Vanguardfi Balanced Index Fund

Vanguard? Balanced Index Fund

Vanguard?

Product Summary Balanced allocation: 60% stocks, 40% bonds. Seeks capital appreciation, current income, and long-term growth of income. Equity portfolio seeks to track the CRSP US Total Market Index; fixed income portfolio seeks to track the Bloomberg U.S. Aggregate Float Adjusted Index. Passively managed approach, using index sampling. Low expenses minimize net tracking error.

Note: The Investor Shares are closed to new investors.

Quality

Market capitalization

Vanguard Style View: Moderate Allocation

Index portfolio of large-, mid-, and small-capitalization stocks diversified across investment styles.

Investment style Value Blend Growth

Large

Mid

Small

Portfolio of U.S. Treasury, investment-grade corporate, and asset-backed securities.

Duration Short Medium Long Trsy/ Agcy Inv Grd Corp Below Inv Grd

Central tendency Expected range of fund holdings

Quarterly Commentary

Some of the concerns that had been weighing on market sentiment earlier in 2021 carried into the fourth quarter. Year-on-year inflation readings accelerated to levels well above central bank targets in a number of developed markets amid rising energy prices and ongoing supply shortages, and the Omicron variant pushed COVID-19 cases up even as vaccination rates climbed. Although volatility occasionally picked up, market fundamentals remained positive, with the global economy continuing to expand, labor markets recovering, and interest rates hovering at historically low levels across much of the globe. Stocks as a whole weakened in November but finished the quarter up more than 6%, as measured by the FTSE Global All Cap Index. The U.S. and, to a lesser extent, Europe, outperformed, while the Asia-Pacific region and emerging markets lagged. Yields of longer-dated U.S. Treasuries declined, while yields of shorter-term Treasuries rose as the Federal Reserve tapered its asset purchases and signaled it could soon begin to raise short-term interest rates. The Balanced Composite Index, which is weighted 60% U.S. stocks and 40% U.S. bonds and is the benchmark index for Vanguard Balanced Index Fund, returned 5.50% for the quarter. The composite index's equity component, the CRSP US Total Market Index, returned 9.16%. Most industry sectors posted positive returns, led by technology, consumer discretionary, and health care. The composite index's fixed income component, the Bloomberg U.S. Aggregate Float Adjusted Index, returned 0.05%, thanks largely to the performances of longer-dated and lower-rated bonds. As of December 31, 2021

For the 12 months ended December 31, the Balanced Composite Index returned 14.28%; its equity component returned 25.72% and its bond component ?1.58%. Small deviations, whether positive or negative, in the fund's performance versus that of its benchmark index may occur because of the fund's sampling approach to approximate the index and temporary pricing differences between the fund and the index.

Vanguard Balanced Index Fund

People and Process Vanguard Balanced Index Fund seeks capital appreciation, current income, and long-term growth of income by tracking the investment performance of a balanced benchmark, with 60% of assets invested in the broad U.S. stock market and 40% of assets held in the investment-grade U.S. bond market. Equity Component: The fund's stock portfolio seeks to track the investment performance of the CRSP US Total Market Index, an unmanaged benchmark representing the overall U.S. equity market. The portfolio replicates approximately 90% of the market capitalization of the CRSP US Total Market Index and invests in a representative sample of the balance using a portfolio optimization technique to avoid the expense and impracticality of full replication. The experience and stability of Vanguard's Equity Index Group have permitted continuous refinement of techniques for reducing tracking error. The group uses proprietary software to implement trading decisions that accommodate cash flow and maintain close correlation with index characteristics. Vanguard's refined indexing process, combined with low management fees and efficient trading, has provided tight tracking net of expenses. Fixed Income Component: The fund's bond portfolio seeks to track the investment performance of the Bloomberg U.S. Aggregate Float Adjusted Index, an unmanaged benchmark representing the broad, investment-grade, taxable U.S. bond market. The portfolio's passive investment style uses a sampling technique to closely match key benchmark characteristics: sector weight, coupon, maturity, effective duration, convexity, and credit quality. The optimized sampling technique is designed to avoid the expense and impracticality of fully replicating the index.

The Vanguard Group Launched in 1975, The Vanguard Group, Malvern, Pennsylvania, is among the world's largest equity and fixed income managers. As chief investment officer, Gregory Davis, CFA, oversees Vanguard's Equity Index, Quantitative Equity, and Fixed Income Groups. The group has advised Vanguard Balanced Index Fund since 1992.

Vanguard Equity Index Group Rodney Comegys, Principal and global head of Vanguard's Equity Index Group, is responsible for all equity index funds. The Equity Index Group manages indexed equity portfolios covering U.S. and international markets. It has developed sophisticated portfolio construction methodologies and efficient trading strategies that seek to deliver returns that are highly correlated with target portfolio benchmarks. Investment Manager Biographies Gerard C. O'Reilly, Principal. Portfolio manager. Advised the fund since 2016. Worked in investment management since 1992. B.S., Villanova University. William Coleman, CFA. Portfolio manager. Advised the fund since 2016. Worked in investment management since 2006. B.S., King's College. M.S., Saint Joseph's University. Vanguard Fixed Income Group Sara Devereux, principal and global head of Fixed Income Group, has direct oversight responsibility for all money market, bond, and stable value portfolios managed by the Fixed Income Group. The Fixed Income Group offers actively managed investments in U.S. Treasury, corporate, and tax-exempt securities, as well as passively managed index portfolios. Since 1981, it has refined techniques in total-return management, credit research, and index sampling to seek to deliver consistent performance with transparency and risk control.

Investment Manager Biographies Joshua C. Barrickman, CFA, Principal, Co-Head of Fixed Income Indexing Americas. Portfolio manager. Advised the fund since 2013. Worked in investment management since 1999. B.S., Ohio Northern University. M.B.A., Lehigh University.

Investment Advisors

Vanguard Equity Index Group Vanguard Fixed Income Group Cash investments Total

Fund Assets Managed

%

$ Million

61

37,334

37

22,638

2

1,033

100

61,005

As of December 31, 2021

Vanguard Balanced Index Fund

Total Returns

Balanced Index Fund Investor Shares (11/9/1992) Admiral Shares (11/13/2000) Institutional Shares (12/1/2000)

Balanced Composite Index

Expense Ratio

0.18% 0.07 0.06

--

Quarter

5.47% 5.50 5.48 5.50

Year to Date

14.09% 14.22 14.20 14.28

1 Year

14.09% 14.22 14.20 14.28

3 Years

17.30% 17.42 17.42 17.79

5 Years

12.24% 12.37 12.37 12.60

10 Years

10.85% 10.99 11.00 11.19

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at performance. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include the reinvestment of all dividends and any capital gains distributions. All returns are net of expenses. Note: Balanced Composite Index: Weighted 60% Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) and 40% Lehman Brothers U.S. Aggregate Bond Index through May 31, 2005; 60% MSCI US Broad Market Index and 40% Bloomberg U.S. Aggregate Bond Index through December 31, 2009; 60% MSCI US Broad Market Index and 40% Bloomberg U.S. Aggregate Float Adjusted Index through January 14, 2013; and 60% CRSP US Total Market Index and 40% Bloomberg U.S. Aggregate Float Adjusted Index thereafter. Admiral class shareholders are required to maintain specific minimum balances and meet other special criteria. Institutional class shareholders are required to maintain a minimum balance of $5 million.

As of December 31, 2021

Vanguard Balanced Index Fund

Quarterly Returns: Investor Shares

Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011

1st Quarter 2.34%

-11.63 9.54 -0.91 3.78 1.94 1.71 1.96 6.50 7.68 3.89

2nd Quarter 5.76%

14.24 3.73 2.25 2.40 2.53 -0.70 3.68 0.70 -1.09 0.93

3rd Quarter -0.06% 5.71 1.64 4.23 2.99 2.79 -3.87 0.03 3.90 4.37 -7.75

4th Quarter 5.47% 8.94 5.36 -8.11 3.93 1.12 3.38 3.88 5.82 0.16 7.66

Balanced Index Fund

14.09% 16.26 21.67 -2.97 13.75

8.63 0.37 9.84 17.91 11.33 4.14

CRSP US Total Market

Index 14.28% 17.34 21.87 -2.80 13.93

8.89 0.76 10.06 18.25 11.72 4.65

Year-End

Assets (Millions)

$317 334 396

3,014 3,474 3,343 3,090 3,174 2,974 2,844 1,921

Quarterly Returns: Admiral Shares

Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011

1st Quarter 2.37%

-11.60 9.57 -0.88 3.82 1.98 1.74 1.99 6.53 7.71 3.92

2nd Quarter 5.79%

14.27 3.73 2.28 2.43 2.56 -0.66 3.71 0.74 -1.02 0.97

3rd Quarter -0.03% 5.74 1.70 4.25 3.02 2.82 -3.83 0.07 3.94 4.37 -7.72

4th Quarter 5.50% 8.97 5.36 -8.09 3.96 1.14 3.41 3.92 5.87 0.19 7.70

Balanced Index Fund

14.22% 16.40 21.79 -2.86 13.89

8.77 0.51 9.99 18.10 11.49 4.29

CRSP US Total Market

Index 14.28% 17.34 21.87 -2.80 13.93

8.89 0.76 10.06 18.25 11.72 4.65

Year-End

Assets (Millions) $47,564

39,901 33,585 23,913 23,556 18,695 15,726 14,112

9,688 7,407 4,254

As of December 31, 2021

Vanguard Balanced Index Fund

Quarterly Returns: Institutional Shares

Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011

1st Quarter 2.35%

-11.59 9.57 -0.87 3.78 1.98 1.78 1.99 6.54 7.71 3.93

2nd Quarter 5.79%

14.24 3.74 2.28 2.43 2.57 -0.70 3.71 0.74 -1.01 0.98

3rd Quarter -0.01% 5.75 1.68 4.26 3.02 2.82 -3.80 0.07 3.94 4.37 -7.72

4th Quarter 5.48% 8.99 5.39 -8.06 3.96 1.18 3.38 3.92 5.87 0.19 7.70

Balanced Index Fund

14.20% 16.41 21.79 -2.82 13.86

8.81 0.52 10.00 18.11 11.51 4.31

CRSP US Total Market

Index 14.28% 17.34 21.87 -2.80 13.93

8.89 0.76 10.06 18.25 11.72 4.65

Year-End

Assets (Millions) $13,081

11,685 11,143

9,543 10,075

8,495 7,452 7,392 6,938 5,554 4,224

Fund Facts

Fund Number Ticker Newspaper Listing CUSIP Number Assets (millions)

(Total $60,962) Inception Expense Ratio

(as of 4/2021)

Investor Shares 0002 VBINX

Balanced

921931101 $317

11/9/1992

0.18%

Admiral Shares

0502 VBIAX BalAdml

921931200 $47,564

11/13/2000

0.07%

Institutional Shares 0869 VBAIX BalInst

921931309 $13,081

12/1/2000

0.06%

Volatility Measures

R-Squared

Beta

Balanced Composite Index Spliced Total Stock Market Index

1.00

1.01

0.98

0.60

R-squared and beta are calculated from trailing 36-month fund returns relative to the associated benchmark.

Ten Largest Stocks

Apple Inc.

% of Total Net Assets

5.7 %

Microsoft Corp.

5.2

Alphabet Inc.

3.4

Inc.

3.0

Tesla Inc.

1.8

Meta Platforms Inc.

1.7

NVIDIA Corp.

1.5

Berkshire Hathaway Inc.

1.1

UnitedHealth Group Inc.

1.0

JPMorgan Chase & Co.

1.0

Top Ten as % of Common Stock

25.4 %

Top Ten as % of Total Net Assets

15.5 %

The holdings listed exclude any temporary cash investments and equity index products.

As of December 31, 2021

Vanguard Balanced Index Fund

Fund Asset Allocation

Stocks Bonds Short-term reserves Total

Equity Characteristics

Number of stocks Median market cap Average market cap Price/earnings ratio Price/book ratio Return on equity Earnings growth rate Equity yield (dividend) Foreign holdings Short-term reserves Turnover rate (fiscal year end)

% of Total Net Assets

60.7% 38.4

0.9 100.0 %

Balanced Index Fund

3,663 $138.0 Billion $564.6 Billion

24.3x 4.3x

18.8% 19.0%

1.2% 0.1% 0.0% 19.7%

CRSP US Total Market

Index

4,107 $138.0 Billion $565.2 Billion

24.3x 4.3x

18.9% 19.1%

1.2% 0.0%

-- --

Distribution by Credit Quality

% of Portfolio

U.S. Government

65.5%

Aaa

3.7

Aa

3.1

A

12.2

Baa

15.5

Less than BBB

0.0

Not Rated

0.0

Total

100.0%

Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). "NR" is used to classify securities for which a rating is not available. NR securities may include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under "U.S. Government." Credit-quality ratings for each issue are obtained from Bloomberg using ratings derived from Moody's Investors Service (Moody's), Fitch Ratings (Fitch), and Standard & Poor's (S&P). When ratings from all three agencies are available, the median rating is used. When ratings are available from two of the agencies, the lower rating is used. When one rating is available, that rating is used.

Sector Diversification (% of Stocks)

Balanced Index Fund

CRSP US Total Market

Index

Overweight/ Underweight

Basic Materials

2.0%

2.0%

0.0

Consumer Discretionary

15.9

16.0

-0.1

Consumer Staples

4.7

4.7

0.0

Energy

2.8

2.8

0.0

Financials

10.9

10.9

0.0

Health Care

12.8

12.8

0.0

Industrials

12.8

12.9

-0.1

Other

0.0

0.0

0.0

Real Estate

3.7

3.7

0.0

Technology

29.0

28.9

0.1

Telecommunications

2.6

2.6

0.0

Utilities

2.8

2.7

0.1

Total

100.0%

100.0%

Sector categories are based on the Industry Classification Benchmark system (ICB), except for the Other category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

As of December 31, 2021

Vanguard Balanced Index Fund

Fixed Income Characteristics

Number of bonds Average effective maturity Average duration

Distribution by Issuer

Asset-Backed Commercial Mortgage-Backed Finance Foreign Government Mortgage-Backed Industrial Treasury/Agency Utilities Other Total

Balanced Index Fund

8,966 8.8 years 6.8 years

Bloomberg Aggregate

Float Adj Index

12,350 8.9 years 7.0 years

% of Portfolio 0.4% 2.1 8.9 3.6

19.8 17.1 44.9

2.3 0.9 100.0%

Distribution by Effective Maturity

Under 1 Year 1 to 5 Years 5 to 10 Years 10 - 15 Years 15 - 20 Years 20 - 25 Years Over 25 Years Total

% of Portfolio

1.1 % 43.6 % 33.1 %

2.2 % 5.1 % 5.5 % 9.4 % 100.0 %

As of December 31, 2021

Vanguard Balanced Index Fund As of December 31, 2021

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