Vanguard brokerage automatic reinvestment price

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Thesaints
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Vanguard brokerage automatic reinvestment price

Post by Thesaints » Thu Jul 06, 2017 12:49 am

Does anyone else have the feeling that the price at which automatic dividend reinvestments take place are always near the daily maximum ?

Today, my VT reinvested at $67.60, daily maximum was $67.63 and yesterday close was $67.64.
On 12/27 it reinvested at $61.42, which was $0.01 above the daily maximum. Could have been the effect of rounding, but still the price was as high as it could be.
I have holdings with DRIP at other brokers and It seems more random (Ameritrade), or they systematically use the previous day close (Sharebuilder).


Has anybody had similar experience with VT or other holdings ?
It is a amall amount for an individual investor, but multiplied for all the investors...

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David Jay
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Re: Vanguard brokerage automatic reinvestment price

Post by David Jay » Fri Jul 07, 2017 12:30 pm

I hold all mutual funds. Dividend Reinvestment is always at today's NAV.
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livesoft
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Re: Vanguard brokerage automatic reinvestment price

Post by livesoft » Fri Jul 07, 2017 12:47 pm

There is at least one thread with reinvestment prices listed. I will try to find that thread.

I do have Vanguard automatically reinvest VSS dividends in one of my accounts, but I don't pay attention to the prices. Otherwise, I've chosen to manually reinvest my ETF dividends because I can invest a day earlier if I want to.

This quarter it has been nice since prices dropped more after the dividends were paid, so the ETF investor got much better prices than the mutual fund investor.
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Thesaints
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Re: Vanguard brokerage automatic reinvestment price

Post by Thesaints » Fri Jul 07, 2017 1:03 pm

Sorry for the confusion; I should have spelled clearly that I'm referring to traded securities.
livesoft wrote:There is at least one thread with reinvestment prices listed. I will try to find that thread.

I do have Vanguard automatically reinvest VSS dividends in one of my accounts, but I don't pay attention to the prices. Otherwise, I've chosen to manually reinvest my ETF dividends because I can invest a day earlier if I want to.

This quarter it has been nice since prices dropped more after the dividends were paid, so the ETF investor got much better prices than the mutual fund investor.
Thanks. I could only find a thread about price inflation on DRIP date for stocks with high participation, but my problem is Vanguard executing near the highest price of the day, however high or low it might be. For that, I would also need the daily chart, or at least a candlestick graph with daily highs and lows.
I might do it myself when I have the time and post the results.
However, I was asking if anybody else has noticed something similar, perhaps in securities different from VT.

deltaneutral83
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Re: Vanguard brokerage automatic reinvestment price

Post by deltaneutral83 » Fri Jul 07, 2017 2:50 pm

livesoft wrote:There is at least one thread with reinvestment prices listed. I will try to find that thread.

I do have Vanguard automatically reinvest VSS dividends in one of my accounts, but I don't pay attention to the prices. Otherwise, I've chosen to manually reinvest my ETF dividends because I can invest a day earlier if I want to.

This quarter it has been nice since prices dropped more after the dividends were paid, so the ETF investor got much better prices than the mutual fund investor.
I had just assumed that divedends were reinvested on the same day with the only difference being ETF's were intra day and MF's were at the NAV after the close. Are they actually re-invested on different days?

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Re: Vanguard brokerage automatic reinvestment price

Post by livesoft » Fri Jul 07, 2017 2:56 pm

deltaneutral83 wrote:I had just assumed that divedends were reinvested on the same day with the only difference being ETF's were intra day and MF's were at the NAV after the close. Are they actually re-invested on different days?
Yes, the dividends are paid on different days and reinvested differently by different brokers. I think the dividend reinvestment practices are one criteria to judge brokerage firms by.

Here is a Case Study thread on brokerage dividends:
viewtopic.php?t=87742

Here is a thread "ETF dividend reinvestment: What Price Did You Get?" viewtopic.php?t=123871
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Thesaints
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Re: Vanguard brokerage automatic reinvestment price

Post by Thesaints » Fri Jul 07, 2017 3:04 pm

deltaneutral83 wrote: I had just assumed that divedends were reinvested on the same day with the only difference being ETF's were intra day and MF's were at the NAV after the close.
It is not a small difference: "intra-day" can mean a lot of different prices and your broker has to pick one. With other brokers I never had the feeling they were taking advantage of it. With Vanguard I'm getting a different impression. Could be bad luck, selective memory, I'm trying to find out.
Even skewing reinvestment price by a few cents, which makes no difference for an individual investors, would allow Vanguard to cash a nice bonus.

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Re: Vanguard brokerage automatic reinvestment price

Post by livesoft » Fri Jul 07, 2017 3:09 pm

My VSS reinvestment prices:

2017/06/27 107.83

2017/03/28 102.61

These were the opening prices on those days:

Image

Image

My conclusion: Nothing nefarious in these transactions.
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Thesaints
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Re: Vanguard brokerage automatic reinvestment price

Post by Thesaints » Fri Jul 07, 2017 3:31 pm

Thank you! In your case they used the opening price.
It seems to be the case for VT as well, although I did not recognized it due to rounding of reported price.

Dirghatamas
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Re: Vanguard brokerage automatic reinvestment price

Post by Dirghatamas » Fri Jul 07, 2017 7:31 pm

Thesaints wrote: Even skewing reinvestment price by a few cents, which makes no difference for an individual investors, would allow Vanguard to cash a nice bonus.
You do realize that Vanguard is structured differently. For a profit oriented company like BlackRock, it is certainly reasonable to suspect "competent but nefarious". They do put out high fees index fund ETF and when they need to compete on price, they release new ETF which are low cost but don't merge the old ones..thus locking in people with high capital gains in older high cost ETF. Similarly, they take a certain % of security lending as profit. Even after all that they can be very good investments/low final fees to investors because they are competent.

Vanguard is structured "at cost". If they make money, then after paying their salaries, the rest simply comes back to fund shareholders (you and I) as lower costs..

So, in all my years dealing with Vanguard I can describe them as "stingy" and perhaps as a huge stretch "less competent" but never "nefarious".

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Thesaints
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Re: Vanguard brokerage automatic reinvestment price

Post by Thesaints » Fri Jul 07, 2017 8:40 pm

Dirghatamas wrote:
Thesaints wrote: Even skewing reinvestment price by a few cents, which makes no difference for an individual investors, would allow Vanguard to cash a nice bonus.
You do realize that Vanguard is structured differently. For a profit oriented company like BlackRock, it is certainly reasonable to suspect "competent but nefarious". They do put out high fees index fund ETF and when they need to compete on price, they release new ETF which are low cost but don't merge the old ones..thus locking in people with high capital gains in older high cost ETF. Similarly, they take a certain % of security lending as profit. Even after all that they can be very good investments/low final fees to investors because they are competent.

Vanguard is structured "at cost". If they make money, then after paying their salaries, the rest simply comes back to fund shareholders (you and I) as lower costs..

So, in all my years dealing with Vanguard I can describe them as "stingy" and perhaps as a huge stretch "less competent" but never "nefarious".

I was wrong, as I wrote earlier. They reinvest at opening price. It was rather naive of me not assuming that such a scheme would have already been uncovered by their competitors.
However, Vanguard's corporate structure is no guarantee. It is true that they don't pay dividends, but they do pay salaries and there are no stockholders to complain should they be too high.

Dontridetheindexdown
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Re: Vanguard brokerage automatic reinvestment price

Post by Dontridetheindexdown » Fri Jul 07, 2017 9:05 pm

We hold the same few equities with several different firms.

Whether they reinvest at opening price, closing price, or average daily traded price does not matter.

Every time they reinvest, I track the range of reinvestment prices - they do vary between firms, based on daily price fluctuations.

However, at the end of each month, our equity holdings all show the same percentage increase or decrease.

During 40 years of reinvesting, there has never been a month when our equities, including reinvested dividends, did not all increase or decrease by the same percentage, regardless of reinvested price.

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