Including dividends in the returns

CreditCardChris

The fund I'm invested in at the moment is the Vanguard global all cap which has a "yield as a close 30th April 2020 2.06%" Does this mean from April 30th last year the fund accumulated 2.06% in dividends? So if last year the fund grew by 5%, in reality it grew by 7.06%? When I use a compound interest calculator how can I factor in dividends reinvested into the calculation? 
Thanks.

eskbanker

Surely if you want to factor in reinvestment of dividends into a compounding calculation then the simplest route would just be to measure the Acc version of the fund rather than the Inc?

CreditCardChris

eskbanker said:

Surely if you want to factor in reinvestment of dividends into a compounding calculation then the simplest route would just be to measure the Acc version of the fund rather than the Inc?

I am looking at the acc version and it pays (reinvests) dividends and since April 2020 it was 2.06%. The cumulative return on the fund since October 2016 is 35.67% so how do I figure out how much return that is per year? I can't just do 35.66 / 4 because that's not the effective rate of return. 

dunroving

CreditCardChris said:

eskbanker said:

Surely if you want to factor in reinvestment of dividends into a compounding calculation then the simplest route would just be to measure the Acc version of the fund rather than the Inc?

I am looking at the acc version and it pays (reinvests) dividends and since April 2020 it was 2.06%. The cumulative return on the fund since October 2016 is 35.67% so how do I figure out how much return that is per year? I can't just do 35.66 / 4 because that's not the effective rate of return. 

Could you not use a compound interest calculator to get a general idea? For example, annual interest of 8% would give 36% growth over 4 years ... or is that not what you mean?

Prism

Although you can plug the total return into a formula to get annualised return the easy way for a single fund is to look it up on Morningstar. So that Vanguard fund has a 7.61% annualised return over the last 3 years. If you want to work it out over a non standard date range (like inception of fund) you would need to run it through a calculation. A ballpark way is to use a compound interest calculator and plug different % yearly returns in until the final value looks correct e.g £1000 becomes £1357

eskbanker

CreditCardChris said:

eskbanker said:

Surely if you want to factor in reinvestment of dividends into a compounding calculation then the simplest route would just be to measure the Acc version of the fund rather than the Inc?

I am looking at the acc version and it pays (reinvests) dividends and since April 2020 it was 2.06%. The cumulative return on the fund since October 2016 is 35.67% so how do I figure out how much return that is per year? I can't just do 35.66 / 4 because that's not the effective rate of return. 

Seems like you're conflating two separate issues - if you're looking at the acc figures then dividend reinvestment is already reflected in reported growth, so you can ignore the published yield when measuring your return, as it's included in the overall figure.

As a separate issue, working out a CAGR (compound annual growth rate) from multiple years of growth is readily supported at sites like https://cagrcalculator.net/

dont_look_now

Type

1.357 ^ (1/4)

into a calculator (or search engine), and you get

1.079

The way to interpret that is: multiplying your money by 1.079 (AKA growth of 7.9%) in a year, for 4 consecutive years, will overall multiply your money by 1.079 x 1.079 x 1.079 x 1.079, which is 1.357 (AKA growth of 35.7%).

CreditCardChris

eskbanker said:

CreditCardChris said:

eskbanker said:

Surely if you want to factor in reinvestment of dividends into a compounding calculation then the simplest route would just be to measure the Acc version of the fund rather than the Inc?

I am looking at the acc version and it pays (reinvests) dividends and since April 2020 it was 2.06%. The cumulative return on the fund since October 2016 is 35.67% so how do I figure out how much return that is per year? I can't just do 35.66 / 4 because that's not the effective rate of return. 

Seems like you're conflating two separate issues - if you're looking at the acc figures then dividend reinvestment is already reflected in reported growth, so you can ignore the published yield when measuring your return, as it's included in the overall figure.

As a separate issue, working out a CAGR (compound annual growth rate) from multiple years of growth is readily supported at sites like https://cagrcalculator.net/

Oh right that makes sense, thanks.

83705628

1. Compare the acc fund with inc fund on vanguardinvestor.co.uk. Both fund's started with a unit price of £100 on 8/11/16, acc's unit price is now £139.61, inc's unit price is now £132.06. So since inception (139.61/132.06)-1 = 5.72% of the return has been dividends, or 1.51% annualised. However this data is never as accurate as comparing the raw index itself, because Vanguard take the fund's cost out of dividends and because both fund's constantly reinvest dividends, and then the inc fund sells some at the end of the year to pay out the fund's dividend so it will always be a little out from the "pure cash" dividends that the fund actually receives.

2. Compare the acc and inc fund on trustnet.com (pdf attached) without income re-invested.