Vanguard Prime Money Market Option (Cash/Short-Term Investments)
The Vanguard Prime Money Market Option seeks to provide income consistent with the preservation of principal.
The Vanguard Prime Money Market Option invests in the Vanguard Prime Money Market Fund, which invests in high-quality, short-term money market instruments, including certificates of deposit, banker’s acceptances, commercial paper, and other money market securities.
The Vanguard Prime Money Market Option's investment in the Vanguard Prime Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of the investment at $1 per share, it is possible that the Vanguard Prime Money Market Option may lose money by investing in the fund.
Vanguard Inflation-Protected Bond Option (Treasury Inflation-Protected Securities, or TIPS)
The Vanguard Inflation-Protected Bond Option seeks to provide inflation protection and income consistent with investment in inflation-indexed securities.
The Vanguard Inflation-Protected Bond Option invests in the Vanguard Inflation-Protected Securities Fund, which invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations.
The fund may invest in bonds of any maturity; however, its dollar-weighted average maturity is expected to be in a range of 7 to 20 years. All bonds purchased by the fund will be rated investment grade.
Vanguard Income Portfolio (Investment-Grade Intermediate-Term Bond)
The Vanguard Income Portfolio invests in two Vanguard bond funds and one Vanguard money market fund resulting in an allocation of 75% of assets to investment-grade U.S. bonds and 25% of assets to money market instruments.
Through its ownership of the Vanguard Total Bond Market II Index Fund, the option indirectly holds a mix of securities that approximates the Barclays Capital U.S. Aggregate Float Adjusted Index. The index represents a wide spectrum of public, investment-grade, taxable fixed-income securities in the U.S.
The option also invests in Vanguard Inflation-Protected Securities Fund, which invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations. All bonds purchased by the fund will be rated investment grade.
Through its investment in the money market fund, the option indirectly holds high-quality, short-term money market instruments.
Vanguard Total Bond Market II Fund
Vanguard Inflation-Protected Securities Fund
Vanguard Prime Money Market Fund
PIMCO Total Return Option (Investment-Grade Intermediate-Term Bond)
The PIMCO Total Return Option invests in the PIMCO Total Return Fund, which seeks maximum total return consistent with preservation of capital and prudent investment management.
The fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its total assets in a diversified portfolio of fixed-income instruments (bonds) of varying maturities, currently averaging around 5 years.
These are primarily investment-grade bonds, but the fund may invest up to 10% of its total assets in high-yield, lower-rated bonds. The fund may invest up to 30% of its total assets in bonds denominated in foreign currencies, but will normally limit its foreign currency exposure to 20% of total assets.
The PIMCO Total Return Fund is a diversified portfolio of high quality bonds that is actively managed.
PIMCO High Yield Trust Option (High-Yield Bond)
The PIMCO High Yield Option invests in the PIMCO High Yield Fund, which seeks maximum total return consistent with preservation of capital and prudent investment management.
The fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in a diversified portfolio of high-yield securities, also known as junk bonds.
The average portfolio duration of this fund normally varies within two years (plus or minus) of the duration of the Merrill Lynch U.S. High Yield BB-B Rated Constrained Index, which as of June 30, 2008, was nearly five years. The fund may invest up to 20% of its total assets in bonds denominated in foreign currencies.