Can someone help me understand this bond fund's performance? (VWEHX)

[thefed]

https://personal.vanguard.com/us/FundsSnapshot?FundId=0029&FundIntExt=INT


How do they calculate the average annual returns on something like this that pays dividends monthly? Do they include those dividends, or only base it on share price?

I now understand that it makes sense to hold something like this in an IRA, specifically a ROTH. But I dont understand how well it is actually doing...because I cant seem to figure out how these annual returns are figured.


Thanks!

 

[chinaco]

Not sure about the return calc.

But, IMO junk bond investments should be kept at a low percentage of the overall portfolio as well as low percentage of the total fixed holdings.

 

[FIRE'd@51]

https://personal.vanguard.com/us/FundsSnapshot?FundId=0029&FundIntExt=INT


How do they calculate the average annual returns on something like this that pays dividends monthly? Do they include those dividends, or only base it on share price?

I now understand that it makes sense to hold something like this in an IRA, specifically a ROTH. But I dont understand how well it is actually doing...because I cant seem to figure out how these annual returns are figured.


Thanks!

They assume the dividends (actually interest and any other distributions) are reinvested each month at the month-end price. They then take the total dollars your initial investment is worth at the end of the measurement period, divide it by the initial investment, and annualize it by finding the N'th root where N is the number of years, and subtracting 1.

Example:

You invested $10,000 in the fund 5 years ago and reinvested all distributions, but added no additional money to the fund

Today your investment is worth $14,440.

Your annualized return (compounded) over the period is

(14,440/10,000)^(1/5) - 1 = (1.444)^0.2 -1 = 0.076 = 7.6%

 

[thefed]

Gotcha.

Now,how exactly does a fund like this which has a yield of 8% show a YTD loss? is it because the distributions arent made til the 31st and the share price went down a hair

 

[brewer12345]

Performance is simply yield +/- the change in the market price pf the bonds. Bond prices must have gone down along with everything else.

 

[FIRE'd@51]

Gotcha.

Now,how exactly does a fund like this which has a yield of 8% show a YTD loss? is it because the distributions arent made til the 31st and the share price went down a hair

Because it's a bond fund, the interest accrues as opposed to being incorporated in the price (NAV) as would be the case in a stock fund, so through Friday you would have earned 25/31 of one month's interest. VWEHX closed 2007 at a price of 5.90. Friday (Jan 25) it closed at 5.80, for a loss in price of 1.7%, which reflects the price performance of the bonds held by the fund. The actual loss is less (about 1.2% YTD shown on the Vanguard website) because of the 25 days of accrued interest, which you would get if you liquidated the fund at Friday's close.

 

[JPatrick]

Ditto the above on the math.
You probably knew this, but this HY fund is considered among the safest because of their insistence in carrying higher grade junk.
I hold this one also, and when the mortgage crap hit the fan, as best I could, I checked to see if this fund was infected directly, and it appeared not to be. Pretty much all HY have been hammered.