Vanguard VLS funds

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  • pinkllama
    pinkllama Posts: 119 Forumite
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    Different saving timeframes?
    I hold Lifestrategy 40, Lifestrategy 80 and VWRL.
    Saving for travelling in 3-4 years.
    Paying off a mortgage in 10 years.
    Pension savings.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    pinkllama wrote: »
    Different saving timeframes?
    I hold Lifestrategy 40, Lifestrategy 80 and VWRL.
    Saving for travelling in 3-4 years.
    Paying off a mortgage in 10 years.
    Pension savings.

    If I was saving for anything in 3-4 years I wouldn't be using funds, I'd be putting regular savings in higher interest regular savings accounts.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    bowlhead99 wrote: »
    Over here, you pick an Income version if you want the income paid out to the cash part of your account (which you could then choose to spend on buying more units of that fund, or another fund, or withdraw it to your bank, or just leave it there a while) ; when the fund goes ex-div the unit price falls and you'll get the cash.

    With the Acc version the income collected from the portfolio of underlying companies is just reinvested back in those underlying companies as they never send you the dividends and the unit price doesn't drop. However, they still track what dividends they would have sent you if you'd opted to receive the divs in cash, so you can pay your taxes on it, because you've still earned it (though not relevant if you're using an ISA or pension wrapper).

    In the US the closest thing to an ISA is the ROTH IRA, but you can only invest $6500 a year max and there are withdrawal restrictions as it's targeted at retirement. So if you want to invest non-retirement money you have to deal with tax. Funds distribute dividends and may times also some capital gains from trading. The investor chooses whether to take the distributions or reinvest. At the end of the year US tax payers have the annual trauma of doing their taxes and the fund company sends forms with the taxable amounts so the investor cane declare them to the tax authorities. If you can keep your total income low enough you can avoid any tax on your capital gains and dividends....and that's what I do.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • pardal51
    pardal51 Posts: 427 Forumite
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    Thank you all for the replies...

    Yes, I am a total noob to investments really. The reason behind was to weigh the funds and and have an average between the three, i.e., "VLS 85"...

    Answering my own question:
    It seems that the retained dividends purchases more shares and therefore increase the value of the fund unit.

    Therefore in theory I hope that after 15+years it will have beaten inflation and returned something....
  • jimjames
    jimjames Posts: 17,621 Forumite
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    pardal51 wrote: »
    Answering my own question:
    It seems that the retained dividends purchases more shares and therefore increase the value of the fund unit. .

    That's not the full picture though. Why did you think the unit price would have dropped from £100 to £90? (even if the calculation on units was wrong)

    Over time business should be making more money so the unit price should have increased over 20 years not dropped
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    TrustyOven wrote: »
    The accumulation fund would not see you buy more shares in the fund, instead your share would increase in value, thus making it look like capital appreciation.
    I think what actually happens is that at ex-div date the Inc fund would drop in value by the dividend percentage that will be taken out of the fund and set aside to be paid out on the dividend date, whereas value of the Acc fund will be unaffected and continue to grow. I was advised that when I previously raised a similar query.
  • TrustyOven
    TrustyOven Posts: 746 Forumite
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    Audaxer wrote: »
    I think what actually happens is that at ex-div date the Inc fund would drop in value by the dividend percentage that will be taken out of the fund and set aside to be paid out on the dividend date, whereas value of the Acc fund will be unaffected and continue to grow. I was advised that when I previously raised a similar query.

    Could you use that to your advantage by making purchases just after the ex-div date to get cheaper units?
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  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    TrustyOven wrote: »
    Could you use that to your advantage by making purchases just after the ex-div date to get cheaper units?
    You would probably get cheaper units on the Inc fund, but you would just miss out on the dividend that you would have got in you had bought them before the ex-div date, so I don't really think you gain any advantage. It would make no differences for purchases of the Acc fund.
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