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Investing Specialists

Living in Interesting Times with Vanguard

A look at 2007's new funds, managers, developments, and performance.

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If you ever wished you lived in interesting times, your wish was granted in 2007. The collapse of the housing market and the subprime mortgages that fueled it blossomed into a full-blown credit crisis that reawakened volatility in the securities markets. Now that we've been reminded to be careful what we wish for, let's look back at some of more notable developments for Vanguard investors last year.

Most Promising New Funds
In 2007, the family launched 17 new traditional and exchange-traded funds (if you count the conventional and ETF share classes of the same funds as distinct entities), including a spate of mega-cap index funds for institutional and ETF investors and a first-ever long/short offering, Vanguard Market Neutral (VMNFX). Although the market neutral fund, which will be jointly run by AXA Rosenberg and Vanguard's own Quantitative Equity Group, has a lot to prove, it does offer some much-needed price competition in a pricey category of funds.

For my money, though, Vanguard's most appealing new offerings were its four new fixed-income ETFs and its two new international stock funds and ETFs. Vanguard Total Bond Market ETF (BND), Vanguard Short-Term Bond ETF (BSV), Vanguard Intermediate-Term Bond ETF (BIV), and Vanguard Long-Term Bond ETF (BLV) hit the market as the cheapest bond ETFs in their respective categories and among the most diversified. Vanguard Europe Pacific ETF (VEA) tracks the same MSCI EAFE Index as the nearly $51 billion  iShares MSCI EAFE Index (EFA), but for half the expense ratio.  Vanguard FTSE All-World ex-US Index (VFWIX) and  ETF (VEU) are pretty cheap, too, but they stand out as true one-stop international options because they include exposure to emerging markets and Canada, which MSCI EAFE does not.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.