Fund selection tool

Your investment fund options are arranged into eight categories based on their underlying investments:

• U.S. stocks
  

  U.S. stock funds represent shares of ownership in domestic companies. Each of the funds in this category is further defined by market capitalization and investment style.

• International stocks
  

  International stock funds can invest in the stocks issued by companies located in developed and emerging markets.

  Non-U.S. stocks or bonds have risks tied to the political and economic stability of their country or region. And if the value of the foreign currency falls, the value of the stocks or bonds would also fall.

• Broad market
  

  Broad market funds invest in stocks that are spread across multiple market capitalization and investment styles.

• Bonds
  

  Bonds are issued by corporations, governments, or government agencies when they borrow money. Bond funds invest in this debt to receive interest as these debts are repaid. The investment fund options in this group can further be categorized by time to maturity and debt type.

  Investments in bond funds are subject to interest rate, credit, and inflation risk.

• Balanced
  

  Rather than investing in a single asset class, balanced funds invest in a mix of , bonds, and stocks. These funds seek to provide a combination of growth and income and conservation of principal (the money you originally invested).

• Money market
  

  Also known as short-term reserves or cash equivalents, these short-term investments generally represent short-term borrowing by customers with an impeccable credit rating. They are conservative investments that often seek to provide current income while maintaining liquidity and a stable share price of $1.

• Stable value
  

  Like money market funds, stable value funds are conservative investments that seek to provide current and stable income, while maintaining a stable share value of $1. They use synthetic investment contracts along with traditional investments (issued by insurance companies and banks) to help preserve this stable share price.

Vanguard ranks each fund based on overall risk and places them in one of five categories. Knowing the risk level you're comfortable with and the length of time you expect to invest can help you select an appropriate fund for your investing needs. It’s important to note that the risk information provided is not an indicator of diversification, but rather an indicator of expected share price stability. Whenever you invest, there’s a chance you could lose the money.

Conservative—Risk level 1
Funds are classified as conservative if their share prices are expected to remain stable or to fluctuate only slightly. Such funds may be appropriate for the short-term reserves portion of a long-term investment portfolio, or for investors with short-term investment horizons (three years or less).

Conservative to moderate—Risk level 2
Funds classified as conservative to moderate are subject to low-to-moderate fluctuations in share prices. In general, such funds may be appropriate for investors with medium-term investment horizons (four to ten years).

Moderate—Risk level 3
Funds classified as moderate are subject to a moderate degree of fluctuation in share prices. In general, such funds may be appropriate for investors who have a relatively long investment horizon (more than five years).

Moderate to aggressive—Risk level 4
Funds of this type are broadly diversified but are subject to wide fluctuations in share price because they hold virtually all of their assets in common stocks. These funds may be appropriate for investors who have a long-term investment horizon (ten years or longer).

Aggressive—Risk level 5
Funds classified as aggressive are subject to extremely wide fluctuations in share price. These funds may be appropriate for investors who have a long-term investment horizon (ten years or longer). The unusually high volatility associated with these funds may stem from a number of strategies.

Your Plans divide your investment options into three menus. Whether you're an experienced or novice investor, picking the right investment menu can help you create a portfolio that fits your investment objective, time horizon, and tolerance for risk. The menus include Vanguard Retirement Trusts, core investments, and supplemental investments.

• Vanguard Target Retirement Trusts
  

  If you want to simplify the investment process, you may want to consider investing in just one Target Retirement Trust. A single Target Retirement Trust provides diversification and is designed to keep your assets invested appropriately for a typical person in your stage of life, up to and including your retirement years. Even though Target Retirement Trusts simplify the investment process, they still require some monitoring to ensure that your portfolio is in line with your current situation.

  Investments in Target Retirement Trusts are subject to the risks of their underlying funds. The year in the trust name refers to the approximate year (the target date) when an investor in the trust would retire and leave the workforce. The trust will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Trust and the Income and Growth Trust have fixed investment allocations and are designed for investors who are already retired. An investment in a Target Retirement Trust is not guaranteed at any time, including on or after the target date.

• Core investments
  

  These investments can offer the basic ingredients for a well-balanced portfolio. Each one offers broad diversification and low costs. You can combine several to create a portfolio that suits you.

• Supplemental investments
  

  These investments can offer a narrower focus while remaining diversified. Each one focuses on a specific segment of the broader market.