Vanguard VIF Total Bond Market Index Portfolio
The Portfolio seeks to track the performance of a broad, market-weighted bond index.
The Portfolio employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. This Index measures the performance of a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than 1 year.
The Portfolio invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. All of the Portfolio’s investments will be selected through the sampling process and, under normal circumstances, at least 80% of the Portfolio’s assets will be invested in bonds held in the Index. The Portfolio maintains a dollar-weighted average maturity consistent with that of the Index. As of December 31, 2019, the dollar-weighted average maturity of the Index was 8.2 years.
An investment in the Portfolio could lose money over short or long periods of time. You should expect the Portfolio's share price and total return to fluctuate within a wide range. The Portfolio is subject to the following risks, which could affect the Portfolio's performance, and the level of risk may vary based on market conditions:
- Interest rate risk,which is the chance that bond prices will decline because of rising interest rates. Interest rate risk should be moderate for the Portfolio because it invests primarily in short- and intermediate-term bonds, whose prices are less sensitive to interest rate changes than are the prices of long-term bonds.
- Income risk, which is the chance that the Portfolio's income will decline because of falling interest rates. Income risk is generally high for short-term bond funds and moderate for intermediate-term bond funds, so investors should expect the Portfolio's monthly income to fluctuate accordingly.
- Prepayment risk, which is the chance that during periods of falling interest rates, homeowners will refinance their mortgages before their maturity dates, resulting in prepayment of mortgage-backed securities held by the Portfolio. The Portfolio would then lose any price appreciation above the mortgage's principal and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Portfolio's income. Such prepayments and subsequent reinvestments would also increase the Portfolio's turnover rate. Prepayment risk should be moderate for the Portfolio.
- Extension risk, which is the chance that during periods of rising interest rates, certain debt securities will be paid off substantially more slowly than originally anticipated, and the value of those securities may fall. For funds that invest in mortgage-backed securities, extension risk is the chance that during periods of rising interest rates, homeowners will repay their mortgages at slower rates. This will lengthen the duration or average life of mortgage-backed securities held by the Portfolio and delay the Portfolio’s ability to reinvest proceeds at higher interest rates. Extension risk should be moderate for the Portfolio.
- Call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. The Portfolio would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Portfolio’s income. Such redemptions and subsequent reinvestments would also increase the Portfolio’s turnover rate. Call risk should be low for the Portfolio because it invests only a small portion of its assets in callable bonds.
- Credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline. Credit risk should be low for the Portfolio because it purchases only bonds that are of investment grade quality.
- Index sampling risk, which is the chance that the securities selected for the Portfolio, in the aggregate, will not provide investment performance matching that of the Portfolio's target index. Index sampling risk for the Portfolio is expected to be low.
- Liquidity risk, which is the chance that the Portfolio may not be able to sell a security in a timely manner at a desired price.
|Year to Date||6.18%|
|Prior 3 Months||2.45%|
|Prior 1 Year||8.77%|
|Prior 3 Years||N/A|
|Prior 5 Years||N/A|
|Prior 10 Years*||7.28%|
The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and unit values will fluctuate so that units, when redeemed, may be worth more or less than their original cost. Investment Fund total return performance currently may be lower or higher than the figures stated above.
The total return performance data are based on a hypothetical investment of $1,000, which is redeemed at the end of the periods shown. The total return figures reflect the reinvestment of investment income and capital gains and losses, and are net of expenses which include a contract fee, an expense risk fee, administrative charges, a distribution expense charge and Underlying Funds fees and expenses.
The total return figures for periods extending beyond a year are average rates of return and do not reflect the Funds' actual year-to-year results, which varied over the periods shown. Contributions or withdrawals made within a period would experience different rates of return based on the unit values on the dates of such transactions.
Portfolio Turnover Rate(%): N/A%**Excludes all short-term securities.
|Sector||% of Portfolio|
|Company||% of Portfolio|
|United States Treasury Note/Bond||3.3%|
|United States Treasury Note/Bond||9.8%|
|Fannie Mae Pool||2.1%|
|Freddie Mac Gold Pool||1.4%|
|Ginnie Mae II Pool||1.1%|
|Ginnie Mae II Pool||0.0%|
|Ginnie Mae II Pool||0.8%|
|Fannie Mae Pool||0.9%|
|Ginnie Mae II Pool||0.7%|
Joshua C. Barrickman, CFA, Principal of Vanguard and co-head of Vanguard’s Fixed Income Indexing Americas. He has been with Vanguard since 1998, has worked in investment management since 1999, has managed investment portfolios since 2005, and has managed the Portfolio since 2013. Education: B.S., Ohio Northern University; M.B.A., Lehigh University.