How Vanguard Found Itself on Top in the "Lost Decade"

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City of Industry, CA Many call it the lost decade. It began with the Internet boom and bust; ended with a roaring housing and credit market bubble that imploded catastrophically; featured a mutual fund trading scandal and the rise of ETFs in between; and left most equity fund investors with little to show for their pains on Dec. 31, 2009. During all the turmoil, a lot of investors lost their faith in some big fund families, including Putnam, Morgan Stanley, and Janus, which saw the largest net outflows for the decade. Yet fund investors still seemed to trust Vanguard, sending the family money through bull and bear markets, controversy and calm. Why? A close look at the family's fund flows offers some answers.


The story told by Vanguard's fund flows is remarkable but also highly correlated with the market environment. [Read the full article]

IRA-conversion mania is in full swing. That's because in 2010, savers of all income levels can convert their IRAs from a traditional to a Roth. Many financial-services companies are clearly using conversions as an opportunity to get their mitts on your assets--that is, stop in to see if a conversion makes sense, and while you're here we'll sell you some of our wares. Your portfolio may well benefit from the help, but in this instance I'd rather see you get the conversion advice from a completely neutral party, such as an accountant, rather than from someone who stands to benefit from your decision to convert.

I've written articles on conversion, but I've also been receiving some more-specialized questions, which I'll tackle today.

Q: I've heard there is a five-year waiting period to begin withdrawing assets once I've converted my IRA. I'm a 77-year-old retiree who's taking distributions from my IRA for living expenses. Does that rule apply to me, too?

A: No. [Read the full article]

NEW YORK (AP) -- Xerox Corp. said Thursday that cost cutting boosted its fourth-quarter earnings, and it forecast a bigger-than-expected profit for this year, when it plans to slash more jobs and fuse with Affiliated Computer Services Inc. to try to jump-start growth.

Xerox chief Ursula Burns, who took the reins last July, said revenue has improved "modestly," especially in developing markets.

But she added, "We believe revenue will continue to be under pressure until there is a more sustainable economic recovery." With that in mind, Burns said the company plans to shed another 2,500 employees, or about 5 percent of its work force.

Though sales fell in the fourth quarter as businesses continued to scrimp on new equipment and supplies, Xerox said it earned $180 million, or 20 cents per share. That compares with a break-even quarter at the end of 2008, when the recession was deepening. [Read the full article]

There has been a lot of talk recently about the lost decade for the S&P 500. And with good reason. SPDRs (NYSEArca:SPY - News), the $73 billion exchange-traded fund and the largest fund in the United States that tracks the S&P 500, lost about 9.6% over the previous decade ended Dec. 31, 2009.

Things look even worse in real terms: If you had $10,000 in 2000, you would have needed about $12,450 at the end of 2009 just to keep up with inflation, according to the federal government. That $10,000 in the S&P would have become $9,040.

What will the next decade look like for S&P index fund investors? Does a horrible past decade of returns necessarily mean a better decade is in store?

David Nelson, chairman of the investment policy committee at Legg Mason (NYSE:LM - News) Capital Management, thinks the market as a whole is undervalued with the current fair value of the S&P 500 at roughly 1,330 based on various assumptions. [Read the full article]

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