According to yahoo finance, Vanguard's Dividend Growth Fund does not appear to have dividend growth. Why is that?
I think you are mixing up forward looking statements with the actual results. The funds objective   The fund invests primarily in stocks that tend to offer current dividends. It focuses on high-quality companies that have prospects for long-term total returns as a result of their ability to grow earnings and their willingness to increase dividends over time Obviously in 1993 quite a few companies paid the dividends and hence VDIGX was able to give dividends. Over the period of years in some years its given more and in some years less. For example the Year 2000 it gave $ 1.26, 1999 it gave $ 1.71 and in 1998 it gave $ 1.87 The current economic conditions are such that companies are not making huge profts and the one's that are making prefer not to distribute dividends and hold on to cash as it would help survive the current economic conditions. So just to clarify this particular funds objective is to invest in companies that would give dividends which is then passed on to fund holders. This fund does not sell appreciated stocks to convert it into dividends.
If you are looking for an index index fund, I know vanguard offers their Star fund which invests in 11 other funds of theirs and is diversified across stocks, bonds, and short term investments. A lot of people use dividend stocks as a regular income, which is why dividend stocks are often associated with retirement. If your goal is growth and you're reinvesting capital gains and dividends then investing growth stocks or dividend stocks should have the same effect. The only difference would be if you are manually reinvesting dividends, which could incur extra trading fees. ... can someone explain to me why vanguard of all companies would be asking for this? If they're a company based on broad index funds, then whether or not exxon or Chevron or whoever else has climate change risk is irrelevant to that model, right? Vanguard has low cost ETFs that track the S&P 500. The ticker is VOO, its expense ratio is 0.05%, which is pretty low compared to others in the market. Someone correct me if I'm wrong, but you won't have to pay tax on the dividends if it's in a retirement account such as a Traditional(pay taxes when you withdraw) or Roth IRA(pay income/federal/fica etc, but no taxes on withdrawal)... Technically, the difference between dividends and growth ought to be that dividends can be reinvested in stocks other than the one that paid them, which is a definite advantage if you actually have a strategy.  Dividend -paying stocks used to be preferred for exactly that reason, back in the days when fewer people were directly playing in the market and more knew what they were doing. Unfortunately,  getting a periodic dividend from a stock whose price is relatively steady isn't as exciting a game as watching your stock's value bounce around and (hopefully)  creep upward on a second-by-second basis. Those who are thinking in gambling terms rather than investment terms -- or who think they can beat the pros at high frequency trading, comment withheld -- want the latter, and have been putting a lot of pressure on companies to operate in the latter mode. That doesn't make it better -- certainly not for the longer-term investors -- just more fashionable. And fashion often means getting stuck with something impractical because everyone else is doing it. On this, I second Scrooge:  Humbug! "How is that possible?? The mutual fund doesn't pay taxes and passes along the tax bill to shareholders via distributions would be the short answer. Your basis likely changed as now you have bought more shares. But I gained absolutely nothing from my dividend, so how is it   taxable? The fund has either realized capital gains, dividends, interest or some other form of income that it has to pass along to shareholders as the fund doesn't pay taxes itself. Did I get screwed the first year because I bought into the fund too   late in the year? Perhaps if you don't notice that your cost basis has changed here so that you'll have lower taxes when you sell your shares.  Is anyone familiar with what causes this kind of situation of   receiving a ""taxable dividend"" that doesn't actually increase the   account balance? Yes, I am rather familiar with this. The point to understand is that the fund doesn't pay taxes itself but passes this along. The shareholders that hold funds in tax-advantaged accounts like 401ks and IRAs still get the distribution but are shielded from paying taxes on those gains at that point at time. Is it because I bought too late in the year?  No, it is because you didn't know the fund would have a distribution of that size that year. Some funds can have negative returns yet still have a capital gains distribution if the fund experiences enough redemptions that the fund had to sell appreciated shares in a security. This is part of the risk in having stock funds in taxable accounts. Or is it because the fund had a negative return that year?  No, it is because you don't understand how mutual funds and taxes work along with what distribution schedule the fund had. Do I wait until after the distribution date this year to buy? I'd likely consider it for taxable accounts yes. However, if you are buying in a tax-advantaged account then there isn't that same issue." At 19 years old you can and should be investing to see your money grow over the years. Reinvesting the dividends does get to be pretty significant because they compound over many years. Historically this dividend compounding accounts for about half of the total gains from stocks. At 70 years old I am not investing to see my money grow, although that's nice. I am investing to eat. I live on the dividends, and they tend to come in fairly reliably even as the market bounces up and down. For stocks selected with this in mind I get about 4% per year from the dividends. "Sure, it doesn't, but realistically they can't/shouldn't do anything about it in their index funds, because then they're just another stock picker, trying to gauge which companies are going to do best.  Their funds not all being indexes is what I was getting at with my original question. How much leeway do they have in their definitions of other funds? IE, if they had a dividend fund that included all large cap dividend paying stocks above 3% yield, they couldn't take out Shell just because of climate risk without fundamentally changing what the fund is. But if it's just ""income fund"" then they can do whatever in that space." Not better companies, they pick the largest market cap companies which isn't guaranteed to be the best. If they were so much better than there would be a much bigger difference between the S&amp;P 500 and the vanguard total stock market fund:   http://quotes.morningstar.com/chart/fund/chart?t=VTSMX&amp;region=usa&amp;culture=en-US  But as you can see above there is barely any difference in the gains between S&amp;P and the total stock market fund and seems to do better than the S&P 500 too. No, that's not true. In fact, this fund is somewhere between S&P500 and the NASDAQ Composite indexes wrt to performance. From my experience (I have it too), it seems to fall almost in the middle between SPY and QQQ in daily moves. So it does provide diversification, but you're basically diversifying between various indexes. The cost is the higher expense ratios (compare VTI to VOO). "The S&P 500 index from 1974 to present certainly looks exponential to me (1974 is the earliest data Google has).  If you read Jeremy Siegel's book there are 200 year stock graphs and the exponential nature of returns on stocks is even more evident.  This graph only shows the index value and does not include the dividends that the index has been paying all these years.  There is no doubt stocks have grown exponentially (aka have grown with compound interest) for the past several decades and compounded returns is definitely not a ""myth"".  The CAGR on the S&P 500 index from 1974 to present has been 7.54%: (1,783 / 97.27) ^ (1 / 40) - 1 Here is another way to think about compounded investment growth: when you use cash flow from investments (dividends, capital gains) to purchase more investments with a positive growth rate, the investment portfolio will grow exponentially.  If you own a $100 stock that pays 10% dividends per year and spend the dividends every year without reinvesting them, then the investment portfolio will still be worth $100 after 40 years.  If the dividends are reinvested, the investment portfolio will be worth $4,525 after 40 years from the many years of exponential growth: 100*(1 + 10%)^40" Look at their dividend history.  The chart there is simply reporting the most recent dividend (or a recent time period, in any event).  GF for example: http://www.nasdaq.com/symbol/gf/dividend-history It's had basically two significant dividends and a bunch of small dividends.  Past performance is not indicative of future returns and all that.  It might never have a similar dividend again. What you're basically looking at with that chart is a list of recently well-performing funds - funds who had a good year.  They obviously may or may not have such a good year next year. You also have funds that are dividend-heavy (intended explicitly to return significant dividends).  Those may return large dividends, but could still fall in value significantly.  Look at ACP for example: it's currently trading near it's 2-year low.  You got a nice dividend, but the price dropped quite a bit, so you lost a chunk of that money.  (I don't know if ACP is a dividend-heavy fund, but it looks like it might be.) GF's chart is also indicative of something interesting: it fell off a cliff right after it gave its dividend (at the end of the year).  Dropped $4.  I think that's because this is a mutual fund priced based on the NAV of its holdings - so it dividended some of those holdings, which dropped the share price (and the NAV of the fund) by that amount.  IE, $18 a share, $4 a share dividend, so after that $14 a share.  (The rest of the dividends are from stock holdings which pay dividends themselves, if I understand properly).  Has a similar drop in Dec 2013.  They may simply be trying to keep the price of the fund in the ~$15 a share range; I suspect (but don't know) that some funds have in their charter a requirement to stay in a particular range and dividend excess value. Avoiding the complexities of tax [dividends likely taxed the year they are received, barring special tax accounts which many countries implement in for example, locked-in retirement type accounts; share growth is likely only taxed when sold / on death / on expatriation / similar], and assuming you reinvest the dividends every year in new shares, then yes, total growth in your account is the same whether that growth is comprised of entirely dividends, entirely share increase, or a mixture of both. It is those caveats (tax + reinvestment) which could change things. "i know that hedge funds shouldn't be compared with index funds. they do different things. they serve different functions. but when the headline is they are reporting big gains, and then they report that ""Ken Griffin’s main Wellington and Kensington funds at Citadel rose almost 7 percent."" YTD, and ""Andreas Halvorsen’s Viking and an equity-focused quantitative fund at Renaissance are up more than 9 percent this year through July"" as reporting ""Big Gains"" it's a little silly when an index fund like SCHB is up 10.7% YTD with an ER of 0.03." Interesting to me.  Index funds are known for hurting active management. Fund flows have been toward index funds, not active funds.  But apparently S&amp;P and MSCI are making hundreds of millions just by licensing out the names of their most popular funds.  Vanguard also had a sweetheart deal at one time:  &gt; Index funds weren't always a big business, and S&amp;P didn't always know just how valuable the indexes it owned really were. Before the first ETF ever hit the market, S&amp;P agreed to a perpetual license with Vanguard that entitled the index owner to a maximum annual fee of $50,000 from Vanguard's premier index mutual fund, the Vanguard 500 Index Fund.  &gt;As Vanguard popularized the index fund, S&amp;P began to realize just how much it had left on the table. By 2001, the Vanguard fund had $90 billion in assets  &gt; To this day, Vanguard's premier S&amp;P 500 index fund is reportedly operating under its perpetual license, paying just $50,000 per year to S&amp;P Global, but subsequent funds based on S&amp;P's indexes are likely paying full freight. For S&amp;P, it was a very costly lesson to learn.