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Stupid question about Wellington Fund Distributions
Old 05-20-2016, 05:16 PM   #1
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Stupid question about Wellington Fund Distributions

I'm kind of embarrassed to ask this question, but here goes.
Looking at the vanguard website for distributions for Wellington Investor Shares I see ST and LT capital gain distributions at the end of the year (https://personal.vanguard.com/us/fun...tExt=INT#tab=4).

I'm guessing these are in addition to the quarterly dividends, such that in 2015 the per share distribution was:

DIVIDENDS
3/25: $0.23
6/18: 0.243
9/17: 0.243
12/23: 0.287

LT Cap Gain:
12/23: 1.325

ST Cap Gain
12/23: 0.064

for an annual total of: $2.39 per share?

Thanks for the help!
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Old 05-20-2016, 05:42 PM   #2
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For a 2015 total of $2.392 per share.

I would not use the word 'annual' only because it might suggest that same number for 2016, 2017, ... and even past years 2014, 2013, ... which cannot be true.
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Old 05-20-2016, 05:45 PM   #3
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Quote:
Originally Posted by petershk View Post
... I see ST and LT capital gain distributions at the end of the year (https://personal.vanguard.com/us/fun...tExt=INT#tab=4).

I'm guessing these are in addition to the quarterly dividends...
You are correct. The quarterly dividends fluctuate a bit, but they come from the holdings' dividends in each quarter. Then, at year end they distribute the additional cap gains accrued by stock trading through the year.
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Old 05-20-2016, 05:52 PM   #4
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Those are the total distributions for 2015. Other years may be similar but will vary depending on the dividends paid by the stocks that the fund holds and what capital gains are generated from trades made by the fund manager in that year.
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Old 05-20-2016, 06:00 PM   #5
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Originally Posted by LOL! View Post
For a 2015 total of $2.392 per share.

I would not use the word 'annual' only because it might suggest that same number for 2016, 2017, ... and even past years 2014, 2013, ... which cannot be true.
Yes. 2008 and 2009 were meaningfully different it seems

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Old 05-20-2016, 06:08 PM   #6
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The cap gain distributions vary the most from year to year. Wellington is an active fund, so the manager trades at his discretion. Besides 2008, 2009, cap gains were also missing in 2010 and 2011 according to Yahoo.
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Old 05-20-2016, 07:43 PM   #7
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The cap gain distributions vary the most from year to year. Wellington is an active fund, so the manager trades at his discretion. Besides 2008, 2009, cap gains were also missing in 2010 and 2011 according to Yahoo.
Yup. I believe they can carry a loss forward and they had enough from the prior two years to do so the next two years.
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Old 05-20-2016, 09:07 PM   #8
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The cap gain distributions vary the most from year to year. Wellington is an active fund, so the manager trades at his discretion. Besides 2008, 2009, cap gains were also missing in 2010 and 2011 according to Yahoo.
Wellington may be a bit different that the S&P, but I have heard the S&P had so many capital losses from 2008, that there was no need to distribute any gains.
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Old 05-20-2016, 09:18 PM   #9
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One may ask how an index fund can have capital gains or losses if it buys, holds, and never sells.

However, companies are added or dropped from the index all the time, so there's a bit of churning. Companies can go bankrupt like in 2000, causing total losses of those positions.

And then, when some shareholders redeem their shares, the fund manager will have to sell shares to raise cash, thereby realizes whatever capital gains the fund has been sitting on, and has to declare it to all shareholders.

ETFs offer a better way for shareholders to control capital gains.
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Old 05-22-2016, 03:33 AM   #10
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many index funds do not own all the funds in the index either . they trade in and out hoping to capture the same returns without owning all the stocks .

some index funds have turnover and expenses comparable to some active funds .

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Old 05-22-2016, 07:50 AM   #11
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One may ask how an index fund can have capital gains or losses if it buys, holds, and never sells.

However, companies are added or dropped from the index all the time, so there's a bit of churning. Companies can go bankrupt like in 2000, causing total losses of those positions.

And then, when some shareholders redeem their shares, the fund manager will have to sell shares to raise cash, thereby realizes whatever capital gains the fund has been sitting on, and has to declare it to all shareholders.

ETFs offer a better way for shareholders to control capital gains.
+1 I find it amazing how many people miss this. With all the retirees that that may be pulling pulling $ to live on or taking RMDs (even if repurchasing outside if IRAs, this may create capital gains for MF.

Not all ETFs are fantastic on avoiding capital gains distributions even if they are index. Take SDY for instance. It is an index fund, but not a broad index the the S&P 500. It has for the last several years kicked out a year end capital gain (short and long). I think it hadn't kicked out for some number of years due to embedded capital losses from 2008/9.

That said, I do use ETFs from much of my taxable accounts to have better control on distributions than MF.
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