For release 29 August 2005

US investment chief warns Australians of investment perils - tax, fees and short-term thinking

Sydney, 29 August 2005: A leading international investment chief has urged Australian investors to think smarter about their long-term investment strategies and to be aware of the dangers of short-term performance figures, high fees and taxes on investments.

John J. (Jack) Brennan is in Australia to open the new Melbourne headquarters of Vanguard Investments Australia Ltd.

"Many people these days have to find the money to fund their own retirement. That means long-term investment - ten, twenty, thirty or forty years of savings. Over that time, fees and taxes can eat away your savings to the point where your enjoyment of retirement is dramatically affected. "We believe more investment companies should offer average investors the same low cost investment options they offer the big end of town. We are concerned that many investment managers inappropriately sell short-term performance figures to investors," Mr Brennan said.

Mr Brennan is the chairman and global chief executive of The Vanguard Group, the second largest mutual fund manager in the United States with more than US$876 billion (A$1.15 trillion) in assets under management, representing some 18 million separate investor accounts.

Mr Brennan said he applauds the recent Australian government initiative to hand more choice to Australian investors through the superannuation fund choice legislation.

In our experience, choice can often be a two-edged sword. On the one hand it's a good thing to give people more options; on the other there can be so many choices it just makes decisions harder.

"My message to investors is: keep it simple, watch the costs, focus on the long-term, diversify your investment portfolio and always seek good quality advice and information.

"Investment by indexing is one of the greatest untapped stories for investors in Australia today. Indexing is simple, cost effective, and is proven to outperform most active fund managers over the long term. Not only that, indexing provides broad diversification which means that investors are less exposed to the performance fluctuations of individual shares and asset classes.

"That is why indexing is widely used by institutional investors in Australia and abroad. But, you know, all personal investors can access indexing here too, and I am proud of the work that our Australian CEO Jeremy Duffield and his crew have done to bring indexing to Australian investors."

Vanguard's new office in Melbourne officially opens on Wednesday 31 August, 2005.

Notes to editors

Vanguard Investments Australia Ltd is a wholly owned subsidiary of The Vanguard Group, Inc., which is based in the United States and currently managers approximately US$876 billion (A$1.15 trillion) for more than 18 million individual and investor accounts as at 31 July 2005. Employees number approximately 11,000 crew (staff).

In Australia, Vanguard has established a reputation as an index specialist, managing more than A$33.7 billion in index funds, for both institutional and retail investors.

The Indexing strategy

Indexing is an investment strategy that attempts to closely match the investment returns of a specified group of shares, bonds or other securities, usually represented by a recognised index.

Unlike an active fund manager, an index manager does not strictly analyse which shares, bonds or other securities are likely to go up or down in value. Rather, index managers build a portfolio that comprises all - or in the case of very broad indexes, a representative sample - of the assets in an index. Indexing is not a short-term investment strategy. Index funds typically buy assets in an index and then hold them for the long term.

Indexing is not about 'timing markets' or picking 'hot' stocks. Instead, the emphasis is on broad diversification within a specific index and low portfolio turnover through what is known as a 'buy and hold' approach. One of the major benefits is that this approach can significantly reduce the cost of investing over time. And lower costs lead to better returns.

Now many individual investors are using indexing as the 'core' of their investment portfolio. Building on that core of broadly diversified index funds, an investor can select actively managed funds, or purchase direct holdings in other assets such as shares or property.

For further information please contact
Carden Calder
Telephone (02) 9247 0992 Fax (02) 9247 8308 Mobile 0403 333 904
Leanne Henderson
Telephone (03) 8888 3823 Fax 1300 765 712

Vanguard Investments Australia Ltd
ABN 72 072 881 086 AFSL 227263