Dividend reinvestment or capital growth (Roth IRA)

I have two funds in mind for my 2006 Roth IRA: BRSIX and VIVAX. I
realize they are quite different, microcap and large value
respectively. One particular thing I'm curious about is the dividend
from these funds, which are 0.15% and 2.4%. With an IRA I have the
option to reinvest dividends so the dividend basically counts as an
increase in capital.

Forgetting the fact these are very different funds ;) is there any
generally accepted wisdom whether to take a large dividend and reinvest
over a small dividend with higher expected capital appreciation?

To me, inside a tax free plan at least, they seem equivalent.

Re: Dividend reinvestment or capital growth (Roth IRA)

spasmous wrote:
> I have two funds in mind for my 2006 Roth IRA: BRSIX and VIVAX. I
> realize they are quite different, microcap and large value
> respectively. One particular thing I'm curious about is the dividend
> from these funds, which are 0.15% and 2.4%. With an IRA I have the
> option to reinvest dividends so the dividend basically counts as an
> increase in capital.
>
> Forgetting the fact these are very different funds ;) is there any
> generally accepted wisdom whether to take a large dividend and reinvest
> over a small dividend with higher expected capital appreciation?

Huh?

>
> To me, inside a tax free plan at least, they seem equivalent.

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote
> I have two funds in mind for my 2006 Roth IRA: BRSIX and
VIVAX. I
> realize they are quite different, microcap and large value
> respectively. One particular thing I'm curious about is
the dividend
> from these funds, which are 0.15% and 2.4%. With an IRA I
have the
> option to reinvest dividends so the dividend basically
counts as an
> increase in capital.
>
> Forgetting the fact these are very different funds ;) is
there any
> generally accepted wisdom whether to take a large dividend
and reinvest
> over a small dividend with higher expected capital
appreciation?

I think you might need a little instruction on different
classes of stocks and what are the advantages of holding
different classes at the same time.

Based on historical data, one can expect a certain
appreciation in principal for large cap stocks, and another
for small caps. Generally, small caps are riskier than large
caps for the short run. So, as one ages, portfolio
allocation tools will tend to suggest a smaller proportion
of of small caps, and a larger proportion of large caps.

But if one's retirement is far away, like 30 years, there is
data to suggest that the growth of small caps will be
greater than large caps, where "growth" here assumes the
dividends are re-invested.

Also, large caps almost definitionally pay a much larger
dividend than small caps. They do so because, in theory,
they can't grow much more, so rather than reinvesting their
earnings into the company, they distribute a sizable amount
of earnings as dividends. Small caps on the other hand are
trying to "grow" their companies. It pays them to reinvest
earnings and not pay earnings out as any significant
dividend.

So, in a nutshell, if you are far away from retirement, you
probably shouldn't use dividend yield as a criteria for your
portfolio mutual funds allocation. You should instead focus
on things like cap size, international vs. domestic stocks,
whether to hold any bonds (junk or other) in your portfolio,
etc.

Some free, and easy to use, online portfolio allocation
tools may assist your grasp of all this. Here's a list of
several:

Googling with words like {"why allocate" stocks "large cap"}
may also turn up some good introductory sites.

> To me, inside a tax free plan at least, they seem
equivalent.

In an IRA, correct, generally speaking. Or to put it another
way, while saving for retirement, put anything that tends to
accumulate high taxable events each year in the Roth IRA.
Put low tax retirement instruments in taxable accounts, if
possible.

Your question is also appropriate to ask at
misc.invest.financial-plan . It's moderated, and the tenor
of responses there is a bit different than here, though both
groups have value.

Re: Dividend reinvestment or capital growth (Roth IRA)

> Some free, and easy to use, online portfolio allocation
> tools may assist your grasp of all this. Here's a list of
> several:

Namely,

Re: Dividend reinvestment or capital growth (Roth IRA)

I see, so any increase in a fund's value *assumes* dividend
reinvestment. Thanks for your reply Tess :)




Tess Millay wrote:
> "spasmous" <> wrote
> > I have two funds in mind for my 2006 Roth IRA: BRSIX and
> VIVAX. I
> > realize they are quite different, microcap and large value
> > respectively. One particular thing I'm curious about is
> the dividend
> > from these funds, which are 0.15% and 2.4%. With an IRA I
> have the
> > option to reinvest dividends so the dividend basically
> counts as an
> > increase in capital.
> >
> > Forgetting the fact these are very different funds ;) is
> there any
> > generally accepted wisdom whether to take a large dividend
> and reinvest
> > over a small dividend with higher expected capital
> appreciation?
>
> I think you might need a little instruction on different
> classes of stocks and what are the advantages of holding
> different classes at the same time.
>
> Based on historical data, one can expect a certain
> appreciation in principal for large cap stocks, and another
> for small caps. Generally, small caps are riskier than large
> caps for the short run. So, as one ages, portfolio
> allocation tools will tend to suggest a smaller proportion
> of of small caps, and a larger proportion of large caps.
>
> But if one's retirement is far away, like 30 years, there is
> data to suggest that the growth of small caps will be
> greater than large caps, where "growth" here assumes the
> dividends are re-invested.
>
> Also, large caps almost definitionally pay a much larger
> dividend than small caps. They do so because, in theory,
> they can't grow much more, so rather than reinvesting their
> earnings into the company, they distribute a sizable amount
> of earnings as dividends. Small caps on the other hand are
> trying to "grow" their companies. It pays them to reinvest
> earnings and not pay earnings out as any significant
> dividend.
>
> So, in a nutshell, if you are far away from retirement, you
> probably shouldn't use dividend yield as a criteria for your
> portfolio mutual funds allocation. You should instead focus
> on things like cap size, international vs. domestic stocks,
> whether to hold any bonds (junk or other) in your portfolio,
> etc.
>
> Some free, and easy to use, online portfolio allocation
> tools may assist your grasp of all this. Here's a list of
> several:
>
> Googling with words like {"why allocate" stocks "large cap"}
> may also turn up some good introductory sites.
>
> > To me, inside a tax free plan at least, they seem
> equivalent.
>
> In an IRA, correct, generally speaking. Or to put it another
> way, while saving for retirement, put anything that tends to
> accumulate high taxable events each year in the Roth IRA.
> Put low tax retirement instruments in taxable accounts, if
> possible.
>
> Your question is also appropriate to ask at
> misc.invest.financial-plan . It's moderated, and the tenor
> of responses there is a bit different than here, though both
> groups have value.

Re: Dividend reinvestment or capital growth (Roth IRA)

Fund value can go up for many reasons. Dividend reinvestment
is just one of them.

Long term growth prospects of different categories of stocks
are generally reported with the assumption that dividends
are reinvested. E.g. you will likely find online
publications that report the S&P 500 is said to have
averaged about 14% growth a year from 1980-2003, assuming
dividend reinvestment. Without considering dividends, the
growth was only about 11% per year.

"spasmous" <> wrote
> I see, so any increase in a fund's value *assumes*
dividend
> reinvestment. Thanks for your reply Tess :)
>
>
>
>
> Tess Millay wrote:
> > "spasmous" <> wrote
> > > I have two funds in mind for my 2006 Roth IRA: BRSIX
and
> > VIVAX. I
> > > realize they are quite different, microcap and large
value
> > > respectively. One particular thing I'm curious about
is
> > the dividend
> > > from these funds, which are 0.15% and 2.4%. With an
IRA I
> > have the
> > > option to reinvest dividends so the dividend basically
> > counts as an
> > > increase in capital.
> > >
> > > Forgetting the fact these are very different funds ;)
is
> > there any
> > > generally accepted wisdom whether to take a large
dividend
> > and reinvest
> > > over a small dividend with higher expected capital
> > appreciation?
> >
> > I think you might need a little instruction on different
> > classes of stocks and what are the advantages of holding
> > different classes at the same time.
> >
> > Based on historical data, one can expect a certain
> > appreciation in principal for large cap stocks, and
another
> > for small caps. Generally, small caps are riskier than
large
> > caps for the short run. So, as one ages, portfolio
> > allocation tools will tend to suggest a smaller
proportion
> > of of small caps, and a larger proportion of large caps.
> >
> > But if one's retirement is far away, like 30 years,
there is
> > data to suggest that the growth of small caps will be
> > greater than large caps, where "growth" here assumes the
> > dividends are re-invested.
> >
> > Also, large caps almost definitionally pay a much larger
> > dividend than small caps. They do so because, in theory,
> > they can't grow much more, so rather than reinvesting
their
> > earnings into the company, they distribute a sizable
amount
> > of earnings as dividends. Small caps on the other hand
are
> > trying to "grow" their companies. It pays them to
reinvest
> > earnings and not pay earnings out as any significant
> > dividend.
> >
> > So, in a nutshell, if you are far away from retirement,
you
> > probably shouldn't use dividend yield as a criteria for
your
> > portfolio mutual funds allocation. You should instead
focus
> > on things like cap size, international vs. domestic
stocks,
> > whether to hold any bonds (junk or other) in your
portfolio,
> > etc.
> >
> > Some free, and easy to use, online portfolio allocation
> > tools may assist your grasp of all this. Here's a list
of
> > several:
> >
> > Googling with words like {"why allocate" stocks "large
cap"}
> > may also turn up some good introductory sites.
> >
> > > To me, inside a tax free plan at least, they seem
> > equivalent.
> >
> > In an IRA, correct, generally speaking. Or to put it
another
> > way, while saving for retirement, put anything that
tends to
> > accumulate high taxable events each year in the Roth
IRA.
> > Put low tax retirement instruments in taxable accounts,
if
> > possible.
> >
> > Your question is also appropriate to ask at
> > misc.invest.financial-plan . It's moderated, and the
tenor
> > of responses there is a bit different than here, though
both
> > groups have value.
>

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> I think

There you go joking again.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> Fund value can go up for many reasons. Dividend reinvestment
> is just one of them.

Reinvesting dividends does not increase the value of your fund.

Re: Dividend reinvestment or capital growth (Roth IRA)

Ed wrote:
> "Tess Millay" <> wrote
>
> > Fund value can go up for many reasons. Dividend reinvestment
> > is just one of them.
>
> Reinvesting dividends does not increase the value of your fund.

Wow, I didn't realize there were so many cranks on this board.

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote

> Ed wrote:
>> "Tess Millay" <> wrote
>>
>> > Fund value can go up for many reasons. Dividend reinvestment
>> > is just one of them.
>>
>> Reinvesting dividends does not increase the value of your fund.
>
> Wow, I didn't realize there were so many cranks on this board.

Let me see. Elle/Tess/Caliban gives you wrong info.
I correct it for YOU, and I'm a "crank"?

Re: Dividend reinvestment or capital growth (Roth IRA)

Make you catch every spelling error too! God, it must drive you crazy.

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote
> Make you catch every spelling error too! God, it must drive you crazy.

I'm not sure I understand that statement. Not important.

You just listen to 'Tess', she'll take good care of you. Just remember,
reinvesting dividends does not increase the value of your fund.

Re: Dividend reinvestment or capital growth (Roth IRA)

Ed wrote:
> ...reinvesting dividends does not increase the value of your fund.

Well, OK - there's probably a long debate we could have over the
definition of each word and precisely what I meant and you meant, but
let's skip that ;)

My original question was about two funds: (a) one that holds high
dividend paying stocks, takes the dividends and buys more of the same
fund and (b) one that holds low dividend paying stocks and where the
individual companies reinvest their profit in themselves.

In both cases, the profits remain in the fund so I don't see any
difference between the two strategies. I was unsure whether in (a) the
fund performance included dividend reinvestment. Tess answered that
question.

Re: Dividend reinvestment or capital growth (Roth IRA)

spasmous wrote:
> Ed wrote:
> > ...reinvesting dividends does not increase the value of your fund.
>
> Well, OK - there's probably a long debate we could have over the
> definition of each word and precisely what I meant and you meant, but
> let's skip that ;)
>
> My original question was about two funds: (a) one that holds high
> dividend paying stocks, takes the dividends and buys more of the same
> fund and (b) one that holds low dividend paying stocks and where the
> individual companies reinvest their profit in themselves.
>
> In both cases, the profits remain in the fund so I don't see any
> difference between the two strategies. I was unsure whether in (a) the
> fund performance included dividend reinvestment. Tess answered that
> question.


Let's see.

Tess answered your question with an incorrect answer. Ed corrected
her. And you called Ed a crank.

Dividend reinvestment increased the number of shares you hold. It does
not increase the NAV of the fund.

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote

> Dividend reinvestment increased the number of shares you hold. It does
> not increase the NAV of the fund.

Exactly right, but the distribution lowers the NAV. You will own more shares
that are worth less each. The total value before and after the distribution
is the same.

Re: Dividend reinvestment or capital growth (Roth IRA)

My comment about reinvesting wasn't directed to you. It was meant to correct
Tess who is so often passing out misinformation.










"spasmous" <> wrote in message
news:
>
> Ed wrote:
>> ...reinvesting dividends does not increase the value of your fund.
>
> Well, OK - there's probably a long debate we could have over the
> definition of each word and precisely what I meant and you meant, but
> let's skip that ;)
>
> My original question was about two funds: (a) one that holds high
> dividend paying stocks, takes the dividends and buys more of the same
> fund and (b) one that holds low dividend paying stocks and where the
> individual companies reinvest their profit in themselves.
>
> In both cases, the profits remain in the fund so I don't see any
> difference between the two strategies. I was unsure whether in (a) the
> fund performance included dividend reinvestment. Tess answered that
> question.
>

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote
> Ed wrote:
> > ...reinvesting dividends does not increase the value of
your fund.
>
> Well, OK - there's probably a long debate we could have
over the
> definition of each word and precisely what I meant and you
meant, but
> let's skip that ;)

Right, but just to torture Eddie ;-), one egregious example
of how stupid it would be not to ask for dividend
reinvestment are bond funds like FTHRX.

But Eddie, you go ahead and order Vanguard (or whomever) not
to reinvest the dividends on VFINX (or whatever), which last
I checked, had distributions four times a year. Total up the
cash you get instead. Compare, etc.

You won't, but I don't post for your education anyway, big
boy. :-)

> My original question was about two funds: (a) one that
holds high
> dividend paying stocks, takes the dividends and buys more
of the same
> fund and (b) one that holds low dividend paying stocks and
where the
> individual companies reinvest their profit in themselves.
>
> In both cases, the profits remain in the fund so I don't
see any
> difference between the two strategies. I was unsure
whether in (a) the
> fund performance included dividend reinvestment. Tess
answered that
> question.

I don't know that I did directly answer that particular
question, but generally speaking, a fund's prospectus
stating performance in terms of past annual returns will
assume dividend reinvestment. In addition, performance data
from most mutual fund screeners will assume the same.

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote
> spasmous wrote:
> > Ed wrote:
> > > ...reinvesting dividends does not increase the value
of your fund.
> >
> > Well, OK - there's probably a long debate we could have
over the
> > definition of each word and precisely what I meant and
you meant, but
> > let's skip that ;)
> >
> > My original question was about two funds: (a) one that
holds high
> > dividend paying stocks, takes the dividends and buys
more of the same
> > fund and (b) one that holds low dividend paying stocks
and where the
> > individual companies reinvest their profit in
themselves.
> >
> > In both cases, the profits remain in the fund so I don't
see any
> > difference between the two strategies. I was unsure
whether in (a) the
> > fund performance included dividend reinvestment. Tess
answered that
> > question.
>
>
> Let's see.

> Tess answered your question with an incorrect answer. Ed
corrected
> her. And you called Ed a crank.
>
> Dividend reinvestment increased the number of shares you
hold. It does
> not increase the NAV of the fund.

I never said anything about NAV on this point. The guy only
asked about "value." Rather than confuse him more, I simply
said dividend reinvestment will increase the value of one's
mutual fund position. See my response to Eddie. Who is a
crank, and this is well-documented here by his stalking of
other posters, his vulgarity, his admission he is "a bit of
a troll," his posting of another poster's home address
without this poster's permission, etc.

Regardless, even cranks can post useful information at
times. Ya just gotta know when Eddie's spewing vitriol and
when he's not.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> "spasmous" <> wrote
> > Ed wrote:
> > > ...reinvesting dividends does not increase the value of
> your fund.
> >
> > Well, OK - there's probably a long debate we could have
> over the
> > definition of each word and precisely what I meant and you
> meant, but
> > let's skip that ;)
>
> Right, but just to torture Eddie ;-), one egregious example
> of how stupid it would be not to ask for dividend
> reinvestment are bond funds like FTHRX.

I am not here to defend Ed or anyone, but why is that stupid? On my
IRA accounts I reinvest dividends, on my taxable accounts I don't. The
dividends go into my cash account for me to invest in the same fund or
others as I choose. I don't lose anything.

>
> But Eddie, you go ahead and order Vanguard (or whomever) not
> to reinvest the dividends on VFINX (or whatever), which last
> I checked, had distributions four times a year. Total up the
> cash you get instead. Compare, etc.
>

And then what? Total up the cash dividends and I get to either
reinvest as I see fit or buy something else.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> Right, but just to torture Eddie ;-), one egregious example
> of how stupid it would be not to ask for dividend
> reinvestment are bond funds like FTHRX.

You are an inferior female, how could you possibly torture me.

> But Eddie, you go ahead and order Vanguard (or whomever) not
> to reinvest the dividends on VFINX (or whatever), which last
> I checked, had distributions four times a year. Total up the
> cash you get instead. Compare, etc.

Reinvesting distributions will not increase the value of your fund.
Taking a cash distribution and spending it on whatever will reduce
the value of your fund. This is very basic stuff Eugenetta.

> You won't, but I don't post for your education anyway, big
> boy. :-)

My loss I guess, you being a PhD and all.

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote
> Tess Millay wrote:
> > "spasmous" <> wrote
> > > Ed wrote:
> > > > ...reinvesting dividends does not increase the value
of
> > your fund.
> > >
> > > Well, OK - there's probably a long debate we could
have
> > over the
> > > definition of each word and precisely what I meant and
you
> > meant, but
> > > let's skip that ;)
> >
> > Right, but just to torture Eddie ;-), one egregious
example
> > of how stupid it would be not to ask for dividend
> > reinvestment are bond funds like FTHRX.
>
> I am not here to defend Ed or anyone,

Like it would be such a crime to oppose posts that are crude
and racist and harass others. Takes a thinking person to
take such a stance, I know.

This /is/ about words. All I said originally was that
dividend reinvestment raises a fund's value. Don't assume I
meant /distributions/ reinvested raise a fund's value,
though there is an argument to be made there. My point was
that, for one thing, the stocks in many a stock mutual fund
do pay dividends, and one way or another, these dividends do
increase the total value of one's investment in the fund.

What Eddie and you are trying to pick on is that
/distributions/ of your typical stock mutual fund typically
are instantaneously made so as to reduce the NAV
proportionately. If these distributions aren't routinely
reinvested, allocations, which tend to be based on assumed
rates of return which factor in dividends etc., are
potentially thrown off, you're losing some dollar cost
averaging, yada.

> but why is that stupid? On my
> IRA accounts I reinvest dividends, on my taxable accounts
I don't. The
> dividends go into my cash account for me to invest in the
same fund or
> others as I choose. I don't lose anything.

I was implying in the context of an IRA, 401(k), or other
account designed for retirement purposes, it would be stupid
not to reinvest. The guy was asking about an IRA.

Now let's here what I predict, with a 99% probability, will
be an ass's response. With the exception of myself and
possibly some newbies, every one (and I do mean /every/ one)
of this newsgroup's regulars participate here as though it
were a boys' locker room. That there isn't a single other
female regular participant explains something about why
women tend to grow old in poverty. Maybe the next woman to
do so will be the wife or daughter or mother of someone
here.

So let's hear the arse's response, Peter. It's par for the
course.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> Now let's here what I predict, with a 99% probability, will
> be an ass's response. With the exception of myself and
> possibly some newbies, every one (and I do mean /every/ one)
> of this newsgroup's regulars participate here as though it
> were a boys' locker room.

I love it. Your penis envy is showing.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> > My original question was about two funds: (a) one that holds high
> > dividend paying stocks, takes the dividends and buys more of the same
> > fund and (b) one that holds low dividend paying stocks and where the
> > individual companies reinvest their profit in themselves.
> >
> > In both cases, the profits remain in the fund so I don't see any difference
> > between the two strategies. I was unsure whether in (a) the
> > fund performance included dividend reinvestment. Tess answered that
> > question.
>
> I don't know that I did directly answer that particular
> question, but generally speaking, a fund's prospectus
> stating performance in terms of past annual returns will
> assume dividend reinvestment. In addition, performance data
> from most mutual fund screeners will assume the same.

There's a subtle difference that I can't quite fathom... namely, with
(a) the companies' profits (ie. your dividend) buy the fund and with
(b) the profits increase the value of that specific stock. In the
former, one large dividend buys you a spread of stocks whereas in the
latter one fast growing stock means more of that stock. Well... until
the manager rebalances the fund anyway.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
>
>
> This /is/ about words. All I said originally was that
> dividend reinvestment raises a fund's value.

No it don't.

> Don't assume I
> meant /distributions/ reinvested raise a fund's value,
> though there is an argument to be made there. My point was
> that, for one thing, the stocks in many a stock mutual fund
> do pay dividends, and one way or another, these dividends do
> increase the total value of one's investment in the fund.
>

Which is very different from saying that it raises a fund's value.

> What Eddie and you are trying to pick on is that
> /distributions/ of your typical stock mutual fund typically
> are instantaneously made so as to reduce the NAV
> proportionately. If these distributions aren't routinely
> reinvested, allocations, which tend to be based on assumed
> rates of return which factor in dividends etc., are
> potentially thrown off, you're losing some dollar cost
> averaging, yada.
>

Possibly. But it's not stupid not to automatically reinvest dividends
back into the same fund.


> > but why is that stupid? On my
> > IRA accounts I reinvest dividends, on my taxable accounts
> I don't. The
> > dividends go into my cash account for me to invest in the
> same fund or
> > others as I choose. I don't lose anything.
>

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote
> Tess Millay wrote:
> >
> >
> > This /is/ about words. All I said originally was that
> > dividend reinvestment raises a fund's value.
>
> No it don't.

People should look back to see the meaning of "value" here.

> > Don't assume I
> > meant /distributions/ reinvested raise a fund's value,
> > though there is an argument to be made there. My point
was
> > that, for one thing, the stocks in many a stock mutual
fund
> > do pay dividends, and one way or another, these
dividends do
> > increase the total value of one's investment in the
fund.
> >
>
> Which is very different from saying that it raises a
fund's value.

We disagree, mostly about gibberish.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> "PeterL" <> wrote
> > Tess Millay wrote:
> > >
> > >
> > > This /is/ about words. All I said originally was that
> > > dividend reinvestment raises a fund's value.
> >
> > No it don't.
>
> People should look back to see the meaning of "value" here.
>
> > > Don't assume I
> > > meant /distributions/ reinvested raise a fund's value,
> > > though there is an argument to be made there. My point
> was
> > > that, for one thing, the stocks in many a stock mutual
> fund
> > > do pay dividends, and one way or another, these
> dividends do
> > > increase the total value of one's investment in the
> fund.
> > >
> >
> > Which is very different from saying that it raises a
> fund's value.
>
> We disagree, mostly about gibberish.

Not gibberish. Words are very precise. The meaning of value is, in
terms of mutual funds, NAV, net asset value. You said dividend
reinvestment raises a fund's value (NAV), which is not true.

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote
> Tess Millay wrote:
> > "PeterL" <> wrote
> > > Tess Millay wrote:
> > > >
> > > >
> > > > This /is/ about words. All I said originally was
that
> > > > dividend reinvestment raises a fund's value.
> > >
> > > No it don't.
> >
> > People should look back to see the meaning of "value"
here.
> >
> > > > Don't assume I
> > > > meant /distributions/ reinvested raise a fund's
value,
> > > > though there is an argument to be made there. My
point
> > was
> > > > that, for one thing, the stocks in many a stock
mutual
> > fund
> > > > do pay dividends, and one way or another, these
> > dividends do
> > > > increase the total value of one's investment in the
> > fund.
> > > >
> > >
> > > Which is very different from saying that it raises a
> > fund's value.
> >
> > We disagree, mostly about gibberish.
>
> Not gibberish. Words are very precise.

Yes, they are. I did not use the acronym NAV or the words
"net asset value," because that is /not/ what the original
poster meant.

Don't mess with me. I have enormous experience in published
technical writing.

> The meaning of value is, in
> terms of mutual funds, NAV, net asset value.

And in the context of the discussion, the meaning of 'value'
was something else.

Go try to be pedantic with the original poster.

> You said dividend
> reinvestment raises a fund's value (NAV), which is not
true.

I did not use "NAV" in my response to the poster on this
point; you simply chose not to read carefully.

Like you wrote (poorly), "Words are very [sic] precise." So
don't try to alter mine.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
>
>
> Yes, they are. I did not use the acronym NAV or the words
> "net asset value," because that is /not/ what the original
> poster meant.
>

Even if you use a more general definition of value, a fund distribution
simply does not raise that fund's value.


> Don't mess with me. I have enormous experience in published
> technical writing.
>

Whatever.


> > The meaning of value is, in
> > terms of mutual funds, NAV, net asset value.
>
> And in the context of the discussion, the meaning of 'value'
> was something else.

Which is what?

>
> Go try to be pedantic with the original poster.
>
> > You said dividend
> > reinvestment raises a fund's value (NAV), which is not
> true.
>
> I did not use "NAV" in my response to the poster on this
> point; you simply chose not to read carefully.
>
> Like you wrote (poorly), "Words are very [sic] precise." So
> don't try to alter mine.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> Fund value can go up for many reasons. Dividend reinvestment
> is just one of them.
>

I am reading this exchange and am quite confused by this whole thing.

How do you define 'fund value'? Are you talking about NAV? Are you
talking
about the value of investment in the fund?

Kaspa

Re: Dividend reinvestment or capital growth (Roth IRA)

On 5 Jan 2006 14:02:23 -0800, "PeterL" <> wrote:
>[...]
>On my IRA accounts I reinvest dividends, on my taxable accounts I don't.
>The dividends go into my cash account for me to invest in the same fund or
>others as I choose. I don't lose anything.
>

As long as you have the discipline to re-invest the money instead
of spending it, then yes that works fine. Trouble is, lots of people
don't have that discipline. Successful investing requires that
you know yourself as well as knowing what you are investing in.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> Don't mess with me. I have enormous experience in published
> technical writing.

MUHAHAHAHAHA!!!!!!!!!!!!

Re: Dividend reinvestment or capital growth (Roth IRA)

spasmous wrote:
>
> > > My original question was about two funds: (a) one that holds high
> > > dividend paying stocks, takes the dividends and buys more of the
> > > same fund and (b) one that holds low dividend paying stocks and
> > > where the individual companies reinvest their profit in themselves.
> [...]
>
> There's a subtle difference that I can't quite fathom... namely, with
> (a) the companies' profits (ie. your dividend) buy the fund and with
> (b) the profits increase the value of that specific stock. In the
> former, one large dividend buys you a spread of stocks whereas in the
> latter one fast growing stock means more of that stock. Well... until
> the manager rebalances the fund anyway.

You may be confusing dividends paid to the fund with dividends paid to
the individual investor. When a company that the fund owns pays a
dividend, the dividend goes to the fund, not to you. The fund manager
can reinvest it in the same company, in other companies, or hold the
cash. It isn't set aside in a separate pile for you.

Every day, the fund manager decides how much of each stock to hold. If
a stock went up because of profits that were retained, the fund manager
may decide to take some money off the table and reallocate it
elsewhere. "Until the manager rebalances" suggests a lag - but that's
the whole job of the fund manager - continually deciding what the fund
should own; there's no time lag here.

So the two cases: (a) fund's stock distributes dividends that the
manager puts to work, and (b) fund's stock goes up in price and fund
manager decides how much to keep in that stock, are effectively the
same.

Now on paper, funds are required to "distribute" the dividends it
receives to the fund shareholders at least once a year. Many people
simply reinvest those fund distributions. To the extent fund
shareholders do reinvest, the distribution is a paper exercise - the
fund manager already reinvested the dividends as they were received
during the year, and now you simply show a dividend on paper - the fund
doesn't send you the cash, you don't actually send the cash back to the
fund, and nothing substantial changes.

If a fund shareholder actually takes the distribution as cash, then the
fund has to come up with that cash. Funds typically keep some cash on
hand - this may or may not be enough to cover the cash distributions.
The manager can always sell securities - they may be sold in the same
proportion that the fund owns them (in which case the fund's holdings
don't change except in magnitude), or the manager may sell some
particular holdings (in which case the asset mix does change).

The bottom line is that it doesn't make a big difference (in terms of
how a manager allocates monies) whether the fund owns dividend paying
securities or not.

(From a tax perspective, it may make a difference, because if a fund has
to sell a lot of securities to pay the distributions, then it may
recognize a lot of gain - same problem as when a lot of people make
redemptions, which is effectively what is happening when the
distributions are not reinvested.)

--
Mark Freeland

Re: Dividend reinvestment or capital growth (Roth IRA)

"kaspakhine" <> wrote
> Tess Millay wrote:
> > Fund value can go up for many reasons. Dividend
reinvestment
> > is just one of them.
> >
>
> I am reading this exchange and am quite confused by this
whole thing.

If you've read the whole exchange, I'm betting you're not in
the least confused but instead joining in with the herd.

> How do you define 'fund value'? Are you talking about
NAV? Are you
> talking
> about the value of investment in the fund?

Kas, I agree with you (and probably now Peter) that the
problem here is not the word "value" but the word "fund."
That was bad writing, though in context, and considering the
OP used it, and the fact that it's used casually and
colloquially (look it up, Ed) in quick exchanges as he used
it, and I suspect many of you use it the same way, it tells
me it's an obnoxious nitpick. Folks, if they really didn't
understand, should have just asked for clarification, or
said, "Don't you mean... " yada.

So use something like "the total value of the shares in the
fund in one's account." But Peter could complain about that,
too; it uses that nasty word "value" again. Or I could just
killfile him along with Eddie. If one looks the other way at
bad behavior, then one perpetuates it. <shrug>

Now post your clever and trivial synonym for "value," and
maybe we'll get back to helping newbies.

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote
TM
> > I don't know that I did directly answer that particular
> > question, but generally speaking, a fund's prospectus
> > stating performance in terms of past annual returns will
> > assume dividend reinvestment. In addition, performance
data
> > from most mutual fund screeners will assume the same.
>
> There's a subtle difference that I can't quite fathom...
namely, with
> (a) the companies' profits (ie. your dividend) buy the
fund and with
> (b) the profits increase the value of that specific stock.
In the
> former, one large dividend buys you a spread of stocks
whereas in the
> latter one fast growing stock means more of that stock.

I'm not sure I understand. Your wording is a little hard to
parse, but if I understand it correctly, what you say is
accurate enough. What part doesn't make sense?

It's true the total dollar value of a stock mutual fund
position that you just leave alone is predicted to grow,
over the long run and based on a long history of data and
general market theory, due to two main causes: Appreciation
in share price of each stock in the mutual fund; and
reinvestment of dividends.

A manager may do some careful stock picking and timing, and
that may cause growth, too, of course.

I trust you are aware some stock mutual funds are dedicated
to growth via increase in its stocks' share prices. But some
stock mutual funds also emphasize (or exclusively emphasize)
the effects of reinvesting dividends from high dividend
paying stocks in its portfolios.

> Well... until
> the manager rebalances the fund anyway.

Yes.

Lastly, a lot of the complaints in this thread concern the
difference between reinvesting mutual fund distributions and
reinvesting dividends. They are not exactly the same. The
point to me (and I think to you) is that stock mutual funds
do have to "deal" with dividends from its stocks that pay
them. Dividends are put back into the fund, generally
speaking, insofar as measures of performance (actual and
published) are concerned.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> If you've read the whole exchange, I'm betting you're not in
> the least confused but instead joining in with the herd.

BooHoo.

> So use something like "the total value of the shares in the
> fund in one's account." But Peter could complain about that,
> too; it uses that nasty word "value" again. Or I could just
> killfile him along with Eddie.

You'd have nobody left to read you posts. Didn't you already killfile:
1. Engineers
2. Males
3. Republicans
4. Cat haters
5. Anyone who proves you wrong
6. Anyone who disagrees with you

I could return the favor and killfile you but you're too funny even though
you're trying to be serious.
This board needs a little humor, you and your brother, NoEd, are always at
the ready to provide it.

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote

> Lastly, a lot of the complaints in this thread concern the
> difference between reinvesting mutual fund distributions and
> reinvesting dividends. They are not exactly the same.

In a Roth IRA they are exactly the same.
Neither will increase the value of the fund.
Neither will generate a tax.
Both will increase the number of shares you own.
Both will decrease the nav by an amount equal to the distribution.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> "kaspakhine" <> wrote
> > Tess Millay wrote:
> > How do you define 'fund value'? Are you talking about
> NAV? Are you
> > talking
> > about the value of investment in the fund?
>
> Kas, I agree with you (and probably now Peter) that the
> problem here is not the word "value" but the word "fund."
> That was bad writing, though in context, and considering the
> OP used it, and the fact that it's used casually and
> colloquially (look it up, Ed) in quick exchanges as he used
> it, and I suspect many of you use it the same way, it tells
> me it's an obnoxious nitpick. Folks, if they really didn't
> understand, should have just asked for clarification, or
> said, "Don't you mean... " yada.
>
> So use something like "the total value of the shares in the
> fund in one's account." But Peter could complain about that,

I only complain about incorrect information. In the context of the
OP's post, how does a fund distribution increase "the total value of
the shares in the fund in one's account"? For example, I have a mutual
fund A worth $10 a share. The fund distributes $1 per share. Now my
fund is worth $9 a share. Whether I reinvest that $1 or not, I still
have the same "total value" in my account. If I reinvest, I'd have
more shares, but still at $9 a share. If I don't reinvest, I'd have
the same number of shares as before, at $9 each. I would have some
cash in my account. The "total value" of my account remains the same.
That's how I understand this. Your understanding may be different,
which led you to conclude that a fund distribution increase "the total
value of the shares in the fund in one's account."


> too; it uses that nasty word "value" again.

It's not a nasty word if used correctly.

> Or I could just
> killfile him along with Eddie. If one looks the other way at
> bad behavior, then one perpetuates it. <shrug>

Discussing the correct useage of terms is bad behavior?


>
> Now post your clever and trivial synonym for "value," and
> maybe we'll get back to helping newbies.

Re: Dividend reinvestment or capital growth (Roth IRA)

"PeterL" <> wrote

> Discussing the correct useage of terms is bad behavior?

Peter, she's a witch. You can't win in her eyes. Let it go and just let her
go to stumble around in her world.

>> Now post your clever and trivial synonym for "value," and
>> maybe we'll get back to helping newbies.

This went to Kaspa, I believe. This is the kind of BS you're dealing with
here. Give it up.
"Clever", "trivial". I'm telling you she's pissed because she wasn't born
with balls. Nothing could be more trivial than Tess/Caliban/Elle/Caroline,
and each of them has a PhD. She put me in her killfile because I figured her
out.

Re: Dividend reinvestment or capital growth (Roth IRA)

Ed wrote:
> "PeterL" <> wrote
>
> > Discussing the correct useage of terms is bad behavior?
>
> Peter, she's a witch. You can't win in her eyes. Let it go and just let her
> go to stumble around in her world.
>
> >> Now post your clever and trivial synonym for "value," and
> >> maybe we'll get back to helping newbies.
>
> This went to Kaspa, I believe. This is the kind of BS you're dealing with
> here. Give it up.
> "Clever", "trivial". I'm telling you she's pissed because she wasn't born
> with balls. Nothing could be more trivial than Tess/Caliban/Elle/Caroline,
> and each of them has a PhD. She put me in her killfile because I figured her
> out.

I am not trying to win anything. There is a question left unanswered
from the OP, or answered incorrectly.

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> ...The
> point to me (and I think to you) is that stock mutual funds
> do have to "deal" with dividends from its stocks that pay
> them. Dividends are put back into the fund, generally
> speaking, insofar as measures of performance (actual and
> published) are concerned.

Thanks, that's the thing I was unsure about. Sorry you have to put up
with all the cretins just to answer a post... that's just usenet tho',
kooks abound. Appreciate your help :)

Re: Dividend reinvestment or capital growth (Roth IRA)

Tess Millay wrote:
> ...The
> point to me (and I think to you) is that stock mutual funds
> do have to "deal" with dividends from its stocks that pay
> them. Dividends are put back into the fund, generally
> speaking, insofar as measures of performance (actual and
> published) are concerned.

Thanks, that's the thing I was unsure about. Sorry you have to put up
with all the cretins just to answer a post... that's just usenet tho',
kooks abound. Appreciate your help :)

Re: Dividend reinvestment or capital growth (Roth IRA)

"Tess Millay" <> wrote in message
news:tXivf.3328$%
>
> Don't mess with me. I have enormous experience in published
> technical writing.
>


MUHAHAHAHAHAHAHAHAH!!!!!!!!!!!!!

Just like the other cunt, NoEd!!!!!!!!!!!!

Re: Dividend reinvestment or capital growth (Roth IRA)

Hey! Ya beat me to it!


"Ed" <> wrote in message
news:
>
> "Tess Millay" <> wrote
>
>> Don't mess with me. I have enormous experience in published
>> technical writing.
>
> MUHAHAHAHAHA!!!!!!!!!!!!
>
>

Re: Dividend reinvestment or capital growth (Roth IRA)

If she can put up with you she can put up with anyone.




"spasmous" <> wrote in message
news:
>
> Tess Millay wrote:
>> ...The
>> point to me (and I think to you) is that stock mutual funds
>> do have to "deal" with dividends from its stocks that pay
>> them. Dividends are put back into the fund, generally
>> speaking, insofar as measures of performance (actual and
>> published) are concerned.
>
> Thanks, that's the thing I was unsure about. Sorry you have to put up
> with all the cretins just to answer a post... that's just usenet tho',
> kooks abound. Appreciate your help :)
>

Re: Dividend reinvestment or capital growth (Roth IRA)

Hiccups?



"spasmous" <> wrote in message
news:
>
> Tess Millay wrote:
>> ...The
>> point to me (and I think to you) is that stock mutual funds
>> do have to "deal" with dividends from its stocks that pay
>> them. Dividends are put back into the fund, generally
>> speaking, insofar as measures of performance (actual and
>> published) are concerned.
>
> Thanks, that's the thing I was unsure about. Sorry you have to put up
> with all the cretins just to answer a post... that's just usenet tho',
> kooks abound. Appreciate your help :)
>

Re: Dividend reinvestment or capital growth (Roth IRA)

(a) one that holds high
dividend paying stocks, takes the dividends and buys more of the same
fund

this is misleading.

A mutual fund is required by law to distribute the dividends to its
shareholders.

shareholders can then CHOOSE to reinvest the dividends in the fund. if
the dividends are reinvested in the funds, the fund manager may use the
money to buy different positions in different stocks or re-invest the
dividends in the same stocks.

I think most fund managers would use new funds to create a new position
within mutual fund and not reinvest dividends in the same stock which
paid the dividend.

Re: Dividend reinvestment or capital growth (Roth IRA)

Joe Stella wrote:
> On 5 Jan 2006 14:02:23 -0800, "PeterL" <> wrote:
> >[...]
> >On my IRA accounts I reinvest dividends, on my taxable accounts I don't.
> >The dividends go into my cash account for me to invest in the same fund or
> >others as I choose. I don't lose anything.
> >
>
> As long as you have the discipline to re-invest the money instead
> of spending it, then yes that works fine. Trouble is, lots of people
> don't have that discipline. Successful investing requires that
> you know yourself as well as knowing what you are investing in.

In the case of the OP, his holdings are in an IRA account. The
dividend don't go to his bank account. If he has the discipline to put
money in an IRA account, he would'nt spend the dividends anyway. As to
myself, I have no problems with that at all.

Re: Dividend reinvestment or capital growth (Roth IRA)

"spasmous" <> wrote
> Tess Millay wrote:
> > ...The
> > point to me (and I think to you) is that stock mutual
funds
> > do have to "deal" with dividends from its stocks that
pay
> > them. Dividends are put back into the fund, generally
> > speaking, insofar as measures of performance (actual and
> > published) are concerned.
>
> Thanks, that's the thing I was unsure about. Sorry you
have to put up
> with all the cretins just to answer a post... that's just
usenet tho',
> kooks abound.

Yes. OTOH, I'm not perfect. :-)

> Appreciate your help :)

FWIW, I'll plug misc.invest.financial-plan again. It is
moderated by reasonably competent and literate folks, with a
pleasantly hard line on living within one's means <grin!>.
Participants come from a wide walk, from paid financial
planners to old, retired D-I-Y hands (lots older than
myself!), to people who read a lot, are in mid-life and are
experimenting (mostly carefully) and so can offer good
anecdotes on some very specific situations.

A few of them argued the virtues of "value investing" (e.g.
bargain hunting for stocks, first trumpeted by Benjamin
Graham, from c. 1932) to me in the last year or so, and it's
got me tuning some of my strategies in a way that makes
rational sense to me.

'course, for fund specific questions, the feedback here is
plenty diverse enough to offer at least some enlightenment.

Re: Dividend reinvestment or capital growth (Roth IRA)

Well that's just tessspasmouserous!



"Tess Millay" <> wrote in message
news:c0zwf.5127$%
> "spasmous" <> wrote
>> Tess Millay wrote:
>> > ...The
>> > point to me (and I think to you) is that stock mutual
> funds
>> > do have to "deal" with dividends from its stocks that
> pay
>> > them. Dividends are put back into the fund, generally
>> > speaking, insofar as measures of performance (actual and
>> > published) are concerned.
>>
>> Thanks, that's the thing I was unsure about. Sorry you
> have to put up
>> with all the cretins just to answer a post... that's just
> usenet tho',
>> kooks abound.
>
> Yes. OTOH, I'm not perfect. :-)
>
>> Appreciate your help :)
>
> FWIW, I'll plug misc.invest.financial-plan again. It is
> moderated by reasonably competent and literate folks, with a
> pleasantly hard line on living within one's means <grin!>.
> Participants come from a wide walk, from paid financial
> planners to old, retired D-I-Y hands (lots older than
> myself!), to people who read a lot, are in mid-life and are
> experimenting (mostly carefully) and so can offer good
> anecdotes on some very specific situations.
>
> A few of them argued the virtues of "value investing" (e.g.
> bargain hunting for stocks, first trumpeted by Benjamin
> Graham, from c. 1932) to me in the last year or so, and it's
> got me tuning some of my strategies in a way that makes
> rational sense to me.
>
> 'course, for fund specific questions, the feedback here is
> plenty diverse enough to offer at least some enlightenment.
>
>

Re: Dividend reinvestment or capital growth (Roth IRA)

spasmous wrote:
> Tess Millay wrote:
> > ...The
> > point to me (and I think to you) is that stock mutual funds
> > do have to "deal" with dividends from its stocks that pay
> > them. Dividends are put back into the fund, generally
> > speaking, insofar as measures of performance (actual and
> > published) are concerned.
>
> Thanks, that's the thing I was unsure about. Sorry you have to put up
> with all the cretins just to answer a post... that's just usenet tho',
> kooks abound. Appreciate your help :)

Well you deserve what you got then.

Re: Dividend reinvestment or capital growth (Roth IRA)

jIM wrote:
>
> (a) one that holds high
> dividend paying stocks, takes the dividends and buys more of the same
> fund
>
> this is misleading.
>
> A mutual fund is required by law to distribute the dividends to its
> shareholders.
>
> shareholders can then CHOOSE to reinvest the dividends in the fund. if
> the dividends are reinvested in the funds, the fund manager may use the
> money to buy different positions in different stocks or re-invest the
> dividends in the same stocks.

The fund gets dividends from the stocks throughout the year. As they
come in, the fund manager does what? Holds the cash, or reinvests the
dividends?

The answer seems obvious - the fund manager reinvests the stock
dividends (and the bond interest, and the cash interest, and the
proceeds when selling stock including capital gains) as they are
received.

UITs like SPY are at a disadvantage relative to most funds, because by
law they are not allowed to reinvest the dividends they receive, except
quarterly (when they distribute the dividends as you described). If all
funds functioned this way, there would be no disadvantage. Yet this
dividend "cash drag" is real and well documented; see, e.g.


(iShares reinvest dividends; other ETFs may not)


(In contrast to UITs, mutual funds are able to reinvest dividends
daily.)

--
Mark Freeland