If you have money in an annuity that is invested in a Mutual Fund and you don’t receive dividend distributions because it is in an annuity account, how does the dividend distributions of the invested stocks in that Mutual Fund get put back into the annuity account in that Mutual Fund? Is it done on a monthy basis, a yearly basis, a quarterly basis or is it done at the time of a stock’s dividend distribution whether it be monthly or quarterly? So once an individual stock declares a dividend and the Mutual Fund has that as an investment with x amount of shares and so much a share, then is that money then distributed to the Mutual Fund holders immediately per customer account by % holdings in that Mutual Fund at that time?
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sgasner 7:04 am on October 31, 2009 Permalink
Each mutual fund will pay dividends based on their own schedule. Some will only do it once a year, just before Christmas, others quarterly. Those used by the retired may pay monthly, so that their investors can use the dividends as income. You can check an individual fund’s prior pattern right her on yahoo. just go to finance.yahoo.com and put the fund symbol in the box on the top left (I used VGSIX). Then on the left hand side, choose the "historical prices" link. You will get a list of historical closing prices for each day of trading, as well as additional entries for dividends. You can slect the button for "dividends only" and filter out all of the entries besides the dividends. You will notice that VGSIX pays quarterly.
Funds may or may not distribute dividends they receive from stocks in efforts to effect amounts of taxable income to their investors.
jebediabartlett 7:04 am on October 31, 2009 Permalink
With most mutual funds, the dividends that come in all year are just added into the NAV of the fund..( the share price)…once a year( sometimes twice) the fund will " distribute" gains , but in almost all funds these gains are re-invested in the fund…check your quarterly reports back a year or so…somewhere along the line you should have picked up a few more shares.
That "distribution" usually occurs in December ( if that helps you find it)….also the NAV may have had a substantial price drop at that point…( the price is lowered- but you have a few more shares.. usually the actual balance in the account will increase or decrease just slightly)
Hope you find it…if I understood your question.
Josh 7:04 am on October 31, 2009 Permalink
Your variable annuity accumulates dividends as they are paid out by the mutual funds that you hold, as the mutual funds distribute them. Dividends are treated no differently than any other type of interest in a variable annuity, since it is tax-deferred.
You don’t get to see dividends quite the same way as you would with a stock or mutual fund held outside of an annuity, where you could elect to have any dividends paid to you directly. Dividends are nearly always automatically reinvested in variable annuities.
Dividends and what they really represent are one of the single most common misconceptions held by individual investors. Most people think when a stock pays a dividend, they are making money. I have clients all the time who think they will miss out on a dividend if they liquidate a stock shortly before it is due to pay out a dividend. Of course, that is far from the case. When a company pays a dividend, whatever the dividend amount is, it reduces the value of the shares by that same exact amount. In other words, you’re just cashing out a small piece of the investment every time a dividend is paid. So, for instance, if company XYZ pays a $1.00 quarterly dividend, on the same day it pays out the dividend the stock price falls by $1.00. You have just turned that $1.00 per share into a cash position, but have not earned anything in the process. Growth is strictly measured by the gains in the price of the stock, taking into account dividends. So, if that same company XYZ shares began the year at $30/share, finished the year at $28/share and paid $1.00 quarterly dividends (13.3% annual dividend yield based on $30/share price), you would have cashed out $4 of equity, but the net gain would have only been $2 for the year or 6.6% total growth ($2/$30 share price).
V.Prasanna K 7:04 am on October 31, 2009 Permalink
Hi,
Dont confuse with the dividend delcared by share companies with the dividend declared by mutual funds…
i.e. there is no direct relationship with the dividends delcared by the share companies which hold by mutual funds.
Mutual Funds on their performance they can declare their own dividends…. like share companies…..
Some MF’s are delcaring dividends once in 15 days also but all depends on scheme to scheme and Fund Manager to Fund Manager
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