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This is the top holding of Pimco Income fund, at 8.24%:
Irs Aud 4.000 03/15/13-10y Cme. Don't know what that is.
And they have more than 7.5% of the below, which I suspect may have gone down today? Nota Do Tesouro Nacional
What is that? Some National Treasury note, is that from Portugal? Would help to explain why the fund may have dropped today.
I don't suspect any trick plays that you allude to. PTTRX looks like it is a more plain vanilla, safer bond fund. Just guessing. Look at the top holding, at almost 19.5%
NYSE/Liffe 10 Year US Treasury Note Future Sept14
Longer term bonds did well today. The market was spooked by Hong Kong. The longer the Treasury bond, the better it did....flight to safety. Junk bonds did not do well. I think global bonds did not do well....flight to Treasuries.
I have been looking around and I cannot find any mention of the monthy distribution today. And I do not know why they would make the distribution today instead of tomorrow. I can not remember the last time I saw PIMIX down this much!
You're probably correct about distribution; although nothing posted at Fido or Pimco. There was a 0.0555 on August 29.....is that what you saw somewhere?
rjb, I think "Irs Aud" is "interest rate swap, Australian dollar," which may be effectively a way to hedge the currency risk of owning Aussie debt, which PIMIX has had as a significant position for a while. Somebody correct me on that, please, if it's not accurate.
Catch and Mona, like rjb said, the 0.47 loss yesterday was in line with losses in foreign developed, EM, and U.S. high yield, which took a pretty good hit -- all of which PIMIX has in the portfolio. PTTRX has much less exposure to those bond classes; it's primarily a core, investment grade fund.
Just fyi, there's a brief PDF piece about PIMIX, linked about in the middle of the Pimco home page under "Important Fund Updates."
PTTRX is a core bond with a bunch of treasuries and some spreads which canceled each other to become zero. PIMIX is all mortgages that blew out (with all other spreads yesterday - high yield, EMD, etc); moreover, it hedges interest rates being short treasuries - which went against them -- hence the NAV impact. PIMIX is a more sophisticated portfolio, but there is no free lunch..
rjb, I think "Irs Aud" is "interest rate swap, Australian dollar," which may be effectively a way to hedge the currency risk of owning Aussie debt, which PIMIX has had as a significant position for a while. Somebody correct me on that, please, if it's not accurate.
rjb, I think "Irs Aud" is "interest rate swap, Australian dollar," which may be effectively a way to hedge the currency risk of owning Aussie debt, which PIMIX has had as a significant position for a while. Somebody correct me on that, please, if it's not accurate.
Thanks AndyJ
I'd also guess cme is the exchange where the interest rate swap is held/was purchased.
I'd also guess cme is the exchange where the interest rate swap is held/was purchased.
Bingo! Chicago Mercantile Exchange. From the intro to the Wikipedia entry for 'CME Group':
"CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is an American futures company and is one of the largest options and futures exchanges. It owns and operates large derivatives and futures exchanges in Chicago and New York City, as well as online trading platforms. .... The exchange-traded derivative contracts include futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, rare and precious metals, weather, and real estate. It has been described by The Economist as "The biggest financial exchange you have never heard of"."
Maybe MFOers should group-author The Rough Guide to Unbelievably Arcane Financial Minutiae.
rjb, I think "Irs Aud" is "interest rate swap, Australian dollar," which may be effectively a way to hedge the currency risk of owning Aussie debt, which PIMIX has had as a significant position for a while. Somebody correct me on that, please, if it's not accurate.
Catch and Mona, like rjb said, the 0.47 loss yesterday was in line with losses in foreign developed, EM, and U.S. high yield, which took a pretty good hit -- all of which PIMIX has in the portfolio. PTTRX has much less exposure to those bond classes; it's primarily a core, investment grade fund.
Just fyi, there's a brief PDF piece about PIMIX, linked about in the middle of the Pimco home page under "Important Fund Updates."
---PIMIX, dividend of 0.05550 per share, declared on 09/30/2014 ---PONDX, dividend of 0.05266 per share, declared on 9/30/2014
Yeah, but what is the ex-dividend date? When was the NAV lowered as a result of the income coming out of the fund? "Declared"? Typically there is a Date of Record, An Ex-Dividend Date/Re-investment date, and a Payable Date.
it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds. the decline you saw was a market decline - movements in spreads -- see my previous explanation.
---PIMIX, dividend of 0.05550 per share, declared on 09/30/2014 ---PONDX, dividend of 0.05266 per share, declared on 9/30/2014
Yeah, but what is the ex-dividend date? When was the NAV lowered as a result of the income coming out of the fund? "Declared"? Typically there is a Date of Record, An Ex-Dividend Date/Re-investment date, and a Payable Date.
it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds. the decline you saw was a market decline - movements in spreads -- see my previous explanation.
Some bond funds (like PIMCO's) do that. Others, like RPHYX, declare monthly, while a few even declare quarterly (Loomis Sayles used to do that until they switched to a monthly calendar a few years ago).
As always, read the prospectus. The PIMCO bond fund prospectus says that its funds covered in that prospectus (with a couple of exceptions) declare daily.
What about the typical, plain vanilla bond funds that pay income dividends monthly, like the Vanguard Total Bond Market Index Fund, etc.
Does the share price drop by an amount equivalent to the income distribution [not considering market activity for the day], as is the case when stock funds distribute dividends and/or capital gains?
Regarding the typical open end bond fund the NAV is NOT lowered when the dividends accrue daily and paid end of month. If you are in the fund just a few days during the month your account is still credited end of month for the dividends on however many days you were in. I much prefer and trade/invest only in these types of bond funds because I like to see the big increase in my account when the dividends are paid out end of month. It's a psychological thing. The other type of bond funds pay out their dividends during the course of the month and that is reflected in the price during the month. Then end of month the price is adjusted downward by amount of ex div. And in these funds, if you exit during the month you get nothing end of month. Clear as mud right?
If you are in the fund just a few days during the month your account is still credited end of month for the dividends on however many days you were in..........The other type of bond funds pay out their dividends during the course of the month and that is reflected in the price during the month. Then end of month the price is adjusted downward by amount of ex div. And in these funds, if you exit during the month you get nothing end of month.
What are these "other" types of bond funds? Let's exclude closed end funds from the discussion.
And regarding the income dividend. They credit you proportionally depending on how many days of the month you were in? I'm sure that stock funds don't do that......you are either in by the Record Date, or not. If you are in, you get the full distribution.....if not, none at all.
it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds.
@fundalarm and other MFOers, in that case, the daily dividends increase the NAV? Take a fund like the Vanguard Total Bond Market Index fund, what can change the NAV besides interest rates going up or down? [note: supply/demand will change bond prices, but that will raise or lower interest rates/yields on those bonds]
it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds.
@fundalarm and other MFOers, in that case, the daily dividends increase the NAV? Take a fund like the Vanguard Total Bond Market Index fund, what can change the NAV besides interest rates going up or down? [note: supply/demand will change bond prices, but that will raise or lower interest rates/yields on those bonds]
Taking the second question first, since it's easier to explain - defaults can change the NAV. Just think Reserve Fund. Its Lehman bonds defaulted, and the NAV of this MMF dropped immediately (broke a buck). That's because the bonds became worth pennies on the dollar, and the interest rate on the bonds fell (not rose) to zero - all money that the bond holders got was repayment of principal - no interest.
Regarding bond funds and accruing dividends - the NAV does not reflect the declared but unpaid dividends after the record date. Rather, once a record day passes, the dividend is set aside by the fund (or company, in the case of a corp) and distributed on the pay date. For example, MSFT has said that people who own shares on Nov 20th will receive $0.31/share on Dec 11th. They'll get that dividend even if they sell their shares on Dec 1st.
The shares of MSFT will drop $0.31 on the ex-date - the first day that the shares trade without the dividend. The $0.31/share is not carried as part of the price (NAV, if you wish). Same idea with mutual funds. They're also companies that declare dividends, have record dates, and pay dates.
Generally, a mutual fund's ex-date is one day after its record date. See, e.g. D&C schedule here. If you were the shareholder of record of DODGX on Sept 24th, you got a $0.50 dividend Sept 26th. It didn't matter if you sold your shares on Sept 25th. You still got that check in the mail (well, figuratively speaking). And that $0.50 div on the share that you sold on Sept 25th did not accrue in the NAV. That money was put aside for your check.
So to answer your question - the NAV did not go up on Sept 25th because of the dividend. The shareholder buying the share ex-dividend got the share without the dividend (even though it hadn't been paid to you yet). That's what ex-dividend means.
Funds can have daily record dates - they just set aside the money until the pay date (typically the end of the month). The NAV is adjusted down on a daily basis because each day the fund goes ex-dividend. But that adjustment is usually so small you never see it. MMFs adjust their NAV downward daily (they declare dividends daily), but they "never" break a buck. They just set aside the little bit of interest that they earn each day and declare that the daily dividend. So the NAV stays at a dollar even.
Bond funds can also have quarterly record dates. Loomis Sayles Inflation Protected Securities Fund (LIPRX) still declares and pays its dividends quarterly. (Link is to 5MB prospectus; wait for full doc to load - link is to specific section.)
msf is very thorough in his answer. but a short answer would be "yes". for daily accrual bond funds -- all pimco's open end funds, vanguard funds, and many others (but not all generally) -- there is a daily interest accrual that is part of the daily NAV calculation. thus, there is no end of month NAV adjustment to accommodate the distribution and, as junkster noted, even if selling mid month, the holder will be eligible for the interest accrued on his/her shares up until the sale.
so when evaluating pimco's open end fund's daily performance, look at underlying assets and general interest rates and credit conditions, not at distribution dates/amounts -- which are irrelevant.
it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds.
@fundalarm and other MFOers, in that case, the daily dividends increase the NAV? Take a fund like the Vanguard Total Bond Market Index fund, what can change the NAV besides interest rates going up or down? [note: supply/demand will change bond prices, but that will raise or lower interest rates/yields on those bonds]
msf is very thorough in his answer. but a short answer would be "yes". for daily accrual bond funds -- all pimco's open end funds, vanguard funds, and many others (but not all generally) -- there is a daily interest accrual that is part of the daily NAV calculation. thus, there is no end of month NAV adjustment to accommodate the distribution and, as junkster noted, even if selling mid month, the holder will be eligible for the interest accrued on his/her shares up until the sale.
best, fa
fa, thanks for your reply and interest in helping me understand this better. I called Vanguard to discuss their Total Bond Market Index Fund and ask some of these questions. Their answers do not agree with what you and junkster state above.
First, they said the NAV is lowered on the day of the monthly income distribution, and it is lowered by the exact amount of the distribution, +/- market activity......exactly what happens when a stock fund distributes dividends.
Second, contrary to what junkster said, they said you either get the full distribution or you get no distribution, depending on whether you are in the fund at the time the distribution is made [of course, assuming you were in on the date of record].
Junkster said above: "If you are in the fund just a few days during the month your account is still credited end of month for the dividends on however many days you were in". Vanguard said this is not correct.
I'm not even gone for a day and someone e-mails about this thread. Robert, seriously, you need to get your act together. I discussed as did fundalarm the two ways bond funds pay their dividends. We described how funds like the one you keep harping on pay their monthly dividends and we also described how others, the majority in open end bondland such as PONDX pay out theirs. With just about every bond fund I ever traded or invested in the dividends accrued daily and you were paid end of month for however long you were in the fund. Fundalarm and I never said that the one you keep harping on that the dividends accrued daily!!! My comments below from this thread! If you are going to accuse someone of being incorrect, at least get your facts straight!!! Edit: you also might want to list the symbol of whatever you are harping on. BND and VBMFX both Vanguard total bond index funds pay out their dividends differently.
>>>Regarding the typical open end bond fund the NAV is NOT lowered when the dividends accrue daily and paid end of month. If you are in the fund just a few days during the month your account is still credited end of month for the dividends on however many days you were in. I much prefer and trade/invest only in these types of bond funds because I like to see the big increase in my account when the dividends are paid out end of month. It's a psychological thing. The other type of bond funds pay out their dividends during the course of the month and that is reflected in the price during the month. Then end of month the price is adjusted downward by amount of ex div. And in these funds, if you exit during the month you get nothing end of month. Clear as mud right?<<<<
Rjb's problem is not that he misunderstands how (most) Vanguard bond funds, such as VBMFX, accrue dividends, but rather that Vanguard misinformed him. Unfortunately, that's something hard to prove.
That is, VBMFX declares daily, pays monthly. (See p. 34 of its prospectus: "The Fund’s income dividends are declared daily and distributed monthly ..."). Rjb is not mistaken that VBMFX pays dividends the same way as PONDX does.
The "right" way to prove that the NAV doesn't drop because of the distribution is to see how the index being tracked (Barclays US Aggregate Float Adjusted Index) moved on the distribution date, adjust the fund shares for the same movement, and then see if the NAV dropped below that by the amount of the distribution. However, the tracking error of the fund on a daily basis seems to be larger than the size of the distribution, so I can't tell whether a given price movement was because of tracking error or because of an adjustment for the distribution. (It's the former, but I can't prove it.)
======
The remainder is a discussion on how/why Vanguard might have provided incorrect info.
One of the things that Vanguard keeps focused on is "don't buy a dividend". It's a habit with Vanguard - so even when you can't buy a dividend (because they accrue daily, not monthly), the reps may still give the same spiel.
For example, here's Vanguard's doc on mutual funds and taxes. In one paragraph they write that "If you hold shares in mutual funds that declare dividends daily - such as money market and bond funds - you are entitled to a dividend for each day you own shares in the fund." (This also means that you cannot buy a dividend, because you're entitled onlyto the dividends for each of the days you own the shares, and not the whole month.)
But two paragraphs later, it goes on to say that "when considering a purchase of fund shares, ask the fund company about the fund's next distribution ... If you own shares on the fund's record date, you will receive the distribution ... you are 'buying the distribution'..."
In the former paragraph, Vanguard gets it right - making a distinction between daily dividends and monthly/quarterly/annual ones. In the latter paragraph, Vanguard omits this distinction and (wrongly) implies that you can buy a dividend even for funds that declare daily.
>>>Rjb is not mistaken that VBMFX pays dividends the same way as PONDX does.<<<
If you look back on this thread you will see RJB hadn't a clue how PONDX paid their dividends.
He said re PONDX and PIMIX >>>>"Yeah, but what is the ex-dividend date? When was the NAV lowered as a result of the income coming out of the fund? "Declared"? Typically there is a Date of Record, An Ex-Dividend Date/Re-investment date, and a Payable Date."<<<<
The NAV is never lowered in PONDX and PIMIX when they pay their monthly dividends. For some reason he can't or refuses to grasp that point. He makes it a bit personal when he accuses me and fundalarm of being incorrect. It's not like I haven't made thousands and thousands of open end bond trades in my time. In fact, was banned long ago by Vanguard and T Rowe for frequent trading.
In researching the topic at hand, on daily accrual mutual funds, I have linked below some information I believe will be beneficial in perhaps understanding how daily accural mutual funds make their distributions.
c'mon junkster! you should take it less personal! you promised to keep out and enjoy your daily positive hy muni performance -- so the rest of us, classically diversified, could just sit there green with envy!
yes, the vanguard guy who advised rjb was wrong. yes, you have dozens of years of experience, and some of us are in the industry, but rjb decided to doubt us, even if the cursory understanding of asset class and spreads would give him a clue. be kind to him; he also invested with berkowitz and that didn't quite work in the last couple of days. some people pick up very sophisticated -- hedge fund like - strategies without a clue as to what they invest in and how market, credit events, or interest rates affect their investments. the cure for this is to either relax and trust the manager, or index the hell out of your investments. alternatively, get an education. but who would listen? so people go from board to board, broker to broker, and ask questions of random strangers without capacity to evaluate the answers. oh, well.
I'm not even gone for a day and someone e-mails about this thread. Robert, seriously, you need to get your act together. I discussed as did fundalarm the two ways bond funds pay their dividends. We described how funds like the one you keep harping on pay their monthly dividends and we also described how others, the majority in open end bondland such as PONDX pay out theirs. With just about every bond fund I ever traded or invested in the dividends accrued daily and you were paid end of month for however long you were in the fund. Fundalarm and I never said that the one you keep harping on that the dividends accrued daily!!! My comments below from this thread! If you are going to accuse someone of being incorrect, at least get your facts straight!!! Edit: you also might want to list the symbol of whatever you are harping on. BND and VBMFX both Vanguard total bond index funds pay out their dividends differently.
the kid who picked up the phone @ Vanguard made a mistake. Vanguard does best to train them, but you know how it goes, plus being a bogle-funded truly mutual fund company (i.e. cheap) they can't really get good help like the loaded institutions can - a fact of life... his answer applied to some funds, but not to the open end fund that you described. The related ETF however could have a different dividend accrual rule.
fundalarm, thanks, you said pretty much what I said but in a kinder and gentler manner. The female touch I imagine. The easy way to sum this up is with all closed end bond funds and bond fund ETFs the price is adjusted downward end of month based on the dividend payout and dividends don't accrue daily. You have to be in the fund on the record date to get the div. Of course, after the dividend adjustment, because closed end and ETFs trade intraday, price can trade anywhere during that day.
With the open end bond funds off the top of my head I would say about 70% (maybe even more) are in the daily accrual camp, where the NAV is not affected end of month, and you are paid accrued dividends for however long you were in the fund that month. To find out which open end are which you don't need to read any prospectus. You can just go to Yahoo finance and click on the historical prices of the fund in question. Then scroll through a few months preferably longer and you will find the dividend payout there too and can see if the NAV remains about the same or adjusted downward by around the amount of the dividend. I do that all the time when researching bond funds to trade/invest. I stay clear of the ones where the dividends aren't accrued daily.
Below is for VBMFX where the dividends are accrued daily. On some days end of month when the dividends are paid the NAV can be up a penny or so, others it might be down a penny and in most others unchanged. The day the accrued dividends are paid is a typical trading day and the NAV is not affected whatsoever by the payout, but instead it's like any other trading day where price is effected by market dynamics.
Comments
Irs Aud 4.000 03/15/13-10y Cme. Don't know what that is.
And they have more than 7.5% of the below, which I suspect may have gone down today?
Nota Do Tesouro Nacional
What is that? Some National Treasury note, is that from Portugal? Would help to explain why the fund may have dropped today.
I don't suspect any trick plays that you allude to.
PTTRX looks like it is a more plain vanilla, safer bond fund. Just guessing. Look at the top holding, at almost 19.5%
NYSE/Liffe 10 Year US Treasury Note Future Sept14
Longer term bonds did well today. The market was spooked by Hong Kong. The longer the Treasury bond, the better it did....flight to safety. Junk bonds did not do well.
I think global bonds did not do well....flight to Treasuries.
I have been looking around and I cannot find any mention of the monthy distribution today. And I do not know why they would make the distribution today instead of tomorrow. I can not remember the last time I saw PIMIX down this much!
Mona
You're probably correct about distribution; although nothing posted at Fido or Pimco.
There was a 0.0555 on August 29.....is that what you saw somewhere?
Thanks.
Catch
You are correct. On the M* page I was reading August as September!
Mona
Catch and Mona, like rjb said, the 0.47 loss yesterday was in line with losses in foreign developed, EM, and U.S. high yield, which took a pretty good hit -- all of which PIMIX has in the portfolio. PTTRX has much less exposure to those bond classes; it's primarily a core, investment grade fund.
Just fyi, there's a brief PDF piece about PIMIX, linked about in the middle of the Pimco home page under "Important Fund Updates."
treasuries were up, spreads were out. easy.
PTTRX is a core bond with a bunch of treasuries and some spreads which canceled each other to become zero. PIMIX is all mortgages that blew out (with all other spreads yesterday - high yield, EMD, etc); moreover, it hedges interest rates being short treasuries - which went against them -- hence the NAV impact. PIMIX is a more sophisticated portfolio, but there is no free lunch..
http://krugman.blogs.nytimes.com/2014/09/30/the-pimco-perplex/
"CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is an American futures company and is one of the largest options and futures exchanges. It owns and operates large derivatives and futures exchanges in Chicago and New York City, as well as online trading platforms. .... The exchange-traded derivative contracts include futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, rare and precious metals, weather, and real estate. It has been described by The Economist as "The biggest financial exchange you have never heard of"."
Maybe MFOers should group-author The Rough Guide to Unbelievably Arcane Financial Minutiae.
P.S. Anyone ever heard of weather futures?
---PIMIX, dividend of 0.05550 per share, declared on 09/30/2014
---PONDX, dividend of 0.05266 per share, declared on 9/30/2014
When was the NAV lowered as a result of the income coming out of the fund?
"Declared"?
Typically there is a Date of Record, An Ex-Dividend Date/Re-investment date, and a Payable Date.
As always, read the prospectus. The PIMCO bond fund prospectus says that its funds covered in that prospectus (with a couple of exceptions) declare daily.
Does the share price drop by an amount equivalent to the income distribution [not considering market activity for the day], as is the case when stock funds distribute dividends and/or capital gains?
Let's exclude closed end funds from the discussion.
And regarding the income dividend. They credit you proportionally depending on how many days of the month you were in? I'm sure that stock funds don't do that......you are either in by the Record Date, or not. If you are in, you get the full distribution.....if not, none at all.
Take a fund like the Vanguard Total Bond Market Index fund, what can change the NAV besides interest rates going up or down? [note: supply/demand will change bond prices, but that will raise or lower interest rates/yields on those bonds]
Regarding bond funds and accruing dividends - the NAV does not reflect the declared but unpaid dividends after the record date. Rather, once a record day passes, the dividend is set aside by the fund (or company, in the case of a corp) and distributed on the pay date. For example, MSFT has said that people who own shares on Nov 20th will receive $0.31/share on Dec 11th. They'll get that dividend even if they sell their shares on Dec 1st.
The shares of MSFT will drop $0.31 on the ex-date - the first day that the shares trade without the dividend. The $0.31/share is not carried as part of the price (NAV, if you wish). Same idea with mutual funds. They're also companies that declare dividends, have record dates, and pay dates.
Generally, a mutual fund's ex-date is one day after its record date. See, e.g. D&C schedule here. If you were the shareholder of record of DODGX on Sept 24th, you got a $0.50 dividend Sept 26th. It didn't matter if you sold your shares on Sept 25th. You still got that check in the mail (well, figuratively speaking). And that $0.50 div on the share that you sold on Sept 25th did not accrue in the NAV. That money was put aside for your check.
So to answer your question - the NAV did not go up on Sept 25th because of the dividend. The shareholder buying the share ex-dividend got the share without the dividend (even though it hadn't been paid to you yet). That's what ex-dividend means.
Funds can have daily record dates - they just set aside the money until the pay date (typically the end of the month). The NAV is adjusted down on a daily basis because each day the fund goes ex-dividend. But that adjustment is usually so small you never see it. MMFs adjust their NAV downward daily (they declare dividends daily), but they "never" break a buck. They just set aside the little bit of interest that they earn each day and declare that the daily dividend. So the NAV stays at a dollar even.
Bond funds can also have quarterly record dates. Loomis Sayles Inflation Protected Securities Fund (LIPRX) still declares and pays its dividends quarterly. (Link is to 5MB prospectus; wait for full doc to load - link is to specific section.)
so when evaluating pimco's open end fund's daily performance, look at underlying assets and general interest rates and credit conditions, not at distribution dates/amounts -- which are irrelevant.
best, fa
>>>Regarding the typical open end bond fund the NAV is NOT lowered when the dividends accrue daily and paid end of month. If you are in the fund just a few days during the month your account is still credited end of month for the dividends on however many days you were in. I much prefer and trade/invest only in these types of bond funds because I like to see the big increase in my account when the dividends are paid out end of month. It's a psychological thing. The other type of bond funds pay out their dividends during the course of the month and that is reflected in the price during the month. Then end of month the price is adjusted downward by amount of ex div. And in these funds, if you exit during the month you get nothing end of month. Clear as mud right?<<<<
That is, VBMFX declares daily, pays monthly. (See p. 34 of its prospectus: "The Fund’s income dividends are declared daily and distributed monthly ..."). Rjb is not mistaken that VBMFX pays dividends the same way as PONDX does.
The "right" way to prove that the NAV doesn't drop because of the distribution is to see how the index being tracked (Barclays US Aggregate Float Adjusted Index) moved on the distribution date, adjust the fund shares for the same movement, and then see if the NAV dropped below that by the amount of the distribution. However, the tracking error of the fund on a daily basis seems to be larger than the size of the distribution, so I can't tell whether a given price movement was because of tracking error or because of an adjustment for the distribution. (It's the former, but I can't prove it.)
======
The remainder is a discussion on how/why Vanguard might have provided incorrect info.
One of the things that Vanguard keeps focused on is "don't buy a dividend". It's a habit with Vanguard - so even when you can't buy a dividend (because they accrue daily, not monthly), the reps may still give the same spiel.
For example, here's Vanguard's doc on mutual funds and taxes. In one paragraph they write that "If you hold shares in mutual funds that declare dividends daily - such as money market and bond funds - you are entitled to a dividend for each day you own shares in the fund." (This also means that you cannot buy a dividend, because you're entitled onlyto the dividends for each of the days you own the shares, and not the whole month.)
But two paragraphs later, it goes on to say that "when considering a purchase of fund shares, ask the fund company about the fund's next distribution ... If you own shares on the fund's record date, you will receive the distribution ... you are 'buying the distribution'..."
In the former paragraph, Vanguard gets it right - making a distinction between daily dividends and monthly/quarterly/annual ones. In the latter paragraph, Vanguard omits this distinction and (wrongly) implies that you can buy a dividend even for funds that declare daily.
The rep likely just followed the script.
If you look back on this thread you will see RJB hadn't a clue how PONDX paid their dividends.
He said re PONDX and PIMIX >>>>"Yeah, but what is the ex-dividend date?
When was the NAV lowered as a result of the income coming out of the fund?
"Declared"?
Typically there is a Date of Record, An Ex-Dividend Date/Re-investment date, and a Payable Date."<<<<
The NAV is never lowered in PONDX and PIMIX when they pay their monthly dividends. For some reason he can't or refuses to grasp that point. He makes it a bit personal when he accuses me and fundalarm of being incorrect. It's not like I haven't made thousands and thousands of open end bond trades in my time. In fact, was banned long ago by Vanguard and T Rowe for frequent trading.
In researching the topic at hand, on daily accrual mutual funds, I have linked below some information I believe will be beneficial in perhaps understanding how daily accural mutual funds make their distributions.
http://blog.fundx.com/blog/2012/11/29/how-bond-funds-make-distributions/
yes, the vanguard guy who advised rjb was wrong. yes, you have dozens of years of experience, and some of us are in the industry, but rjb decided to doubt us, even if the cursory understanding of asset class and spreads would give him a clue. be kind to him; he also invested with berkowitz and that didn't quite work in the last couple of days. some people pick up very sophisticated -- hedge fund like - strategies without a clue as to what they invest in and how market, credit events, or interest rates affect their investments. the cure for this is to either relax and trust the manager, or index the hell out of your investments. alternatively, get an education. but who would listen? so people go from board to board, broker to broker, and ask questions of random strangers without capacity to evaluate the answers. oh, well.
fa
With the open end bond funds off the top of my head I would say about 70% (maybe even more) are in the daily accrual camp, where the NAV is not affected end of month, and you are paid accrued dividends for however long you were in the fund that month. To find out which open end are which you don't need to read any prospectus. You can just go to Yahoo finance and click on the historical prices of the fund in question. Then scroll through a few months preferably longer and you will find the dividend payout there too and can see if the NAV remains about the same or adjusted downward by around the amount of the dividend. I do that all the time when researching bond funds to trade/invest. I stay clear of the ones where the dividends aren't accrued daily.
Below is for VBMFX where the dividends are accrued daily. On some days end of month when the dividends are paid the NAV can be up a penny or so, others it might be down a penny and in most others unchanged. The day the accrued dividends are paid is a typical trading day and the NAV is not affected whatsoever by the payout, but instead it's like any other trading day where price is effected by market dynamics.
http://finance.yahoo.com/q/hp?s=VBMFX+Historical+Prices