Vanguard Closes Some Doors, Opens Others

The typically quiet Vanguard Group underwent a flurry of activity last week.

First, it announced on June 28 that it would close its (VGPMX Quote)Precious Metals fund -- a somewhat surprising move. Precious metals funds are in the midst of the biggest rally in nearly a decade, and Vanguard's fund in particular has returned more than 33% year-to-date, and has attracted $124 million in new money, according to Morningstar.

Precious metals funds averaged a 19% gain last year, while the S&P fell by nearly that much. But the sector's performance is volatile -- the typical precious metals fund has a standard deviation 37% higher than that of the average stock fund.

That spectacular run is most likely why the fund has closed not only to new investors, but also existing ones, according to Morningstar analyst Christopher Davis. The funds' performance has attracted many speculative investors. Those investors would likely be the first ones to leave the fund in a downturn, Davis says, which would trigger a wave of redemptions that could hurt performance. ...