VASVX down big, why?

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michw
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VASVX down big, why?

Post by michw » Wed Dec 18, 2013 12:21 am

I'm a fairly new investor, stumbled onto the boglehead website a while ago, and have most of my IRA invested in a few Vanguard funds.

Today, the markets are fairly even while VASVX is down 5.4%. How do I determine why? Nothing big happened with the top 10 holdings.

I was under the impression this fund would generally track the markets and was surpised by a 5% delta. Is this standard?

goodenoughinvestor
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Re: VASVX down big, why?

Post by goodenoughinvestor » Wed Dec 18, 2013 1:19 am

It probably just distributed long-term capital gains. Share price goes down when that happens. If you have your gains automatically reinvested into the fund then you'll see that, although the price per share declined, your total number of shares will have just gone up, so it's a "wash."


John3754
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Re: VASVX down big, why?

Post by John3754 » Wed Dec 18, 2013 7:18 am

"Because of the size and characteristics of the stocks the fund holds, performance can vary significantly from that of the broad stock market. The fund is typically concentrated in a small number of stocks and, therefore, can be subject to significant volatility. Investors in this fund should have a long-term horizon and may consider the fund complementary to an already diversified portfolio."

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frugaltype
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Re: VASVX down big, why?

Post by frugaltype » Wed Dec 18, 2013 7:45 am

goodenoughinvestor wrote:It probably just distributed long-term capital gains. Share price goes down when that happens. If you have your gains automatically reinvested into the fund then you'll see that, although the price per share declined, your total number of shares will have just gone up, so it's a "wash."

Yup. Wellesley just did that.

sscritic
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Re: VASVX down big, why?

Post by sscritic » Wed Dec 18, 2013 7:57 am

michw wrote:Is this standard?
Every year in December, just like clockwork.

Topic Author
michw
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Re: VASVX down big, why?

Post by michw » Wed Dec 18, 2013 8:51 am

Dividend, I got it now. Thanks everyone.

sscritic
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Re: VASVX down big, why?

Post by sscritic » Wed Dec 18, 2013 8:57 am

Not quite: it's not just the dividend.

Which is larger?

Code: Select all

Dividend	   $0.33000	12/16/2013	
LT Cap Gain	$1.22000	12/16/2013
From the link you were provided before.

Also from goodenoughinvestor:
It probably just distributed long-term capital gains.

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nisiprius
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Re: VASVX down big, why?

Post by nisiprius » Wed Dec 18, 2013 9:42 am

It's not a concern. QUIT LOOKING AT PRICE CHARTS, they're for speculators. If you get in the habit of looking at growth charts, not price charts, you won't see it. If you look in your account, you won't see it, or nothing out of the ordinary day-to-day fluctuations.

If you're reinvesting dividends, which is typical, then on the day the dividends are distributed, the "price" (per share) number drop, but the QUANTITY (OF SHARES) number will rise, and the current balance line will stay almost the same.

If you're not reinvesting dividends, then the "current balance" line on the mutual fund will drop, but the "current balance" line in your settlement account (money market fund) will rise.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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nisiprius
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Re: VASVX down big, why?

Post by nisiprius » Wed Dec 18, 2013 9:52 am

Growth charts show total return--capital appreciation and dividends. Since you as an investor get both capital appreciation and dividends, that is what you should care about. Dividends move business earnings out of the business and into the shareholders' pockets. This is generally considered to be a Good Thing, and it's what stocks are for. When money moves out of the business, there is now less in the business so each share of the business is worth less, and that's reflected in the stock price. Same thing with mutual funds.

P.S. Why do the fluctuations on the second chart look bigger? Because the fluctuations are really smaller, and so Morningstar switches to a more magnified scale.

Image

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

tomd37
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Re: VASVX down big, why?

Post by tomd37 » Wed Dec 18, 2013 4:39 pm

Sometimes we fail to see the truth of the matter.....it just depends on the way we are looking at things. Thanks Nisiprius.
Tom D.

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michw
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Re: VASVX down big, why?

Post by michw » Wed Dec 18, 2013 11:37 pm

LT Cap gain vs. dividend = not the same. Got it for real now (maybe). I do not think the tax differences impact me yet. It's an IRA account and I believe it's set up to automatically reinvest. I can't tell because the dividends or LT gains have not yet been redeposited in cash or back in the fund. Maybe it's not even possible to reinvest LT gains. I'll wait and see where the money goes.

I can't figure out how to look at growth charts on Etrade but I was able to recreate the growth chart on Morningstar. Very helpful.

Thanks again. The devil is in the detail.

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grabiner
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Re: VASVX down big, why?

Post by grabiner » Wed Dec 18, 2013 11:49 pm

michw wrote:LT Cap gain vs. dividend = not the same. Got it for real now (maybe). I do not think the tax differences impact me yet. It's an IRA account and I believe it's set up to automatically reinvest.
In an IRA, there is no effective difference. In both cases, the fund paid out some cash, and since the net asset value is the total value of the fund assets divided by the number of shares, the fund price decreased by an equal amount.

The difference between dividends and capital gains is important for taxable investors, as they are taxed differently. They also represent different actions; the fund pays out dividends from the income it received, while it pays out capital gains because of transactions it made.
Wiki David Grabiner

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