How a Star Investor is Born

Opinions referenced in the below blog are that of the individual author and do not necessarily represent the opinions of Hennessy Construction Services.


People often ask me about investments outside of our 401(k) plan that may be for their IRA, personal savings or for their children’s education. I’m happy to help and to be a self-anointed “expert” at something. There is no such thing as a one-size-fits-all investment, but I have one that comes pretty close. I tell people they should have a mix of stocks and bonds (a 60% stocks / 40% bonds ratio is actually hard to beat when it comes to long term performance). I tell them that for a well diversified portfolio they should have a mix of large, mid and small cap stocks. They should have foreign stocks as well as domestic. They should also have some short and long term bonds and some GNMA (ginnie mae) and money market funds. Whew!

The thought of assembling all these funds is daunting to most of us. That’s why Vanguard Star is a perfect solution for many investors. Vanguard has created a “Fund of Funds”, which includes 11 of their “Star” funds. It covers all the bases I mentioned earlier. It includes 8 different stock funds from large to small cap and foreign and domestic. It also has 3 fixed income funds. This is a well-diversified, balanced portfolio that provides a much smoother ride than the typical all-stock mutual fund. This is truly one-stop shopping that is automatically rebalanced by Vanguard. You can buy it and forget about chasing the next hot trend or tip.

Established in 1985, Star has returned an average of 9.2% a year. Some years are greater, some are less, but that is a very respectable average annual return. Morningstar gives it 4 out of 5 stars for the 3, 5, 10 and overall periods. While the Dow Jones Industrial average is down 3% as of June 30, Star is up 7.28%, thanks to its diversified mix. It has a yield of 3.88% from the fixed income component which helps steady the return year after year. Best of all, it is a no load fund with a Vanguard-famous low annual fees. Minimum initial purchase is $1,000. You can add to your investment with $100 minimums. You can easily invest online directly with Vanguard.

Yes, I eat my own cooking and invest in this myself for our Roth IRA accounts. If you want to have stellar returns, look up the Star Fund on Vanguard.com.


Posted by: Alan Lukas

Alan, who celebrated his 15th Anniversary with Hennessy in 2008, is our Vice President and CFO. Alan is tasked with a wide range of number-crunching duties but is always available to help with any accounting question or even a chat about the latest Ray’s game.

For more information on Hennessy Construction Services, please visit our website www.hcsfl.com.