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Wellesley Income fund question
Old 01-07-2011, 05:31 PM   #1
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Wellesley Income fund question

I maybe a mathematically dense for asking this but...
I had VG Wellesley Income investor shares and this past October it was converted to Admiral shares. At that time the Investor share price was $21.74 and the Admiral share price was $52.68. The yield on investor class is 2.91% and 2.98% for admiral shares. It seems to me I will be getting a lot less shares at dividend times with Admiral shares and over the long haul, that would make a significant difference. So are Admiral shares for Wellesley worth it.
None of my other funds when converted from investor to Admiral had any (significant) price change/share.
Please help me understand this.
Thanks
Larry
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Old 01-07-2011, 05:37 PM   #2
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Larry, to compare apples to apples, work with dollar amounts, not the number of shares. Multiply the total # of shares x the share price for both investor class and Admiral class, then apply the yield % to each total. You may see a slightly higher dollar amount for Admiral to reflect the lower expense ratio of Admiral funds.
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Old 01-07-2011, 05:38 PM   #3
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If I'm reading your question correctly and it's the same amount of money. 2.98% is higher than 2.91% so there's no problem that I can see.
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Old 01-07-2011, 06:24 PM   #4
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Thanks and I understand what you are telling me. I did what yuo told me and yes the Admiral share would get a larger dividend. I will give you my specifics. In October, VG converted 2739.14 shares of investor class at 21.74/share to 1130.389 Admiral shares at $52.68/share. The total was $59,548.90. If I use that amount as an end of year total and multiply it by 2.91% and by 2.98% I get $1732.87 and $1774.56 respectively. The larger dividend bought 33+ shares. The total amount of cash difference in the dividend was not much. The investor class bought 79+ shares. I thought with holding and compounding, over time you are better off having a lot more shares of a fund.
Please continue to help me understand this.
Thanks again
Larruy
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Old 01-07-2011, 06:29 PM   #5
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If Admiral shares have a lower ER, in the long run you'll always make more money. It's all working off a % not how many shares you have.
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Old 01-07-2011, 06:34 PM   #6
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Quote:
Originally Posted by 73ss454 View Post
If Admiral shares have a lower ER, in the long run you'll always make more money. It's all working off a % not how many shares you have.
Right. Don't get hung up on the number of shares you buy when dividends are reinvested. It is the dollar amount the dividend buys you that you want to focus on.
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Old 01-07-2011, 06:35 PM   #7
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Just because you have more share doesn't mean you'll have more money. The dollar amount is the only thing that's important.
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Old 01-08-2011, 05:24 AM   #8
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Thanks everyone. The fog has lifted.
Larry
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Old 01-08-2011, 07:13 AM   #9
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I think Larry was confusing the yield (a percentage) with the dividend (a dollar amount).
He was multiplying the yield percentage by the number of shares, instead of multiplying the dividend amount by the number of shares.

Not a big deal; that's an easy mistake to make if you're not used to dealing with these things.
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