Vanguard gave money this year. Did you miss me?

A man smiles as he looks at the dividend distributions. Vanguard recently announced the estimated additional distributions it will pay to shareholders in March 2022.

Investors with Vanguard mutual funds in their portfolios are set to receive some extra cash later this month.

The company announced Friday that additional distributions of capital gains and dividends will be paid to shareholders of 34 different Vanguard mutual funds. Additional distributions are planned for later in March after capital gains and taxable income realized last year exceeded those paid out to shareholders in December. These supplemental distributions range from as little as 0.02% of net asset value (NAV) for bond funds to 3.60% for a pair of Vanguard healthcare funds.

For help choosing and managing your mutual funds, consider working with a financial advisor. Find a trusted trust advisor today.

What is Mutual Fund Distribution?

A man does some math on a calculator while looking at his portfolio.  Vanguard recently announced the estimated additional distributions it will pay to shareholders in March 2022.

A man does some math on a calculator while looking at his portfolio. Vanguard recently announced the estimated additional distributions it will pay to shareholders in March 2022.

A distribution is interest, capital gains, or dividends paid by an issuer of a particular security to its investors. For mutual funds, distributions come from the net profit of assets sold by a fund, as well as any dividends or interest that a fund regularly pays to its shareholders.

While dividends are usually paid to shareholders on a quarterly basis, some companies pay dividends monthly or semi-annually. The net capital gains made by a particular fund during a year are usually distributed to shareholders towards the end of each year. Vanguard, for example, made its 2021 year-end distributions in late December and early January.

Because capital gains and dividends are passed on to shareholders, it is the shareholders’ responsibility to report these gains as income and pay the required taxes due, even if the money is reinvested in the fund. It is important to remember that capital gains are taxed as ordinary income if the fund has held the underlying asset for less than a year. Lower long-term capital gains tax rates apply to assets held for more than one year before sale. Dividends and interest are subject to ordinary income tax rates.

To determine whether you are in line to receive a capital gains and/or dividend distribution, you should consider a fund’s registration date: the specific date used to determine who is eligible to receive a distribution. Investors holding shares as of that date will receive capital gains and/or dividend payments the next time they are distributed. The ex-dividend date, on the other hand, is the day the per-share distribution is deducted from the fund’s NAV. This usually happens on the next business day after the registration date. The payout date, as the name suggests, is the day when capital gains and dividends are paid to shareholders.

What to Expect If You Own Vanguard Funds

A man looks at recent dividend distributions.  Vanguard recently announced the estimated additional distributions it will pay to shareholders in March 2022.

A man looks at recent dividend distributions. Vanguard recently announced the estimated additional distributions it will pay to shareholders in March 2022.

On Friday, Vanguard announced the estimated supplemental distributions that 34 of its funds would pay to shareholders later this month. These additional distributions are necessary since the taxable income and/or capital gains realized for 2021 exceed what was paid to investors in December.

Vanguard’s Health Care Admiral ( VGHAX ) and Health Care Investor ( VGHCX ) funds will pay distributions of $3.20 and $7.58, respectively, or 3.60% of each fund’s net asset value. As a result, an investor with 100 shares of VGHAX will receive approximately $320 on March 29, while 100 shares of VGHCX will result in an additional $758 on the same day.

The announcement of the supplemental distributions comes less than a month after the firm announced it was cutting expense ratios for 18 mutual funds and exchange-traded funds (ETFs). The move, Vanguard said, will result in $1 billion in savings for shareholders.

Here’s a look at other Vanguard funds that will pay the largest estimated distributions this month:

  • Institutional Total Stock Market Index Institutional: $2.48 (3.10% of MSRP)

  • Institutional Total Stock Index Institutional Plus: $2.48 (3.10% of MSRP)

  • Institutional Plus Index: $2.06 (0.55 NAV)

  • Dividend increase: $0.96 (2.55% of MSRP)

  • Balanced Index Admiral: $.20 (0.43% of NAV)

  • Balanced Index Institutional: $.20 (0.43% of NAV)

  • Balanced Index Investor: $.20 (0.43% of NAV)

  • Managed Allocation Fund: $0.17 (0.89% of MSRP)

Conclusion

Vanguard shareholders got some good news on Friday when the firm announced the estimated supplemental distributions that 34 of its funds would pay to shareholders. The payouts, which include the capital gains and dividends a fund produced in 2021, are on top of what the company paid out to shareholders in December 2021. A pair of Vanguard funds that invest in health care produced the biggest capital gains for investors: $3.20 and $7.58 per share.

Tips for Investing in Mutual Funds

  • A financial advisor can help you build a portfolio of mutual funds and ETFs that aligns with your financial and investment goals. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • When evaluating mutual funds or ETFs, don’t just consider the fund’s past performance. A fund’s expense ratio, the fees and expenses charged to investors, can have a significant impact on your performance. The lower these fees, expressed as a percentage, the more money you save in the long run.

  • Planning for the future often requires projections. Calculate how your money will grow over time with SmartAsset’s investment calculator.

Photo Source: ©iStock.com/svetikd, ©iStock.com/Jirapong Manustrong, ©iStock.com/miniseries

The post See Who’s Getting Extra Income From Vanguard This Month appeared first on SmartAsset Blog.

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