Changes

Vanguard has a number of funds which are prone to make return of capital distributions.

Vanguard has a number of funds which are prone to make return of capital distributions.

* '''Real Estate funds''': The Vanguard REIT Index Fund and Vanguard Global ex-U.S. Real Estate Index Fund. In the case of equity REIT funds, the return of capital distribution mainly reflects the  accounting value of real estate depreciation (operating earnings are in excess of earnings including depreciation). As most dividends distributed by equity REITS are [[Non-qualified dividends | non-qualified]] dividends, taxed at marginal rates, the return  of capital dividend serves, for taxable account investors, to both defer taxation and to switch the taxation of the distribution from marginal rates to usually lower capital gains rates.

* '''Real Estate funds''': The Vanguard REIT Index Fund and Vanguard Global ex-U.S. Real Estate Index Fund. In the case of equity REIT funds, the return of capital distribution mainly reflects the  accounting value of real estate depreciation (operating earnings are in excess of earnings including depreciation). As most dividends distributed by equity REITS are [[Non-qualified dividends | non-qualified]] dividends, taxed at marginal rates, the return  of capital dividend serves, for taxable account investors, to both defer taxation and to switch the taxation of the distribution from marginal rates to usually lower capital gains rates.

* '''Managed Payout Funds''': The Vanguard Managed Payout Growth Focus Fund, Vanguard Managed Payout Growth and Distribution Fund, and Vanguard Managed Payout Distribution Focus Fund. As a part of these fund's managed distribution policies, monthly income distributions can come from dividends, realized capital gains, and return of capital.

* '''Managed Payout Fund''': As a part of the Vanguard Managed Payout Fund's managed distribution policy, monthly income distributions can come from dividends, realized capital gains, and return of capital.

* '''Inflation-Protected Securities Fund''' Mutual funds which hold [[TIPS]] are required to distribute as dividends both the coupon on the bond and the inflation adjustment. In one quarter, deflation was more than the bond yield, and thus the amount Vanguard Inflation-Protected Securities Fund needed to distribute for the year was less after the fourth quarter than after the third quarter. The fund made no distribution, and recharacterized part of the third-quarter dividend as a return of capital so that the dividends for the full year would be the correct amount.

* '''Inflation-Protected Securities Fund''': Mutual funds which hold [[TIPS]] are required to distribute as dividends both the coupon on the bond and the inflation adjustment. In some quarters, deflation is more than the bond yield, and thus the amount Vanguard Inflation-Protected Securities Fund needs to distribute for the year is less after the fourth quarter than after preceding quarters. The fund makes no distribution, and recharacterizes part of the dividend as a return of capital so that the dividends for the full year are the correct amount. Historically, the fund has made return of capital distributions in the 2007 and 2016 fiscal years.

==See also==

==See also==