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How do you tell Vanguard, for example, that you just want to take dividends from a bond fund?

If your account is at Vanguard and the fund is in a taxable account, log on to the Vangaurd web site, click on "Account Options", then under "Dividends and Capital Gains" click on "view/change". The next screen shows the list of accounts you have and gives you the option of what you want to change for the dividends and capital gains distributions for each fund you check:

- Reinvest (the default if no election had been made)
- Transfer to a Bank Account
- Transfer to a Vanguard fund
- Mail a check.

Before I moved my funds to Vanguard, I had my funds automatically reinvest dividends and capital gains. When I moved my taxable investments, I decided to have Vanguard deposit the dividends and capital gains in my checking account so I can decide to then direct that money as well as additional money to invest into the fund most lacking according to my asset allocation plan. By having just one monthly purchase, it simplifies tracking of my basis and thus tax calculations, instead of having two monthly transactions (the monthly bond fund distribution and the monthly additional contribution).

I'll be keeping an eye on how well this method goes for a while. If I decide later that it would be better to reinvest, it is really easy to find on Vanguard's web site where to change that.

Note: the election doesn't change dividends that were previously invested (those reinvested dividends are treated by tax law as additional purchases), but it will affect future dividends until a subsequent election is made.
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