info provided by Vanguard "personal performance" page, for a security

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67Bosox
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Joined: Sat Apr 28, 2018 7:48 am

info provided by Vanguard "personal performance" page, for a security

Post by 67Bosox »

I posed this question to vanguard (with real numbers), and got the following answer:

Question posed - I bought $X worth of FUND SYMBOL on DATE. But on the "performance" page when I select for just this one holding, it
shows the $X initial investment in full at the investment date on the graph, but as i go across left to right (from investment date towards the present), it then starts to show my initial investment as a smaller number, lower than the $X that i actually invested. Can you tell me why it changes indifferent positions on the date axis from left to right?

Answer received: Because you have dividends and capital gains set as "Transfer to settlement fund," this is showing as a "withdrawal" from the specific mutual fund and it is decreasing that net "Purchases & withdrawals" figure.

My Question to you all: does this make sense? i suppose since i don't reinvest automatically the dividends, this is how vanguard does this. But couldn't Vanguard just as easily keep displaying my actual initial investment amount, and elsewhere keep track of my dividends as they go into my settlement fund?

Thank you in advance for considering this.
Silk McCue
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Re: info provided by Vanguard "personal performance" page, for a security

Post by Silk McCue »

This does make sense. And no I don't believe VG should complicate the reporting in order to support your desired view. You will need to manually track this in a spreadsheet if it is important to you.

Cheers
dbr
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Re: info provided by Vanguard "personal performance" page, for a security

Post by dbr »

67Bosox wrote: Wed Apr 07, 2021 6:37 am

My Question to you all: does this make sense? i suppose since i don't reinvest automatically the dividends, this is how vanguard does this. But couldn't Vanguard just as easily keep displaying my actual initial investment amount, and elsewhere keep track of my dividends as they go into my settlement fund?

Thank you in advance for considering this.
What they did makes sense though something like this would not be in a set of data I would put at the top of a list.

It does make sense to have a listing of your initial investment amounts for everything you buy. That would be your cost basis by tax lots. I don't have an account at Vanguard but surely they have a way to produce that report, at least for covered shares and assuming election of specific ID basis accounting. I do have my own record in a spreadsheet of this information and also a set of files of the purchase confirmations for everything I hold.

At my current broker the "positions" page shows the current value of each holding, the cost basis, and the current gain.
ruud
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Location: san francisco bay area

Re: info provided by Vanguard "personal performance" page, for a security

Post by ruud »

67Bosox wrote: Wed Apr 07, 2021 6:37 am My Question to you all: does this make sense? i suppose since i don't reinvest automatically the dividends, this is how vanguard does this. But couldn't Vanguard just as easily keep displaying my actual initial investment amount, and elsewhere keep track of my dividends as they go into my settlement fund?
What Vanguard does on the "personal performance" page is using the well-known Internal Rate of Return algorithm: this considers all cash flows into and out of the investment. And a non-reinvested dividend should be considered a cash flow, since it's money no longer invested in this fund, just as if you had withdrawn a little every year.
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BJJ_GUY
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Re: info provided by Vanguard "personal performance" page, for a security

Post by BJJ_GUY »

ruud wrote: Wed Apr 07, 2021 3:43 pm
67Bosox wrote: Wed Apr 07, 2021 6:37 am My Question to you all: does this make sense? i suppose since i don't reinvest automatically the dividends, this is how vanguard does this. But couldn't Vanguard just as easily keep displaying my actual initial investment amount, and elsewhere keep track of my dividends as they go into my settlement fund?
What Vanguard does on the "personal performance" page is using the well-known Internal Rate of Return algorithm: this considers all cash flows into and out of the investment. And a non-reinvested dividend should be considered a cash flow, since it's money no longer invested in this fund, just as if you had withdrawn a little every year.
Why would this reduce the value of the initial investment? I've never seen that as part of an IRR calculation
Thesaints
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Re: info provided by Vanguard "personal performance" page, for a security

Post by Thesaints »

BJJ_GUY wrote: Wed Apr 07, 2021 4:08 pm Why would this reduce the value of the initial investment? I've never seen that as part of an IRR calculation
Vanguard's is the correct way accounting-wise. It tracks your position value vs. your net investment.
Imagine you invest $100 in one share of VXYZX. The fund pays a $10 distribution (which would lower its NAV to $90), but at the same time market forces increase valuation of the underlying securities, so that VXYZX is worth $95.

Vanguard says you have invested $90 and valuation is $95, so that your return is 5.56%, which is correct.
You would say that you invested $100 and your position is worth $105, for a 5% return, which is wrong.
BJJ_GUY
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Re: info provided by Vanguard "personal performance" page, for a security

Post by BJJ_GUY »

Thesaints wrote: Wed Apr 07, 2021 4:16 pm
BJJ_GUY wrote: Wed Apr 07, 2021 4:08 pm Why would this reduce the value of the initial investment? I've never seen that as part of an IRR calculation
Vanguard's is the correct way accounting-wise. It tracks your position value vs. your net investment.
Imagine you invest $100 in one share of VXYZX. The fund pays a $10 distribution (which would lower its NAV to $90), but at the same time market forces increase valuation of the underlying securities, so that VXYZX is worth $95.

Vanguard says you have invested $90 and valuation is $95, so that your return is 5.56%, which is correct.
You would say that you invested $100 and your position is worth $105, for a 5% return, which is wrong.
If Vanguard calculates an IRR, then neither of those looks correct to me. (I would have said that my $100 invested resulted in $10 of distribution and a residual value of $95 for a return of 15/100=15%, but that wouldn't be an IRR either because we aren't account for timing).

I'm assuming -- and please correct me if I'm wrong -- but Vanguard's main priority was to provide an accurate IRR at the total account level. In order to maintain internal consistency, the fund level returns get manipulated in order to account for intra-account cash movement? (Otherwise, it seems silly that dividends don't count towards performance, and just as silly that position-level performance would be calculated a on a price change -- or share price change.)
Thesaints
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Re: info provided by Vanguard "personal performance" page, for a security

Post by Thesaints »

BJJ_GUY wrote: Wed Apr 07, 2021 6:18 pm If Vanguard calculates an IRR, then neither of those looks correct to me. (I would have said that my $100 invested resulted in $10 of distribution and a residual value of $95 for a return of 15/100=15%, but that wouldn't be an IRR either because we aren't account for timing).

I'm assuming -- and please correct me if I'm wrong -- but Vanguard's main priority was to provide an accurate IRR at the total account level. In order to maintain internal consistency, the fund level returns get manipulated in order to account for intra-account cash movement? (Otherwise, it seems silly that dividends don't count towards performance, and just as silly that position-level performance would be calculated a on a price change -- or share price change.)
Yes and they do. Timing is included in their calculation as net invested capital is updated for distributions when they happen.
Dividends count towards performance:

Invest $100. At the 1-year mark you receive $10 in dividends and ex-div shares are still worth $100.
Vanguard would show:
- Initial invested capital: $100
- Contributions/withdrawals: -$10
- Return: +10%

Now, let's suppose that instead you invest the day before the $10 distribution and, after 1 year, shares are worth $100.
Vanguard would show:
- Initial invested capital: $100
- Contributions/withdrawals: -$10
- Return: +11.1%.
BJJ_GUY
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Joined: Wed Mar 13, 2019 7:45 am

Re: info provided by Vanguard "personal performance" page, for a security

Post by BJJ_GUY »

Thesaints wrote: Wed Apr 07, 2021 6:27 pm
BJJ_GUY wrote: Wed Apr 07, 2021 6:18 pm If Vanguard calculates an IRR, then neither of those looks correct to me. (I would have said that my $100 invested resulted in $10 of distribution and a residual value of $95 for a return of 15/100=15%, but that wouldn't be an IRR either because we aren't account for timing).

I'm assuming -- and please correct me if I'm wrong -- but Vanguard's main priority was to provide an accurate IRR at the total account level. In order to maintain internal consistency, the fund level returns get manipulated in order to account for intra-account cash movement? (Otherwise, it seems silly that dividends don't count towards performance, and just as silly that position-level performance would be calculated a on a price change -- or share price change.)
Yes and they do. Timing is included in their calculation as net invested capital is updated for distributions when they happen.
Dividends count towards performance:

Invest $100. At the 1-year mark you receive $10 in dividends and ex-div shares are still worth $100.
Vanguard would show:
- Initial invested capital: $100
- Contributions/withdrawals: -$10
- Return: +10%

Now, let's suppose that instead you invest the day before the $10 distribution and, after 1 year, shares are worth $100.
Vanguard would show:
- Initial invested capital: $100
- Contributions/withdrawals: -$10
- Return: +11.1%.
I agree with this version of examples, thanks
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