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Do index funds track an index or include the yield?

Robin | Gloucestershire| 03/09/2018 | 0

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Robin's question in full

I am confused about index funds, e.g. Vanguard Equity fund. Do they track an index or include the yield? In the case of Vanguard, their low cost is attractive but their portfolio is made up of other Vanguard funds. I assume these probably each carry a fee structure - is this correct?

Mark Dampier's Response

Hi Robin,

In the case you mention, the Vanguard Equity fund is an all global equity trust.

This means that it is a fund which invests across the world in passive indices such as the FTSE All Share and the S&P 500. The aim of such funds is capital growth.

There is a yield of 1.65%, however that rolls up as part of the total return. There is no double charging.

Hope this helps!

 

Holly adds:

Index funds can be pretty tricky to understand, so we've written the detailed article 'Index Funds Explained', which might be some help to you Robin.

Good luck!

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Mark Dampier

Mark currently works as Head of Research at Hargreaves Lansdown, and is regarded as one of the best in the profession. He began his career in financial services in 1983, joining Hargreaves Lansdown in 1998. Mark also contributes regularly to The Times and The Telegraph, and writes a weekly column in The Independent.

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