How does time in mutual fund (VTSAX) affect quarterly dividend

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anon3838
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How does time in mutual fund (VTSAX) affect quarterly dividend

Post by anon3838 » Thu Feb 13, 2020 10:26 pm

Let's say I contribute an additional $100K to VTSAX halfway through the quarter. How is the dividend calculated on that lot/those shares?

ruud
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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by ruud » Thu Feb 13, 2020 10:32 pm

Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
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anon3838
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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by anon3838 » Thu Feb 13, 2020 11:01 pm

ruud wrote:
Thu Feb 13, 2020 10:32 pm
Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
thank you!

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by grabiner » Fri Feb 14, 2020 9:16 pm

ruud wrote:
Thu Feb 13, 2020 10:32 pm
Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
And if the market doesn't move, the fund price drops by the amount of the dividend, so you don't actually gain anything by holding the fund on the record date rather than on any other date.
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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by rossington » Sat Feb 15, 2020 3:45 am

grabiner wrote:
Fri Feb 14, 2020 9:16 pm
ruud wrote:
Thu Feb 13, 2020 10:32 pm
Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
And if the market doesn't move, the fund price drops by the amount of the dividend, so you don't actually gain anything by holding the fund on the record date rather than on any other date.
But if reinvesting the dividend you GAIN more shares of the fund when the VTSAX dividend is paid. This is beneficial in a rising stock market environment when one is selling shares.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by UpperNwGuy » Sat Feb 15, 2020 6:33 am

rossington wrote:
Sat Feb 15, 2020 3:45 am
grabiner wrote:
Fri Feb 14, 2020 9:16 pm
ruud wrote:
Thu Feb 13, 2020 10:32 pm
Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
And if the market doesn't move, the fund price drops by the amount of the dividend, so you don't actually gain anything by holding the fund on the record date rather than on any other date.
But if reinvesting the dividend you GAIN more shares of the fund when the VTSAX dividend is paid. This is beneficial in a rising stock market environment when one is selling shares.
Not sure I follow your argument. More shares at a lower price is beneficial somehow?

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by N.Y.Cab » Sat Feb 15, 2020 7:09 am

For money market or bond funds, there is accrued dividend that grows daily. At Vanguard it’s under Balances by date tab.

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by acegolfer » Sat Feb 15, 2020 7:51 am

N.Y.Cab wrote:
Sat Feb 15, 2020 7:09 am
For money market or bond funds, there is accrued dividend that grows daily. At Vanguard it’s under Balances by date tab.
That's because for bonds, the "quoted" price doesn't drop after the coupon is paid. What one pays at purchase (=invoice price) = quoted price + accrued interest. Or, quoted price = PV - accrued interest.

a big difference in what quoted prices represent between stocks and bonds.

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by grabiner » Sun Feb 16, 2020 11:15 am

rossington wrote:
Sat Feb 15, 2020 3:45 am
grabiner wrote:
Fri Feb 14, 2020 9:16 pm
ruud wrote:
Thu Feb 13, 2020 10:32 pm
Time you own the fund does not matter. The dividend is a specified amount per share owned on the record day.
And if the market doesn't move, the fund price drops by the amount of the dividend, so you don't actually gain anything by holding the fund on the record date rather than on any other date.
But if reinvesting the dividend you GAIN more shares of the fund when the VTSAX dividend is paid. This is beneficial in a rising stock market environment when one is selling shares.
It doesn't matter whether you gain shares or your existing shares gain value.

Suppose that you have 100 shares of a fund worth $100 per share. If the market rises by 1% on a non-dividend day, you have 100 shares worth $101 per share. If the market rises by 1% on the day that a dividend of $1 per share is paid out, and you reinvest that dividend, you have 101 shares worth $100 per share.

The only reason this matters is the tax consequence, for a taxable investment. If you reinvested the $100 dividend in a taxable account, you still owe tax on it, likely $15. (Therefore, it is recommended not to buy a mutual fund right before it makes a large distribution. For something like Vanguard Total Stock Market with dividends of 0.5% per quarter, almost all qualified, the tax benefit from waiting more than a week is less than the loss of staying out of the market.)
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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by jhfenton » Sun Feb 16, 2020 7:25 pm

N.Y.Cab wrote:
Sat Feb 15, 2020 7:09 am
For money market or bond funds, there is accrued dividend that grows daily. At Vanguard it’s under Balances by date tab.
Money market and some bond funds. I believe Vanguard Total Bond Index Admiral Shares declares and accrues dividends daily, and many of the older active Vanguard bond mutual funds do as well--including Vanguard Ohio Long-Term Tax Exempt that I own. But most of the newer Vanguard bond index mutual funds declare dividends monthly to match the ETF share class. (That mismatch is actually why the Total Bond Index Admiral Shares are not convertible to the ETF share class while the newer bond index mutual funds are convertible to the ETF share class.)

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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by rkhusky » Sun Feb 16, 2020 7:51 pm

jhfenton wrote:
Sun Feb 16, 2020 7:25 pm
N.Y.Cab wrote:
Sat Feb 15, 2020 7:09 am
For money market or bond funds, there is accrued dividend that grows daily. At Vanguard it’s under Balances by date tab.
Money market and some bond funds. I believe Vanguard Total Bond Index Admiral Shares declares and accrues dividends daily, and many of the older active Vanguard bond mutual funds do as well--including Vanguard Ohio Long-Term Tax Exempt that I own. But most of the newer Vanguard bond index mutual funds declare dividends monthly to match the ETF share class. (That mismatch is actually why the Total Bond Index Admiral Shares are not convertible to the ETF share class while the newer bond index mutual funds are convertible to the ETF share class.)
There are some special rules involved with bond funds that do not accrue dividends daily. Specifically, there is a 6-month holding period for claiming losses in tax exempt bond funds that do not accrue dividends daily.

viewtopic.php?f=1&t=241278
viewtopic.php?f=1&t=240490
https://www.bogleheads.org/wiki/Municipal_bonds

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jhfenton
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Re: How does time in mutual fund (VTSAX) affect quarterly dividend

Post by jhfenton » Sun Feb 16, 2020 9:56 pm

rkhusky wrote:
Sun Feb 16, 2020 7:51 pm
There are some special rules involved with bond funds that do not accrue dividends daily. Specifically, there is a 6-month holding period for claiming losses in tax exempt bond funds that do not accrue dividends daily.

viewtopic.php?f=1&t=241278
viewtopic.php?f=1&t=240490
https://www.bogleheads.org/wiki/Municipal_bonds
I'm aware of the rules, and, as I said, VOHIX does declare dividends daily. I believe all of Vanguard's original active muni bond funds declare daily. (I don't hold any other bond funds in a taxable account.)

From the VOHIX prospectus:
Income dividends generally are declared daily and distributed monthly; capital gains distributions, if any, generally occur annually in December.
The newer Vanguard Municipal Bond Index Fund (VTEAX) declares monthly, so 6-month rule for capital losses would apply:
Income dividends generally are declared monthly and distributed monthly; capital gains distributions, if any, generally occur annually in December.
Vanguard's newer bond index funds were created with ETF share classes from the beginning, so they declare monthly for simplicity. Vanguard Total Bond Index Admiral is the oddball, with the ETF share class added later. So Total Bond kept its daily declaration of dividends.

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