Rigorous primary research

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.

Using data from more than 5 million Vanguard retail households, this report represents the industry's most comprehensive analysis of individual investor behavior. It focuses on portfolio construction, sentiment, and trading behavior from 2015 through 2019 and provides a glimpse of investor reaction to the 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.

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.

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.

Vanguard’s Advisor's Alpha research explores how advisors can add value, or alpha, through relationship-oriented services such as providing cogent wealth management through financial planning, discipline, and guidance. This paper seeks to quantify the value that advisors can add by providing these services, both individually and in combination.

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.

In this paper, Vanguard researchers quantify the role of emotions in the advisory relationship, finding that emotional value is a significant component of the perceived value of financial advice.

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.

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.

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.

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.

Vanguard tested two measures of market volatility for their relationship with growth in index assets and selected macroeconomic factors. Published in The Journal of Index Investing, the analysis demonstrates that volatility and macroeconomic factors are highly correlated, whereas volatility and the growth of indexing are negatively correlated.

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.

The amount of negative-yielding debt has surged worldwide, but in this research note, Vanguard asserts that international bonds can play an important role in an investment portfolio. For U.S.-based investors, hedging foreign currency exposure helps maintain the risk profile of international bonds and dampen portfolio volatility.

This research examines factors beyond typical demographic composition measures to assess the labor market— specifically, changes in the propensity to participate based on age and generational differences. As future generations become more highly educated and work longer, a higher participation rate could persist and improve future growth prospects.

This paper explores the benefits that investors have reaped by moving from concentrated investments in a few directly held stocks to diversified mutual funds.

This paper explores client use of digital channels—desktop or laptop, mobile phone, and mobile app—and breaks down how digital use has changed over time.

Signing up for Medicare is daunting because of the “alphabet soup” of available coverage and the importance of the decision. Vanguard retirement experts encourage individuals to recognize their personal preferences and health care issues and to understand the trade-offs between affordability and the convenience of various coverage options.

In this paper, Vanguard researchers introduce a model for determining asset allocation across active, passive, and factor investments. Using forward-looking return and expectations for alpha risk and return, the model creates portfolios consistent with the full set of investor preferences, resolving ad hoc and suboptimal portfolio construction issues.

In this paper, Vanguard researchers introduce a framework for measuring the benefits of financial advice and, using data derived from 44,000 Vanguard Personal Advisor Services clients, demonstrate that its value encompasses three broad dimensions: portfolio, financial, and emotional.

Vanguard research shows that most retirement-age DC plan participants leave their employer's retirement plan over time, but that participants are more likely to remain in a plan if it permits flexible distributions.

This paper explores the factors—including age, gender, and asset level—that influence trading among households with Vanguard accounts.

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.

Debate is intensifying about the U.S. dollar's likely direction and its implications for the global economy and portfolios. In this paper, Vanguard economists find that the dollar is close to fair value based on economic fundamentals and poised to fluctuate around current levels absent a change in those fundamentals or an economic shock.

In this comprehensive assessment of design trends and participant behavior in small business 401(k) plans, Vanguard researchers find that small business plan participants are benefiting from enhanced plan design features, including professionally managed allocations, which have led to increased participation and optimized portfolio construction.

In this paper, Vanguard researchers explain the transmission mechanisms through which Brexit is expected to affect the U.K. economy over the short and long term. It concludes that the impact on GDP and living standards is likely to be negative, most notably in scenarios where the U.K.'s trading relationship with the EU changes the most.

In this paper, lower costs allow investors to keep a greater share of an investment's return. For more than ten years, investors have been favoring low-cost equity and bond funds.

In a low-return environment, using alternative investments can be a way to improve a portfolio’s risk-return profile. This research paper compares and contrasts liquid alternatives and hedge funds and demonstrates that certain investors who are comfortable with the implications of investing in these vehicles should carefully consider them.

In this paper, research finds that funds with high active share—those whose portfolios differ more from their benchmark index—on average don't outperform low-cost funds with low active share.

Approximately 98% of Vanguard defined contribution plans offer a principal preservation option. This commentary explains the characteristics of stable value and money market funds and explores the risks and benefits plan fiduciaries should consider when deciding whether to offer a principal preservation fund as a plan option.

Vanguard researchers explore the impact of two types of high-yield bond positions, one funded by an investor's existing fixed income allocation and one by an equity allocation. They conclude that a high-yield position may improve the risk-adjusted return characteristics of a traditional balanced portfolio if funded by an existing equity allocation.

When designing a liability-driven strategy, prioritizing the drivers of pension liability risk could lead to more efficient surplus risk mitigation, particularly if liability-hedging capital is limited. Vanguard recommends focusing on the longest-dated benefit payments, parallel shifts in the Treasury yield curve, and movement in credit spreads. 

Our Megatrends series examines fundamental shifts in the global economy likely to affect the financial services industry and society. In this edition, Vanguard explores the economic implications of an unprecedented shift in the age of global populations toward a smaller young-age cohort and a larger old-age cohort. 

In this paper, Vanguard researchers examine Treasury Inflation-Protected Securities (TIPS) and commodities for their potential to protect a portfolio against inflation. The findings: Stocks offer the ultimate protection against inflation over the long run, but for shorter-term offsets, commodities and short-term TIPS may be the best alternatives.

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. 

As the U.S. economy enters the later stages of expansion, Vanguard economists project a moderate growth environment rather than an imminent recession. Vanguard foresees more modest returns than in previous similar periods but expects better real returns and increased diversification from fixed income and international equity assets. 

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 replacement ratio is a valuable planning tool that drives such considerations as the optimal savings rate and potential level of risk one might target for adequate growth. This paper explains the role of a replacement ratio, the process used to develop one, and the factors that could affect an individual’s retirement needs. 

Strategies to reduce risk are often implemented when a pension plan's funding rises. This path leads to a more conservative portfolio with a lower expected return. But the size of the asset base is just as important in determining the pension expense as the return. 

This series explores the concept of “digital financial attention”—how investors interact digitally with their accounts. Following a sample of Vanguard investors over three years, researchers find a wide range of attentiveness that varies by investor characteristics such as age, gender, and account tenure. 

One-quarter of wealthier household retirement income comes from financial account withdrawals. The role of these withdrawals is expected to grow as financial accounts make up an increasing share of retiree wealth in the future. Vanguard researchers delve into the topic in the reissued paper Withdrawals from Financial Accounts in Retirement.

This paper provides a comprehensive view of income and spending flows among U.S. households. Vanguard researchers find that the relative importance of guaranteed income, financial account withdrawals, wages, and other income varies markedly among different cohorts. The variety and complexity of retiree situations call for tailored advice solutions.

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%. 

When setting and executing a systematic strategy for rebalancing your portfolio to its target asset allocation, use best practices: Rebalance to manage risk and emotion, set a rebalancing "trigger" and minimize rebalancing costs.

The use of target-date funds (TDFs) continues to grow among participants saving for retirement. This paper outlines the theoretical foundation for life-cycle investing and details aspects of Vanguard's TDF approach including glide-path construction, asset-class diversification, and the potential benefits of an all-indexed investment strategy.

This paper looks at how tightening financial conditions and greater policy uncertainty influence the likelihood of recession, and at the effects of Federal Reserve interest rate policy.

Vanguard researchers examine the demographics of exchange-traded fund (ETF) investors and the factors driving adoption. They find that more established investors use ETFs in conjunction with other investments, while newer investors use them as their primary investment vehicle. Overall, equities were the favored ETF asset class. 

Social Security provides a base level of guaranteed income for most retirees. In this Research Insight, Vanguard experts report that for most retirees who can afford to do so, deferring Social Security for a few years—even past “full retirement age”—greatly increases the lifetime monthly benefit and can provide powerful longevity protection. 

This paper details the growing importance of target-date funds (TDFs) in defined contribution plans and reports that 90% of plans offered TDFs, 75% of participants had positions in TDFs, and TDFs accounted for 35% of plan assets. Vanguard expects TDF adoption among plan participants to increase beyond their 52% usage rate in 2018 to 80% by 2023.

The less diversified a portfolio is, the less likely it is to hold the small percentage of stocks that account for most of the market's long-term return. Our analysis yields two measures that a manager must meet to outperform the market.

Vanguard research finds automatic retirement plan features and target-date funds (TDFs) have the greatest influence on the savings behavior of the millennial generation. Millennials are more likely to experience automatic enrollment and twice as likely to use professionally managed options, including TDFs, than early baby boomers. 

This paper explores gender differences in investing behavior and the impact of automatic enrollment on retirement savings plans. It finds that women are more likely to participate, and when they do, they save more, while men’s wages and account balances are higher. When controlling for income, women save more and have higher balances. 

In this The Journal of Investing paper, Vanguard analysts employed simulations and empirical analysis to evaluate the relationship between portfolio diversification and equity market outperformance. The findings: Increasing portfolio concentration doesn’t raise the odds of outperforming the market; instead, it lowers them.

For plans that don’t offer automatic enrollment, one strategy for increasing contributions is to “stretch the match.” Vanguard research indicates, however, that stretching the match does not result in higher contribution rates; instead, higher match thresholds are typically associated with lower contribution rates and lower plan participation.

In this The Journal of Portfolio Management paper, Vanguard economists propose an enhancement to standard cyclically adjusted price/earnings-based forecasts that conditions mean reversion in the ratio on real (not nominal) bond yields, expected inflation rates, and financial volatility in a vector autoregression model. The results are promising.