Why do Schwab fund only pay distributions once a year?

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ChinchillaWhiplash
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Why do Schwab fund only pay distributions once a year?

Post by ChinchillaWhiplash » Sat Sep 22, 2018 12:49 pm

Any idea why a lot of Schwab mutual funds and ETFs only pay once a year? Any advantage or disadvantage over quarterly distributions? I personally prefer the 1/4 for better averaging over time. Just curious as to why they set it up this way.

livesoft
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Re: Why do Schwab fund only pay distributions once a year?

Post by livesoft » Sat Sep 22, 2018 1:20 pm

Don't know, but Vanguard used to do that, too. I suppose a once-a-year calculation is cheaper for the fund company, but quarterly schedule is not bad for investors since they don't have to "avoid a distribution" that is one-fourth of a big annual distribution.
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aristotelian
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Re: Why do Schwab fund only pay distributions once a year?

Post by aristotelian » Sat Sep 22, 2018 1:32 pm

Maybe it helps them look like they are outperforming with their share price slightly inflated?

billthecat
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Re: Why do Schwab fund only pay distributions once a year?

Post by billthecat » Sat Sep 22, 2018 1:44 pm

ChinchillaWhiplash wrote:
Sat Sep 22, 2018 12:49 pm
Any idea why a lot of Schwab mutual funds and ETFs only pay once a year? Any advantage or disadvantage over quarterly distributions? I personally prefer the 1/4 for better averaging over time. Just curious as to why they set it up this way.
Maybe the fund is able to float the dividends it receives throughout the year, before distributing them, to keep the ER down? That would be kind of sneaky.

For what it's worth, SCHZ (total bond) is monthly, SCHB (total US stock) is quarterly, and SCHF (total foreign) is annually.

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indexfundfan
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Re: Why do Schwab fund only pay distributions once a year?

Post by indexfundfan » Sat Sep 22, 2018 1:58 pm

Schwab does annual distributions for their international funds. Vanguard used to do that too until a few years ago when it switched to the quarterly schedule. State Street and Blackrock both use semi-annual schedules for their international funds.

I think having an annual distribution discourages investments late in the year (in the taxable account). I was planning to move some of my emerging market equity out from my tax-deferred account to the taxable account. Schwab's SCHE turned out to have the best tax efficiency among emerging markets ETFs. But because of the annual distribution, I am moving half into VWO instead (after VWO's September distribution) and putting off the other half until after the SCHE distribution in December.
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drk
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Re: Why do Schwab fund only pay distributions once a year?

Post by drk » Sat Sep 22, 2018 6:31 pm

billthecat wrote:
Sat Sep 22, 2018 1:44 pm
For what it's worth, SCHZ (total bond) is monthly, SCHB (total US stock) is quarterly, and SCHF (total foreign) is annually.
Good clarification. For anyone interested, Schwab's ETF distribution schedule is online (PDF).

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Doc
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Re: Why do Schwab fund only pay distributions once a year?

Post by Doc » Sun Sep 23, 2018 8:14 am

drk wrote:
Sat Sep 22, 2018 6:31 pm
For anyone interested, Schwab's ETF distribution schedule is online (PDF).
Thanks for the link.
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Artsdoctor
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Re: Why do Schwab fund only pay distributions once a year?

Post by Artsdoctor » Sun Sep 23, 2018 9:00 am

ChinchillaWhiplash wrote:
Sat Sep 22, 2018 12:49 pm
Any idea why a lot of Schwab mutual funds and ETFs only pay once a year? Any advantage or disadvantage over quarterly distributions? I personally prefer the 1/4 for better averaging over time. Just curious as to why they set it up this way.
At the risk of sounding as if I've been around a very long time, the reason why is because of tradition. Many, many years ago, distributions were almost all declared once a year at the end of the year (for equity funds). As time went by, some companies started declaring distributions twice annually and then quarterly. So it's not so much why Schwab (or Fidelity or anyone else) decided to distribute dividends/gains annually, it's why they decided not to change.

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