VCIT Year to Date growth? Exactly how is it calculated

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cpumechanic
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VCIT Year to Date growth? Exactly how is it calculated

Post by cpumechanic »

Sorry if this dumb question but when I look up VCIT on morningstar I see that it says the NAV is up 3.49% Year to date.

When I look at the closing price on Dec 30 2016 I see a value of 85.7 $/share.. and the closing price on Friday July 20th was 88.02.

When I divide those two values I get 1.02707117853, or 2.7% change in price from Year end 2016 to last Friday.

Why does Morningstar report 3.49%.

Here is the link... not sure how to post a screen image.

http://performance.morningstar.com/fund ... ion?t=VCIT

Thanks in advance.. I was a nerd engineer fixing stuff for many years.. not thinking about NAV and all the money stuff.

:sharebeer

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Kevin M
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Kevin M »

Price return is as of 6/30. How does your calculation using the 6/30 price come out?
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Re: VCIT Year to Date growth? Exactly how is it calculated

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Kevin M wrote:Price return is as of 6/30. How does your calculation using the 6/30 price come out?
No, that still doesn't work out.

I think M* is using adjusted price, which accounts for dividend distributions.

Kevin
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stlutz
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by stlutz »

The 3.49% includes reinvested dividends.

To use a hypothetical, suppose a fund was priced at $10 on 12/31/2016 and you owned 100 shares, or $1000. On 3/31/2017, it was at $10.50 and it paid a $.25 dividend. That comes right out of the fund, so the price drops to $10.25. So, if you reinvest that you now have you original 100 shares plus .25/10.25 * 100 = 102.439 shares.

On 6/30/2017, the fund is priced at $11. The value of your holding is 102.439 * 11 = $1126.83. So, your total return is 12.68% even though the price of the fund was up 10.00%.
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Kevin M
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Kevin M »

Kevin M wrote:
Kevin M wrote:Price return is as of 6/30. How does your calculation using the 6/30 price come out?
No, that still doesn't work out.

I think M* is using adjusted price, which accounts for dividend distributions.

Kevin
Yep, that's it. You can get adjusted price from Yahoo (VCIT 88.21 0.19 0.22% : Vanguard Intermediate-Term Corp - Yahoo Finance). Adjusted price on 6/30 was 87.30, and on 12/30/2016 it was 84.35. This gives 3.50% = 87.30/84.35 - 1, so close enough to M*'s value of 3.49%.

Kevin
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cpumechanic
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by cpumechanic »

Ok.. so when I follow the link you shared to get "adjusted price" on Yahoo the numbers work out to exactly 3.49% from Dec 30 to June 30.
Sorry but I like to think of an ETF fund like a stock.. and the closing price on each day is the price I would receive if I sold my shares.

What exactly is the definition of the Yahoo daily adjusted price table you linked to? Is that the closing price I would receive if/when I sell the ETF?

Why does the morningstar chart display a different value when I use the "hover" feature to extract a price/date?

So.. the "Price" accumulation of 3.49% YTD on morning star uses an "adjusted price" that accounts for dividends, then also lists an "Nav"" accumulation year to date of 3.67% YTD... sorry I am still confused on exactly how each of these YTD numbers is created.

Thanks to all the folks who quickly replied.. would like to understand this stuff a little better now that I am retired and have time to think about it.
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cpumechanic
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by cpumechanic »

stlutz wrote:The 3.49% includes reinvested dividends.

To use a hypothetical, suppose a fund was priced at $10 on 12/31/2016 and you owned 100 shares, or $1000. On 3/31/2017, it was at $10.50 and it paid a $.25 dividend. That comes right out of the fund, so the price drops to $10.25. So, if you reinvest that you now have you original 100 shares plus .25/10.25 * 100 = 102.439 shares.

On 6/30/2017, the fund is priced at $11. The value of your holding is 102.439 * 11 = $1126.83. So, your total return is 12.68% even though the price of the fund was up 10.00%.
Thanks.. Stlutz.....this is very clear and I understand the "price" YTD calculation.. just need to find out how they get 3.67% for NAV growth YTD
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by tibbitts »

cpumechanic wrote:Sorry if this dumb question but when I look up VCIT on morningstar I see that it says the NAV is up 3.49% Year to date.

When I look at the closing price on Dec 30 2016 I see a value of 85.7 $/share.. and the closing price on Friday July 20th was 88.02.

When I divide those two values I get 1.02707117853, or 2.7% change in price from Year end 2016 to last Friday.

Why does Morningstar report 3.49%.

Here is the link... not sure how to post a screen image.

http://performance.morningstar.com/fund ... ion?t=VCIT

Thanks in advance.. I was a nerd engineer fixing stuff for many years.. not thinking about NAV and all the money stuff.

:sharebeer

CPU
You shouldn't have started thinking about NAV. Just look at total return.
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Kevin M
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Kevin M »

cpumechanic wrote: What exactly is the definition of the Yahoo daily adjusted price table you linked to?
You can read the definition here: What is the adjusted close? | Yahoo Help - SLN28256.

If you look at the YTD historical data, you'll see the close = adjusted close for dates after the most recent dividend on 7/3, and you'll see that the adjusted close on 6/30 is approximately close minus dividend. Yahoo uses a slightly more complicated calculation to avoid negative historical prices.
Is that the closing price I would receive if/when I sell the ETF?
No. You would have received the (unadjusted) close for shares of the ETF you sold on a particular date.
Why does the morningstar chart display a different value when I use the "hover" feature to extract a price/date?
The hover feature shows unadjusted close.

M* isn't showing price return in the table that shows 3.49% YTD--they are showing total return based on price, as distinguished from total return based on NAV. The adjusted close values provided by Yahoo allow you to calculate total return, since the return contribution from dividends is included.
So.. the "Price" accumulation of 3.49% YTD on morning star uses an "adjusted price" that accounts for dividends, then also lists an "Nav"" accumulation year to date of 3.67% YTD... sorry I am still confused on exactly how each of these YTD numbers is created.
I wouldn't use the word "accumulation"--the more standard term is "total return", which includes price/NAV or capital return and dividend or income return. Since the market price of ETFs typically deviates from the NAV somewhat (unlike for mutual funds, for which they are the same), M* and others show the returns for ETFs based on both. The total return based on NAV also includes the dividend component of return, so the only difference will be due to the differences between price and NAV on the start and end dates.

Kevin
Last edited by Kevin M on Sun Jul 23, 2017 12:20 pm, edited 1 time in total.
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Kevin M »

You may gain additional insight into this by viewing the Vanguard web page for historical returns: Vanguard - Intermediate-Term Corporate Bond ETF - Historical Returns. Looking at the Annual investment returns table, you'll see capital return by NAV and income return by NAV, along with the sum which is total return by NAV. Vanguard only shows total return by market price, which you can see is slightly different than total return by NAV.

Capital return consists of the return from price/NAV change plus any capital gain distributions. Income return is the return from dividend distributions.

We can verify the NAV capital return component for 2016 as follows. There were no capital gain distributions in 2016, so capital return consisted only of NAV return. We can get the NAV on 12/31/2015 and 12/30/2016 from the historical price search tool, and from this compute the capital return as 85.37/83.74-1 = 1.95%, which agrees with the capital return displayed in the Vanguard annual investment returns table.

Kevin
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cpumechanic
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by cpumechanic »

Kevin/all

Thank you for the education and the links to the definitions... I now understand how the returns listed as % are calculated.. and they make sense. I liked the detailed explanations listed on the Yahoo Finance links.. unlike the glossary at M* that provides a very basic word based definition of the terms without any examples.

Time to sell some VCIT for living expenses... now that it is back up YTD... still don't understand why it is up if the Feds are raising rates.. but I don't know why the shares of many companies move up and down as much as they do, and Mr Bogle says that >99% of the stock sales each year are "shear speculation" so I am going to take my gains and spend them.

Thanks again if you need your car airbag fixed, or your house appliances or computers updated let me know.. that I can handle.

God bless Jack Bogle my hero

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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Doc »

tibbitts wrote:You shouldn't have started thinking about NAV. Just look at total return.
Why would someone want to look at total return when they were not reinvesting dividends and just wanted to compare prices of different bond ETFs?

A price vs. NAV comparison also tells me something about the trading characteristics of an ETF. Something total return does not.
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Re: VCIT Year to Date growth? Exactly how is it calculated

Post by Kevin M »

cpumechanic wrote: Time to sell some VCIT for living expenses... now that it is back up YTD... still don't understand why it is up if the Feds are raising rates..
Intermediate-term yields aren't closely related to the federal funds rate (FFR), which is a short-term rate--especially over periods of a couple of years or less. You'll find yields of 1-month Treasuries closely related to the FFR, but it's easy to find periods when 5-year or 10-year yields moved in the opposite direction of the FFR, or moved up and down without any apparent correlation to FFR changes. In other words, the yield curve flattens and steepens as longer-term and shorter-term rates move by different amounts and even in different directions.

Kevin
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