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I suspect that what @Derf might actually be observing is income or dividends being paid out and than used to buy additional shares, as some funds pay out income on a quarterly basis. Technically, the payout likely occurred at the end of the day yesterday.
In any event, Derf may be inaccurate in assuming that distribution donuts amount to extra food on the plate. In reality, the distribution in whole is extracted from the shareholder’s pie at the end of the day before it is reinvested back into the same account. So slice-to-slice, distributions shouldn’t affect the total amount of pie on the plate.
Re: Distributions Dates: Generally the payout date for capital gains falls somewhere around the end of the quarter for those funds that have donuts to dish up. Some funds‘ distributions more closely resemble pizza than donuts, being issued only once a year - if at all. Don’t confuse distribution donuts with the income frosting most bond funds (but not all) serve up monthly or quarterly. Two different desserts.
Me? Doesn’t make much difference. With rates so low, income funds are shucking out crumbs these days.
Linked article addresses the nature of what are commonly termed donuts. I believe these distributions are done primarily to comply with regulations imposed by either the IRS, the SEC, or likely, both. So it’s a way for investors in the funds to pay their legitimate taxes. Of course, in a tax deferred account, it doesn’t make any difference.
Sometimes an investor will suffer a mild “panic attack” on what’s called “the record date.” That’s the date the distribution amount is drawn from funds through a reduction in NAV. Typically, investors will experience surprise at a big drop in their fund’s NAV. On the following day, however, that temporary reduction is plowed back into accounts in the form of additional shares. Bottom line: investor owns more shares but at a lower NAV. The term donut actually refers to the circuitous nature of the transaction.
I had that happen with DODLX a week ago, a fund one wouldn’t ordinarily associate with cap gains. But it really rocked my boat when the NAV fell through the floor one day for no apparent reason. Of course, next day the $$ was back in my account via additional share purchase. Should add here that often both cap gains and normal income distributions are credited to the account on the same day. Likely, you observed some of both.
>> a week ago [DODLX] really rocked my boat when the NAV fell through the floor one day for no apparent reason. Of course, next day the $$ was back in my account via additional share purchase.
so does this mean you are or were unclear how the whole thing works?
>> a week ago [DODLX] really rocked my boat when the NAV fell through the floor one day for no apparent reason. Of course, next day the $$ was back in my account via additional share purchase.
so does this mean you are or were unclear how the whole thing works?
The record and distribution dates and the $ amount per share are announced on the fund company's website. Year-end distrtribution are even larger when capital gains, short- and long-term, are included. My fixed income funds have modest dividend distribution. Certainly nothing comparing to the past where 4 or 5% SEC yields were common in quality bond funds.
In the old days, on prior discussion board, when someone would post "what happened to XYZ fund today?" and it was a distribution, that poster would have to "buy donuts" for the group.
Comments
In any event, Derf may be inaccurate in assuming that distribution donuts amount to extra food on the plate. In reality, the distribution in whole is extracted from the shareholder’s pie at the end of the day before it is reinvested back into the same account. So slice-to-slice, distributions shouldn’t affect the total amount of pie on the plate.
Re: Distributions Dates: Generally the payout date for capital gains falls somewhere around the end of the quarter for those funds that have donuts to dish up. Some funds‘ distributions more closely resemble pizza than donuts, being issued only once a year - if at all. Don’t confuse distribution donuts with the income frosting most bond funds (but not all) serve up monthly or quarterly. Two different desserts.
Me? Doesn’t make much difference. With rates so low, income funds are shucking out crumbs these days.
Stay Safe, Derf
Linked article addresses the nature of what are commonly termed donuts. I believe these distributions are done primarily to comply with regulations imposed by either the IRS, the SEC, or likely, both. So it’s a way for investors in the funds to pay their legitimate taxes. Of course, in a tax deferred account, it doesn’t make any difference.
Sometimes an investor will suffer a mild “panic attack” on what’s called “the record date.” That’s the date the distribution amount is drawn from funds through a reduction in NAV. Typically, investors will experience surprise at a big drop in their fund’s NAV. On the following day, however, that temporary reduction is plowed back into accounts in the form of additional shares. Bottom line: investor owns more shares but at a lower NAV. The term donut actually refers to the circuitous nature of the transaction.
I had that happen with DODLX a week ago, a fund one wouldn’t ordinarily associate with cap gains. But it really rocked my boat when the NAV fell through the floor one day for no apparent reason. Of course, next day the $$ was back in my account via additional share purchase. Should add here that often both cap gains and normal income distributions are credited to the account on the same day. Likely, you observed some of both.
Article
>> a week ago [DODLX] really rocked my boat when the NAV fell through the floor one day for no apparent reason. Of course, next day the $$ was back in my account via additional share purchase.
so does this mean you are or were unclear how the whole thing works?