[Vanguard Ship Logo]
P.O. Box 2600
Valley Forge, PA 19482-2600
610-669-5284
Lisa_Matson@vanguard.com
July 24, 2006
Christian Sandoe, Esq.
Division of Investment Management
U.S. Securities and Exchange Commission VIA ELECTRONIC FILING
450 Fifth Street, N.W., Fifth Floor
Washington, D.C. 20549
RE: VANGUARD BALANCED INDEX FUNDS
Dear Mr. Sandoe,
The following responds to your comments of July 18, 2006 on the post-effective
amendment of the registration statement of the Vanguard Balanced Index Funds
(the "Trust"). You commented on Post-Effective Amendment No. 29 that was filed
on June 2, 2006.
COMMENT 1: MARKET CAPITALIZATION RISK DISCLOSURE
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Comment: Item 2 disclosure states that the Fund's stock portion holds
the largest 1,200-1,300 stocks in the MSCI US Broad Market
Index. If these stocks include mid- and small-cap stocks,
include appropriate risk disclosure in Item 2.
Response: The Fund typically invests in the largest stocks in the MSCI
Index, which is an index dominated by large-cap stocks. Based
on the fact that only a portion of the Fund's total assets are
invested in stocks, and then predominantly in large-cap
stocks, we do not believe it is appropriate to add mid- or
small-cap risk as a primary risk of the Fund. We state in our
Item 4 disclosure that mid- and small-cap stocks are also
represented in the Index generally, although as of December
31, 2005 small- and mid-cap stocks made up only 21% of the
Index's total market value, of which the Fund invests in the
largest stocks in the Index. We also state that the medium
market capitalization range of the Fund's stock portfolio as
of December 31, 2005 was $29.9 billion.
Therefore, we believe our current Item 2 disclosure
appropriately describes the Fund's primary investment risks.
COMMENT 2: INVESTMENTS IN INTERNATIONAL DOLLAR-DENOMINATED BONDS RISK
DISCLOSURE
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Comment: The Fund's bond portion includes investment in "international
dollar-denominated bonds." Consider adding disclosure relating
to the risks of foreign investments to the primary risk
section (Item 2 disclosure) of the prospectus.
Response: The Fund's primary investment strategy for its bond portion
seeks to track the performance of the Lehman Brothers
Aggregate Bond Index, which measures a wide spectrum of bonds,
including
Christian Sandoe
July 24, 2006
Page 2
international dollar-denominated bonds. As disclosed in the
Fund's prospectus, as of December 31, 2005, only 3% of the
Fund's bond portion (which makes up approximately 40% of the
Fund's total) was invested in international dollar-denominated
bonds. Thus, only approximately 1% of the Fund's total assets
are invested in international dollar-denominated bonds.
Accordingly, we believe our current Item 2 disclosure
appropriately describes the Fund's primary investment risks.
We do not believe that the overall extremely low level of
investment in international dollar-denominated bonds warrants
disclosure of these investments as a primary risk of the Fund.
However, the risk of investments in international
dollar-denominated bonds does exist for the Fund since such
investments are made, and as such it is appropriately included
in Item 4 disclosure.
COMMENT 3: TANDY REQUIREMENTS
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Comment: The SEC is now requiring all registrants to provide at the end
of response letters to registration statement comments, the
following statements:
o The Trust is responsible for the adequacy and accuracy of the
disclosure in the filing.
o Staff comments or changes in response to staff comments in the
filings reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing.
o The Trust may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Response: As required by the SEC, we will provide the foregoing
acknowledgements.
* * * * *
As required by the SEC, the Trust acknowledges that:
o The Trust is responsible for the adequacy and accuracy of the
disclosure in the filing.
o Staff comments or changes in response to staff comments in the
filings reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing.
o The Trust may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please contact me at (610) 669-5284 with any questions or comments regarding the
above responses. Thank you.
Sincerely,
/s/ Lisa Matson
Lisa L. B. Matson
Associate Counsel
Securities Regulation, Legal Department