Vanguard Variable Annuity provides investment options in VVA (Vanguard Variable Annuity) funds. Vanguard has an excessive trading policy which is different from most of brokerages: it imposes 60 days waiting period before one could repurchase a fund again afer selling the fund. IMPORTANT NOTE: because MyPlanIQ does not have VVA fund data, all of these funds are substituted by their Vanguard mutual fund equivalents. We believe the Vanguard mutual funds should closely track their corresponding VVA funds.
The following is the excerpt on the Vanguard Variable Annuity exchange policy from its prospectus. Based on the description, MyPlanIQ has yet to work out a way to handle so caled 'round trip' limitation. We will fix this shortly.
L I M I T A T I O N S ON Exchanges
Because excessive exchanges can disrupt management of the Fund and increase the Fund’s costs for
all Contract Owners, the Fund limits exchanges as follows:
■ You may make no more than two substantive round trips through a Portfolio (not including the
Money Market Portfolio) during any 12-month period.
■ The Fund and the Company may refuse an exchange at any time, for any reason.
■ The Company may revoke a Contract Owner’s exchange privilege at any time, for any reason.
A round trip is a redemption from a Portfolio followed by a purchase back into the Portfolio. Also, round
trip covers transactions accomplished by any combination of methods, including transactions conducted
by check, wire, or exchange to or from another Vanguard fund. “Substantive” means a dollar amount
that Vanguard determines, in its sole discretion, could adversely affect the management of the Fund.
Investment options of PreTest 4-day Plan Vanguard Variable Annuity
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Investment model portfolios
We provide two types of investment model portfolios for PreTest 4-day Plan Vanguard Variable Annuity participants. You can customize and follow a model portfolio in your plan account.
Types of portfolio strategies
- Strategic asset allocation portfolio: It invests in a diversified portfolio of multiple assets, buy-and-hold without frequently changing the asset allocation weights.
- Suitable: For long-term (more than 15 years, preferably more than 20 years), want to be tax efficient and can withstand interim drawdown or loss as high as 50% or more.
- Pros:
- Less error-prone
- Infrequent rebalancing or transactions
- Tax efficient for taxable brokerage investments
- Cons:
- Interim loss or drawdown can be substantial
- Possible low returns for an extended period, such as 10 years or longer
- Tactical asset allocation portfolio: it invests in a diversified portfolio of multiple assets, dynamically adjust stock and bond allocations to minimize losses during market stress.
- Suitable: For long-term (more than 10 years or preferably longer) capital. Investors are willing to rebalance as frequent as monthly.
- Pros:
- Reduce large interim loss or drawdown
- Less sensitive to investment entry point
- Likely to improve returns
- Cons
- Demand more frequent rebalancing or transactions
- Less tax efficient — more suitable in a tax-deferred account such as 401(k) or IRA
- Can experience a period of lower returns compared to a broad-based strategic allocation or a buy-and-hold benchmark, especially in some bull markets
These portfolios are proactively monitored and rebalanced on a monthly basis when needed, ensuring it remains in line with its target allocation.
Let us know (Email us) if you need help to create a custom model portfolio for your plan.