Vanguard Target Retirement 2030 Down 15%
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steelyman
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Graybeard
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It appears this fund pays ST, LT cap gains and dividends only at the end of December.
https://investor.vanguard.com/mutual-funds/profile/distributions/vthrx
Thanks, I’d actually gone to the news page there but didn’t think to check the dist page. Seems they did an extra large LT cap gains distribution this year, at least compared to last year.
disneysteve
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A lot of funds pay year-end distributions. That's quite common, but it still catches a lot of new investors by surprise. After the first year, you know to expect it.
disneysteve
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Yes, a lot of funds had large CGs this year.
jollystomper
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Many of the Vanguard Target Retirement Funds had large capital gains distributions. I own the 2020 Target Retirement fund, that one was forecast to distribute $5.19 per share in long term capital gains, which at the time was about 14% of the share price. The actual distribution was bigger.
Some portion of that clearly due to rebalancing requirements but I read in Bogleheads that a large portion may also be due to Vanguard merging Institutional with Investor Target date funds although I'm not clear on how that works to create CG.
DangerDad
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I figured this was due to distribution but I’m still unclear on how this works. So the share price went down considerably but I’ll have more shares, so…it’s a wash? My Target Date funds are in 401(k) if this matters.
Thanks,
DangerDad
steelyman
Moderator Emeritus
That matters a lot (that it’s in your 401(k)). You won’t have to pay tax on the distribution.
Showing the same issue in Target 2025 fund. Vanguard web site shows down $44K but distributions only add up to $12.5K. Also noticed share price on web site shows $20.34 while reinvestment price per share is $21.51 per share. Google VTTVX and it shows closing price of $23.67 which would be about right for a close before the distribution so I think the share prices might be off. Also noted that the additional shares for reinvestment were not downloaded into quicken for further errors.
I completed a ROTH conversion last week and the changes were reflected on the Vanguard web site but also did not download into Quicken so I had to make the changes manually this afternoon. Don't know if it's just me or what.
I completed a ROTH conversion last week and the changes were reflected on the Vanguard web site but also did not download into Quicken so I had to make the changes manually this afternoon. Don't know if it's just me or what.
Still Learning
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It is most definitely year end Dividends & Capitol Gains Distributions still in motion on their system per Vanguard Rep. that I just spoke to. Any Vanguard fund with any bonds is affected. System will hopefully be whole by end of day.
PaunchyPirate
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Yes, it's a wash. When a fund distributes the short term and long term capital gains it has earned during the year, as well as any regular dividend for the quarter or year, the value of the fund goes down by the same amount. You see this decrease in the form of a drop in the share price of the fund.
If you have your investment set to reinvest all distributions, then that happens and shows back up in the value of your account the following day usually.
In your case, since this is inside a 401k, you may not even notice it all happens if you don't check daily balances. Once it's all done, you will have more shares (due to the reinvestment), but they will each be worth less. But the total value of the investment will be the same (plus or minus any daily gains or losses due to the current day's market).
It matters a LOT more if the investment is NOT inside a 401k or IRA. Because, if the investment is in a taxable brokerage account, you would have to pay taxes on the distributions (even if they were reinvested). So while your fund would maintain it's overall value, you would have to pay taxes on the amount distributed -- costing you money for the year. This is why you often hear people say that fund distributions are not necessarily a good thing. Many prefer to be in investments that don't pay distributions. But inside a 401k, it doesn't matter.
Apparently the still in motion thing is accurate. Checking this morning I see my distributions have increased from about $12.5K to over $44K which makes my account whole again. I don't recall this confusion from prior years but maybe I never checked it mid update before.
disneysteve
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Probably so. If you didn't look on those couple of days, you wouldn't have noticed as your balance would have been stable. You'd only see the changes when you looked at your account activity and saw the distributions and reinvestments.
Carpediem
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My heart stopped when I logged into my VG account this a.m. It is now pumping again. Whew!
