"Andrew Koenig" <ark[at]acm.org> wrote in message
news:ecs0i.2924$yM2.2033[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

As someone else suggested, we have been ambiguous (and in violent
agreement). The NAV of the fund includes the dividends it receives (from
the underlying portfolio), the dividends it has not yet paid out, but not
the dividends it has paid out.

(This differs somewhat from the benchmark index, which drops immediately
when an underlying stock distributes a dividend; the fund drops, say
quarterly, when it passes through those dividends to its shareholders - long
term, no difference aside from expenses.)


Mark Freeland
BnetOnewsX[at]sbcglobal.net

HW \"Skip\" Weldon wrote:

- quote -

We've seen you give variations of this advice many times here, typically
to new posters. Ordinarily, I would agree with you. But Jane is
semi-retired already and may need this money within the next five years.
That tells me that she doesn't have much more income to save and that
she doesn't want to put this money someplace too risky. To me, this
makes the "where" more important than the "how much" for this situation.

To generalize further, "how much" (is saved each year) is more important
that "where" (that money is invested) only to relatively new savers.
Using very broad rules-of-thumb thrown around this newsgroup (regardless
of validity), if a person wants to retire with an annual retirement
income of X, then that person may have to save as much as 25X. When
that person begins to save, each dollar saved typically makes a much
bigger contribution to the end goal than each dollar of return, hence
the "how much" is much more important than the "where".

But after our saver has saved something like 3X, additional savings are
getting to have a pretty small impact on the total saved. For example,
if our saver saves 0.1X each year (another rule-of-thumb), then after
accumulating 3X, new savings represents just enough money to keep up
with inflation. If that saver only put money under the mattress and
never invested, it would take 250 years to reach the 25X retirement
goal. To get there in 40 years would require more than 0.6X - an annual
savings of 60% of salary may even force a person to drink cheap beer.
Who wants a life like that? Nobody should have to drink cheap beer. So
it seems that the "where" becomes increasingly important (for beer
drinkers). Fast forward to the point where our saver has accumulated
20X and the "where" really dominates the scene. Even if our saver is
putting back 0.3X, this will only cover mutual fund expenses.

I'm not saying that a saver near retirement should stop saving - indeed,
covering expenses would be a good thing - but the choice of investment
vehicle becomes the dominant decision in terms of growth of our saver's
nest egg.

All of this may or may not apply to Jane depending on what her assets
are outside of her 401(k).

-Will

darkness39[at]yahoo.com wrote:


- quote -

This not any kind of proof, but is some interesting data. One of my favorite
contrarian indicators is the American Association of Individual Investors
sentiment index.

Bullish 28.57% -- long term average is 39.2%
Neutral 17.14% -- long-term average of 32.9%
Bearish 54.298% -- long-term average of 28.0%

The bearish reached it's record peak in August 1990, just before the first gulf
war rally. It reached it's record low in August 1987 just before the October
crash. The bullish reached it's peak in January 2000 and it's low in November
1990.

If you believe the current data, the market still has some room to run.

-- Doug

On May 11, 1:21 am, Will Trice <wwtr...[at]paragondynamics.com> wrote:
- quote -

Institutional flows are the biggest component of the market, I
believe. There are a lot of pension funds and insurance companies and
family endowments, worldwide.

I presume this observation includes mutual funds? In addition, there
are hedge funds, which could be institutional investors or individual
investors.

If this means a zero flow of funds
- quote -

The conventional wisdom (I've never seen this proven) is that
individual investors always have it wrong. When they are buying
stocks, we are closer to the top than the bottom (1999). When they
are selling stocks, we are close to the bottom.

I want to thank you all very much for your thorough and thoughtful
answers. It's been a very big help.

Thanks again!

Jane

joetaxpayer wrote:
- quote -

Interestingly, CNBC reported this morning that individual investors "are
not putting money into the market." If this means a zero flow of funds
(i.e. inflows and outflows balanced), does this mean we're in an
inflection point and the market is beginning to decelerate to a top?

-Will

Jane <googlemail2003[at]yahoo.com> writes:
- quote -

If your plan is to roll it a little at a time into the
pair of Vanguard funds we were talking about, roll it
all at once right now into a Vanguard *Money Market*
fund first. Then, Vanguard will let you move a little
at a time from one fund to another. Vanguard's
Prime Portfolio Money Market fund is one of the
best in the business.

If you weren't going to be going into Vanguard funds,
I'd have told you to roll it all into a brokerage
account elsewhere and then buying the funds you want
in the brokerage account. But if you're interested
only in Vanguard fund, start with a Vanguard money
market fund and then go from there. (That Prime
Money Mkt Fund is currently yielding over 5% -
even better than where you have the money now!)


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No HTML in E-Mail! -- http://www.expita.com/nomime.html
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Jane wrote:
- quote -

Of course you can roll over the entire sum (and should), but then invest
as you choose. A rollover doesn't mean you must go 100% stocks. You'll
choose the mix as you decide. Good MM funds or short CDs are at 5%, so
that's where you'd put much of it until you start the shift to the mix
level appropriate for the longer term.
JOE

On May 9, 5:42 pm, BreadWithS...[at]fractious.net wrote:
- quote -

I'd like to roll it over slowly but I can't. The 401k that it's in
now is an all or nothing roll over. I can make withdrawals, but then
I have to pay tax.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

On Wed, 9 May 2007 16:03:27 -0500, Jane <googlemail2003[at]yahoo.comwrote:


- quote -

At the end of every bull market we find countless people who had no
business investing (taking risks.)

One thing I've come to understand is that achieving financial security
comes more from HOW MUCH we save, not where we save. If investing
this money truly makes you nervous, I'd suggest you take a nap until
the urge passes.


-HW "Skip" Weldon
Columbia, SC

On May 9, 10:42 pm, BreadWithS...[at]fractious.net wrote:

- quote -

Good and sensible advice, all of the above!

- quote -

On May 9, 10:03 pm, Jane <googlemail2...[at]yahoo.com> wrote:
- quote -

As it would any sane person. It's a big part of your wealth.

- quote -

See Bread with Spam's comment: it's not a bad return. In the long
run of your retirement though, the value of that income (to you) will
fall as inflation eats away.

Given the high market, is now a good time to put a big
- quote -

Jane

Assuming you are going to put it into the 2 Vanguard funds, why not
put some in now, and then the rest over the next 2 years say? In the
meantime, it can sit in a Vanguard Money Market fund, earning c. 4% I
believe. 80% over 24 months would be about 3% a month.

The combination of the 2 funds (50/50) right now would yield about
3.5%.

Say the minimums on Wellesley and Wellington are $10k. You could put
$15k into each ($30k) every 3 months for the next 2 years: that's
$240k over the next two years.

Bread with Spam has some great comments.

Jane wrote:

- quote -

What if you wait, and wait, and from here the market goes sideways a
bit, then moves up? In effect, you are trying to 'market time' which is
a losing game. As BWS stated, averaging in over time (I'd say two years)
may be the way to go. You need to understand the basics in terms of
average return, and standard deviation around that return. Does 10%
average sound good? Of course it does, but it comes with about a 16%
standard deviation, a bell curve that suggests the chance of a down year
is 1/3 or so for any given year. If you are too nervous, you should have
less in the market. There is data for something called 'flow of funds'
the money moving into or out of mutual funds. Funny (in a pathetic, sad,
kind of way) that at the market peaked in 2000, money was pouring in.
Money poured out during 02 as the market bottomed. So, many people
bought high and then sold low, and 'learned their lesson' that the
market is dangerous. But those who averaged in through the 90's and
continued to buy in through the crash (as we 401(k) investors all do)
didn't see quite the swing, and certainly "didn't lose it all." Just
lost some time that would need to be made up. I had a point somewhere.
Consider your own 'sleep factor' to determine the percent you will
invest in stocks. That was it.
JOE

"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote in message
news:Blp0i.2998$RX.1538[at]newssvr11.news.prodigy.net...
- quote -

Quite the opposite -- that behavior implies that the NAV does not include
dividends once they have been distributed, just like individual stocks. In
other words, if you look at the NAV of a fund that tracks a particular
index, it will be a close approximation to the appropriately weighted
average of the prices of the stocks that constitute that index. Those
prices exclude dividends, which means that the NAV does as well.

Another way to look at it is this: If you buy an S&P 500 index fund, and
the S&P index goes up 10% over the next year, you should expect the NAV of
the fund to go up 10% as well, not 10%+dividends. The dividends are
separate.

Now, I believe (but am not completely certain) that it is the case that the
NAV will actually track the index, and the expenses will cause the dividends
to be slightly smaller than one would expect. But I am quite certain that
the NAV will correspond to the value of the index, not the value of the
index plus dividends.

Jane <googlemail2003[at]yahoo.com> writes:

- quote -

4.8% - very reliable, dependable 4.8% - is quite good. You
need to put returns in context of risks and a risk-free 4.8%
is excellent.

It may not be adequate for long-term investing (ie. funding
one's retirement) but in the long-term, folks often can
take a bit more risk. Short-term, risk-free - it's good.

- quote -

If you're nervous about prices, and think a correction
may be on the horizon, don't put it all in at once.

There's absolutely nothing wrong with letting it sit in
cash while you take your time and figure out what to do -
or while you move it into longer-term positions incrementally.

Instead of investing all of it at once, maybe put 20% of
it into the other funds at a time, putting another chunk
in every couple of months on a regular basis. If the market
just keeps going up, you'll have missed out a bit on the
earlier gains. If it goes down for a bit before resuming
its climb, though, you'll (a) not have lost as much, and
(b) have bought more when cheaper.

Don't rush into something you're not comfortable with,
especially while in the meantime, you're earning a
reliable 4.8%.

Just don't sit on that cash for 30 years...

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

On May 7, 8:53 am, Jane <googlemail2...[at]yahoo.com> wrote:
- quote -

One final question before I do this (God this makes me nervous):

The $275k is currently is a "fixed" fund that is paying 4.8%. It's
been paying this rate for several years. Not very good, but certainly
dependable. Given the high market, is now a good time to put a big
bunch of money into anything that handles stocks or should I wait
until the market corrects?

I've done some checking. While putting my money into the Total Stock
fund and Total Bund fund makes sense, I did see that the Wellesley
fund has had a much higher yield over 10 years than either of the
other two funds.

Vanguard Total Stock fund: 8.6
Vanguard Total Bond fund : 6.08

Wellesley fund: 8.84

Wouldn't this more than make up for the higher expense ratio of the
Wellesley fund or am I looking at this the wrong way?

BreadWithSpam[at]fractious.net wrote:

- quote -

I did understand Andrew's post. He agreed with me that if one compared
the 'price' of the fund vs S&P index, that neither of these counted the
dividends paid during the year. My original reply was just to point out
that the annual returns quoted by these funds will certainly include
dividends and that when one looks at any index, needs to adjust.
(The S&P which is now "near record levels" is now positive since its all
time high when one accounts for dividends).
And now someone, I forget who, will say, that inflation adjusted, it's
not there yet. Agreed.
JOE

"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> writes:

- quote -

Perhaps the earlier poster means that if one *charts* NAVS
the graph will not represent returns adequately due to the
need to do something (typically reinvest) with the dividends.

- quote -

And, of course, charts of NAVs for MMFs and bond funds are
even less useful, in general.

(chart of NAV for a MMF is very very boring. Or, I suppose,
very very exciting...)

Nevertheless, they day before a dividend is paid out,
the NAV does include the accumulated cash with which
that dividend will be paid (and typically, that cash
will have come from dividends generated by the equities
held by the fund). The day after, it won't.

The question is when folks say that NAV represents
or doesn't represent the dividends, well, it's just
not clear what those folks *mean*. There's too much
ambiguity in those partial statements.

It makes it a little more clear if, in context of
talking about funds, we use "distribution" to talk
about the fund's payouts.

And, of course, note that distributions may be
from income, long or short term cap gains, or
even return-of-capital.

And all of that is distinct from dividends accruing
inside the fund due to the funds investments.


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Plain Bread alone for e-mail, thanks. The rest gets trashed.
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Are you posting responses that are easy for others to follow?
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"Andrew Koenig" <ark[at]acm.org> wrote in message
news:j6d0i.629$yM2.603[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

If that were correct, then the NAV would not drop when a fund distributed
its dividends; yet it does.

The only exceptions are MMFs and bond funds that declare dividends daily
(e.g. Fidelity funds). These funds receive interest from their securities,
and credit it daily to their shareholders (who thus accrue it daily). The
funds then pay the accrual out as dividends on a (typically) monthly basis.

It is the same as with a bank deposit that accrues interest daily. You
don't see the balance jump except when the interest is paid monthly.

Equity funds, and many bond funds, are analogous to stocks. As the record
date nears, the price (NAV) of the stock appreciates because the stock
includes rights to that dividend. After the dividend distribution, the
stock (or fund) price drops by the amount of the dividend (plus daily
fluctuation). Unlike the bank account, which doesn't drop in value if you
have the bank send you interest checks.

You are correct that expenses are paid first out of available cash, before
selling securities. In one sense the cash is fungible - whether the cash
came from inflows, idle cash, realized gains, portfolio dividends, or
portfolio interest, the fund has a single pool of cash from which to extract
its expenses.

But a well-managed fund will for tax purposes prioritize the sources of cash
for its expenses. It will take the cash representing the highest taxable
income first. So, it will (or at least should) pay expenses out of
recognized short term gain and nonqualified dividends. Only later should it
dip into revenue that gets preferential tax treatment.

Mark Freeland
BnetOnewsX[at]sbcglobal.net