How does a balanced fund lose 3.6% today?

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1

VBIAX, about as conservative a balanced fund you’ll find, lost 3.6% today, December 30, 2024. How does that happen? Are bonds crashing?

2

It could be that it dropped with the market. It could also be that it went ex-dividend, that sometimes causes it to drop. If combined then it could be a big drop.

3

The year end distribution of 2.57% went ex-dividend, plus the market was down about 1%.

https://advisors.vanguard.com/content/dam/fas/pdfs/FYEEST.pdf

intercst

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4

Thank you for the Vanguard PDF link; just what I was looking for.

JimA

5

So this is a really bad investment for a taxable account no? I’m going to get taxed on the dividend. However, while I got enough new shares to equal the amount of the dividend, the NAV drops by that same amount. My overall balance does nothing but I get a tax bill, meaning that dividends created a loss of capita for me. Am I right here?

If so, I’ll sell this fund and buy two ETFs to simulate the balanced fund.

Come to think of it, not a good vehicle for an IRA either, as after the dividend I still have no increase in funds.

6

Yes, this is how dividends work. You have the dividends money to use.

7

Note though, that this is far from unique to this fund, but how ETF dividends all work. They spin off a little money and in doing so there is less in the ETF and the value goes down, but you have a little cash. You can elect to automatically reinvest the money in the ETF, in which case your total holding will be the same after as before* or you can use the money elsewhere.

  • note that it can take a couple of days to do the reinvest and the price can change during that interval.
8

That’s why I put my excess funds into BRK – no dividend. Right now, BRK’s cash position of $325 billion on a $1 Trillion market cap is 33% of the total. That’s not too far from the 60/40 split of the Vanguard Balanced Index Fund.

intercst

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9

Is it not how all dividends work? The company is sitting on some cash and then distributes it to shareholders. The value of the company has decreased and the value of the shareholders has increased.

DB2

10

This is exactly why I don’t like dividends! The COMPANY is deciding when you should take some of your capital gain instead of YOU deciding when to take it.

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