Money Market funds

pbcpdeveloper

Received my first MMF Dividend in my Vanguard account today.

plumb1_2

No reply from the secure message, but received the dividend.

pbcpdeveloper

plumb1_2 said:

L9XSS said:

Can I ask what dividend it returned for your 40k? (Was it close to 4%).

Tbh, i can’t realistically tell you as I’ve been adding to it almost weekly , and over£50k in it now. 

Any spare money for the next few week/months I going to put into my isa.

It's a dividend not interest so this doesn't matter, it simply calculated from the amount of money you have put in (£1 per unit) and held at 31st March.

The dividend was 0.003525 so if £50k held at 31st March:

The dividend you should have received:

50,000 * 0.003525 = 176.25.  

% Return:

((176.25 / 50,000)*100)*12 = 4.23%

Which obviously doesn't include costs.

GeoffTF

pbcpdeveloper said:

plumb1_2 said:

L9XSS said:

Can I ask what dividend it returned for your 40k? (Was it close to 4%).

Tbh, i can’t realistically tell you as I’ve been adding to it almost weekly , and over£50k in it now. 

Any spare money for the next few week/months I going to put into my isa.

It's a dividend not interest so this doesn't matter, it simply calculated from the amount of money you have put in (£1 per unit) and held at 31st March.

The dividend was 0.003525 so if £50k held at 31st March:

The dividend you should have received:

50,000 * 0.003525 = 176.25.  

% Return:

((176.25 / 50,000)*100)*12 = 4.23%

Which obviously doesn't include costs.

It will not have been bought at £1 per unit, and the monthly interest payments compound. There will also have been a capital gain, or much more likely a capital loss. If the fund is held outside a tax shelter, there will also be equalisation.

pbcpdeveloper

The price cycles monthly from cira 0.9995 to 1.0029, depending on the number of days in the month, so there won't be a capital gain or loss.

It's a non-accumulating dividend payment, not interest, so there is no compounding unless you add them back in yourself.

Mines held in an ISA, and the dividend payment I received matches the calculation.

This is the Vanguard Sterling Short Tem Money Market Fund,so we may being talking about different things.

masonic

pbcpdeveloper said:

It's a non-accumulating dividend payment, not interest, so there is no compounding unless you add them back in yourself.

From the fund's prospectus (page 42):

Distributions from open ended money market funds (or ETFs) will always be interest distributions, as they will never hold a sufficient quantity of equities or other asset classes to make dividend distributions.

As you are only holding in an ISA, this is of no consequence to you, but anyone holding unwrapped needs to understand this.

plumb1_2

I’ve received a reply from vanguard, they simply state they need upto 10 days to pay the dividend ( they call it a dividend).
Received £180.84. Which is in a tax shelter.

GeoffTF

pbcpdeveloper said:

The price cycles monthly from cira 0.9995 to 1.0029, depending on the number of days in the month, so there won't be a capital gain or loss.

If you look at the graph closely, you will find that the peak and trough are not always exactly the same, so there will be a capital gain or loss between successive ex-dividends. You need to account for that.

pbcpdeveloper

masonic said:

pbcpdeveloper said:

It's a non-accumulating dividend payment, not interest, so there is no compounding unless you add them back in yourself.

From the fund's prospectus (page 42):

Distributions from open ended money market funds (or ETFs) will always be interest distributions, as they will never hold a sufficient quantity of equities or other asset classes to make dividend distributions.

As you are only holding in an ISA, this is of no consequence to you, but anyone holding unwrapped needs to understand this.

Fair enough, but the point was made about allowances for compounding interest, which doesn't apply.

pbcpdeveloper

GeoffTF said:

pbcpdeveloper said:

The price cycles monthly from cira 0.9995 to 1.0029, depending on the number of days in the month, so there won't be a capital gain or loss.

If you look at the graph closely, you will find that the peak and trough are not always exactly the same, so there will be a capital gain or loss between successive ex-dividends. You need to account for that.

Fair enough, I thought you were viewing it as a ordinary fund/share price.