistent, with one-year stock market return expectations of about 5% and ten-year average annual return expectations of about 6%.

In this paper, Vanguard researchers record the increasing adoption of target-date funds (TDFs) in defined contribution plans and explore how TDFs continue to reshape investment patterns. Most notably, TDFs help participants improve portfolio construction, avoid extreme portfolio allocations, and stay disciplined when it comes to risk.

Analyzing the asset allocations of more than 44,000 self-directed investors who adopted Vanguard Personal Advisor Services, Vanguard researchers find that professional advice improves portfolio construction for nearly 90% of the investors by addressing equity risk-taking, increasing international exposures, and reducing cash holdings.

Many contradicting theories exist about the consequences of environmental, social, and governance (ESG)-related factors on equity risk and return. In this The Journal of Portfolio Management paper, Vanguard finds that the majority of ESG funds do not produce statistically significant positive or negative gross alpha.

Vanguard’s Megatrends series examines fundamental shifts in the global economic landscape that are likely to affect the financial services industry and broader society. In this edition, Vanguard analysis suggests a productivity increase of 1.2% annually over the next five years, resulting in higher wages, profits, and living standards.

In this outlook, Vanguard economists explore how an increasingly unpredictable policy environment is undermining global economic activity through postponed investments and declines in production. This uncertainty will act as a drag on demand and may, if it persists, result in lower economic growth and a fragile market backdrop beyond 2020.

This paper explores how households can prepare for both unexpected spending shocks, such as a car repair, and the rarer but generally more severe income shocks, such as a job loss.

In this paper, Vanguard researchers examine investing behavior in 1.8 million 529 plan accounts holding $53 billion in assets. The findings: Accounts using automatic investment methods exhibit the most consistent savings behavior, and those using age-based allocations have substantially less portfolio risk than self-directed ones. 

Technology advances have spawned fear that they eliminate jobs. New Vanguard research finds more room for optimism.

ETFs can be useful tools for investors building their portfolios. A Vanguard commentary explores their role in portfolio construction and in providing market liquidity and market information.

The current geopolitical and economic uncertainty presents a challenge to the Fed as it engineers a soft landing. Our goal in this paper is to provide a framework for assessing the Fed’s responses to various possible scenarios. This can help investors understand the nuances that drive the Fed’s decisions.

How America Saves is Vanguard’s seminal report on 401(k) plan design and retirement savings habits. This year’s report reveals plan design opportunities employers can address to further improve workers’ retirement readiness as many participants face increasingly complex financial situations and life events.

This supplement to How America Saves offers practical advice and insights from Vanguard's leading retirement plan experts on how to improve plan efficacy and employee participation. In our 2022 edition, learn more about advice solutions; automatic enrollment and escalation; and ways to meet the needs of a more mobile workforce. 

A new Megatrends paper explores equilibrium interest rates, the forces that shape them, and where they may be headed.

Our experts provide insights into who has retired during the pandemic and whether these retirees might need to return to the workforce.

Recent Vanguard research indicates that gender diversity on a fund’s investment team may offer performance benefits. The findings underscore the benefit of evaluating the diversity of an investment management team with the same rigor we do portfolio diversification, recognizing the meaningful impact that both can have on fund performance.

Even the most groundbreaking technological innovations can experience a lag between discovery and the implementation of a commercial application. That lag—along with current social, economic, and technological conditions—can have vast implications on the broader economy.

We summarize in two pages the conditions of five major economic blocs and provide 10-year return forecasts for major asset classes.

A Vanguard white paper looks at ways to tailor portfolios to address specific investor goals and preferences.

Seven in 10 defined contribution plan participants are saving enough to replace 65% of their salary in retirement. A new Vanguard white paper looks at several ways plan sponsors can help participants boost these replacement rates. Among them: Automatic enrollment defaults and enhanced employer contributions.

This paper presents a methodology for estimating the trading volume on U.S. exchanges attributable to index funds, index ETFs, and other indexing strategies. Vanguard researchers estimate that index funds and index ETFs currently account for approximately 1% of overall trading volume on U.S. exchanges, well below the more widely quoted 5% to 7%.

Using four hypothetical case studies, a new Vanguard research paper, The Value of Personalized Advice, provides insights into how to think about and measure the value of financial advice for individual clients.

A new Vanguard research paper, Revisiting the conventional wisdom regarding asset location, takes a second look at best practices for asset location and whether they are appropriate for investors.

Relying on a simple robust model, Vanguard Investment Strategy Group presents three broad economic scenarios that the Federal Reserve could face in the coming months: a softish landing, a hard landing, and stagflation.

Regulation, fee, and technology trends in the advice industry may get all the attention, but it’s still soft skills and relationships that will distinguish advisors from others. Learn more from the latest in the Vanguard Advisor’s Alpha series.

A new Vanguard research paper sheds light on how investors’ health state can affect their asset allocation and consumption in retirement. 

Vanguard Financial Advice Model (VFAM) is a new approach to financial planning, assessing combinations of strategies and their relative value for an investor.

A new Vanguard research paper outlines an approach to determining life insurance needs that could save thousands of dollars while minimizing the chances that coverage falls short of those needs.

A recently updated research paper makes the investment case for Vanguard target-date funds and offers insights into the role these strategies can play in the portfolios of different types of investors.

As direct indexing accelerates in popularity among investors, one of its measurable benefits is the ability to implement a systematic tax-loss harvesting (TLH) strategy. Vanguard researchers examine the value of different modes of TLH for direct indexing investors to determine which is the most effective. The paper was published in The Journal of Beta Investment Strategies.

Our research shows that an annual rebalancing is optimal for investors who don’t participate in tax-loss harvesting or where maintaining tight tracking to the multiasset benchmark portfolio is not a concern.

Understanding your health care priorities and available coverage types can help you choose a Medicare coverage option, according to Vanguard researchers.

Americans donated $471 billion to charitable organizations in 2020. Vanguard research explores the three key elements of a successful giving plan: When to give, what to give, and how to give.

There’s no place like home, even when it comes to stock investing. Recent Vanguard research discusses investor local bias, what that disposition means for a portfolio, and how a few small tweaks can alleviate a portfolio’s concentration risk.

Time-varying asset allocation can help build diversified, tax-efficient portfolios, Vanguard researchers say.