<quote> Where are my dividends and capital gains?
Dividends and capital gains are automatically reinvested in additional shares of mutual funds or, in the case of annuity options, the underlying funds. These distributions cause the net asset values of the mutual fund or the underlying fund to decline. However, since distributions purchase additional shares, unit values are maintained at their previous levels. </quote>
To me, this is a pretty bogus explaination. As others have pointed out, if you go over to Yahoo and chart a fund's close and "adjusted close" (adjusted for dividends and splits) over time, it's easy to see that the adjusted close has a higher return than the unadjusted close;
So what gives? Is NEF stiffing us out of our dividends? This is, of course, on top of the $6.25 per quarter "contract fee". Even if their explaination is valid, I would feel much better about receiving those dividends and purchasing additional shares. At least then, I wouldn't have this nagging feeling that they're cheating us.
To do a rudimentary comparison, I pulled up the fund performance sheet for my wife's 401k. For the 3-year period ending 3/30/07, their S&P 500 index fund had a return of 8.85%. So I went over to Yahoo and pulled up the following data:
Date Close Adj. Close 3/30/07 130.83 130.83 3/30/04 104.08 98.60
Assuming 4 compounding periods per year, this corresponds to a return of 7.7% and 9.55%, respectively.
I'm going to go out on a limb and guess that NEF's S&P 500 index fund did NOT beat VFINX by 1.15%. Instead, it looks like they're lumping the dividends in with the NAV, but then taking a pretty big slice. The 0.7% difference can be explained by the higher expense ratio (0.6% vs. 0.18%) and different compounding.
Anyway, that's my $0.02 worth.