Vanguard Market Neutral Fund

Vanguard Market Neutral Fund

Supplement Dated April 29, 2021, to the Prospectus Dated April 29, 2021

Important Change to Vanguard Market Neutral Fund As previously announced, James P. Stetler will retire from Vanguard in July 2021 and will no longer serve as a co-portfolio manager for Vanguard Market Neutral Fund (the Fund).

Binbin Guo and Cesar Orosco, who currently serve as portfolio managers with Mr. Stetler, will remain portfolio managers of the Fund upon Mr. Stetler's retirement. The Fund's investment objective, strategies, and policies will remain unchanged.

? 2021 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.

PS 634A 042021

Vanguard Market Neutral Fund Prospectus

April 29, 2021 Investor Shares Vanguard Market Neutral Fund Investor Shares (VMNFX)

This prospectus contains financial data for the Fund through the fiscal year ended December 31, 2020. The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Contents

Fund Summary

1 Investing With Vanguard

27

More on the Fund

8 Purchasing Shares

27

The Fund and Vanguard

19 Converting Shares

30

Investment Advisor

19 Redeeming Shares

31

Dividends, Capital Gains, and Taxes

21 Exchanging Shares

35

Share Price

24 Frequent-Trading Limitations

35

Financial Highlights

26 Other Rules You Should Know

38

Fund and Account Updates

42

Employer-Sponsored Plans

43

Contacting Vanguard

45

Additional Information

45

Glossary of Investment Terms

46

Fund Summary

Investment Objective The Fund seeks to provide long-term capital appreciation while limiting exposure to general stock market risk.

Fees and Expenses The following table describes the fees and expenses you may pay if you buy, hold, and sell Investor Shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.

Shareholder Fees (Fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases Purchase Fee Sales Charge (Load) Imposed on Reinvested Dividends Redemption Fee Account Service Fee Per Year (for certain fund account balances below $10,000)

None None None None

$20

Annual Fund Operating Expenses (Expenses that you pay each year as a percentage of the value of your investment)

Management Fees

0.17%

12b-1 Distribution Fee

None

Other Expenses

Dividend Expenses on Securities Sold Short1

0.98%

Borrowing Expenses on Securities Sold Short2

0.00%

Other Operating Expenses

0.03%

Total of Other Expenses

1.01%

Total Annual Fund Operating Expenses3

1.18%

1 When a cash dividend is declared on a stock the Fund has sold short, the Fund is required to pay an amount equal to that dividend to the party from which the Fund borrowed the stock and to record the payment of the dividend as an expense.

2 In connection with its short sales, the Fund may receive income or be charged a fee on borrowed stock. This income or fee is calculated on a daily basis, based upon the market value of the borrowed stock and a variable rate that is dependent upon the availability of the stock. A net amount of fees is listed as Borrowing Expenses on Securities Sold Short.

3 Excluding borrowing and dividend expenses on securities sold short, the Total Annual Fund Operating Expenses are 0.20%.

1

Example

The following example is intended to help you compare the cost of investing in the Fund's Investor Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you were to invest $10,000 in the Fund's shares. This example assumes that the shares provide a return of 5% each year and that total annual fund operating expenses remain as stated in the preceding table. You would incur these hypothetical expenses whether or not you were to redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

1 Year $120

3 Years $375

5 Years $649

10 Years $1,432

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 172% of the average value of its portfolio.

Principal Investment Strategies The Fund follows a market neutral strategy, which the Fund defines as a strategy designed to produce a portfolio that is neutral with respect to general stock market risk (sometimes referred to as beta neutrality). Beta is a measure of a portfolio's volatility relative to the volatility of the general stock market. The Fund, as a whole, does not seek to adhere to any other definition of market neutrality.

To implement the strategy, the advisor buys securities that it believes offer an appropriate balance between strong growth prospects and reasonable valuations relative to their industry peers and sells short securities that the advisor expects to be overvalued or have weak growth prospects, in amounts that it believes will achieve market neutrality. By taking long and short positions in different securities, the Fund attempts to limit the effect of market movements on portfolio performance. The advisor does this by using a quantitative process and may, at any time, buy or sell short any number of publicly traded, exchange-listed equity securities and may emphasize specific industries, styles (growth/value), capitalization ranges, countries, or other factors. The overall performance of the Fund depends on the net performance of its long and short positions, and it is

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