Investment Strategy
The Portfolio invests in two Vanguard® bond index funds and two Vanguard stock index fund, resulting in an allocation of 75% of its assets to investment-grade bonds and 25% of its assets to stocks. The percentages of the Portfolio's assets allocated to each Fund are:
Vanguard Total Bond Market II Index Fund (52.5%)
Vanguard Total International Bond Index Fund (22.5%)
Vanguard Total Stock Market Index Fund (15%)
Vanguard Total International Stock Index Fund (10%)
Through its ownership of the two stock funds, the Portfolio indirectly owns primarily large-capitalization and, to a lesser extent, mid-, small-, and micro-capitalization U.S. stocks, and international stocks. Through its ownership of Vanguard Total Bond Market II Index Fund, the Portfolio indirectly holds a mix of bonds—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities— that represent a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States, all with maturities of more than 1 year. The Fund maintains a dollar-weighted average consistent with that of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index, which generally ranges between 5 and 10 years.Through its ownership of Vanguard Total International Bond Index Fund, the Portfolio also indirectly holds government, government agency, corporate, and securitized non-U.S. investment-grade fixed income investments, all issued in currencies other than the U.S. dollar and with maturities of more than 1 year. To minimize the currency risk associated with investment in bonds denominated in currencies other than the U.S. dollar, the Fund attempts to hedge its currency exposures. Through its ownership of the stock funds, the portfolio also indirectly owns primarily large-capitalization U.S. stocks and, to a lesser extent, mid-, small-, and micro-capitalization U.S. stocks.
Investment Risks
Because it invests mainly in bond funds, the Portfolio primarily is subject to low to moderate levels of interest rate risk, credit risk, income risk, call risk, prepayment risk, and extension risk. The Portfolio also has low to moderate levels of stock market, country/regional risk, currency hedging risk, and nondiversification risk, and low levels of currency risk, emerging markets risk, index sampling risk, and derivatives risk.