Do index funds track an index or include the yield?

19 July 2021

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Question by Robin

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?

Answered by Boring Money

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!

Answered by

Boring Money