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Determining monthly income
Old 03-11-2012, 11:52 AM   #1
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Determining monthly income

Needing a little clarification on what the numbers to use and how in determining estimated monthly income from a fund.

Say you have $1,000,000 to invest and wanted to determine an estimate of what it would produce monthly what #'s would you use to calculate that #?

Total bond (Vbmfx) as of 2/29 has a SEC yield of 2.03% and Distributuion yield of 2.89%. Distributions paid out monthly.

Is the math

(1,000,000 * 2.03%) / 12 = $1,691 monthly income


(1,000,000 * 2.85%) / 12 = $2,375 monthly income

Now, second part if one were to invest the same amount in th Wellesley fund, SEC yield of 2.89% as 12/15/11, with quarterly distributions, no % stated on vanguard website for Distributuion yield.

Is the math

(1,000,000 * 2.89%) / 4 = $7,225 quarterly income

If for the Wellesley one would need the distribution yield %, how would one determine what it would be withou it being made available.

Hope my question makes sense. I have always been little confused when the statement comes and there is money reinvested on a monthly basis for Say total bond fund and how that number is figured out and also quarterly for funds that make distributions on this type of schedule.


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Old 03-11-2012, 12:49 PM   #2
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I just Googled "Distribution yield vs SEC yield" to get this definition:
The distribution yield simply indicates "what the fund is paying you" in income distributions. The figure is typically calculated by taking the fund's income dividends in the most recent month, multiplying by 12 and dividing by a recent fund share price. In essence, the figure assumes the distributions remain constant for a year, although that often won't be the case.
The SEC yield is a much more complex calculation that aims to more accurately reflect the fund's potential income over time by looking at the "yield to maturity" of all the individual holdings in the portfolio.

I go by Distribution yield. I keep a list of stocks and funds in my spreadsheet and their dividends, so I can calculate the yields and predict annual income. Quicken is also quite accurate about estimating income, but it needs a little help when the dividend changes.
Hard to say what it was, when it isn't.
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