VBTLX (Total Bond) rate of return versus cost basis discrepancy

[Laserjet3051]

I was just analyzing my VBTLX holding at VG and noticed that my cost basis for this holding is slightly negative (small total loss), however, when examining it's rate of return over the same time period (on VGs "Balances over time" screen), the ROR shows a small positive value. I don't necessarily understand this apparent discrepancy. Could it be due to monthly interest payments being reinvested? And such reinvestments are accounted for in the ROR calculation, but not in the cost basis computation, where the latteronly factors in the price per share, but not the fact that they were "free" (monthly interest payment) shares?

Or is there another explanation?

Thanks in advance.

[secondcor521]

The price of VBTLX has been dropping slightly recently, but it also pays a small (about 2% annually IIRC) dividend.

Let's say you bought $100 worth of VBTLX a year ago at $1 per share.  It has paid $2 in dividends.  But the price has dropped to 99 cents per share.  So you have 102 shares at 99 cents per share so current value is $100.98.

So your cost basis of $102 is higher than the current value of $100.98.  So a small loss.

On an ROR basis, you've put in $100 of your own money and now have something worth $100.98.  So a small gain.

(I know VBTLX's price is higher than $1/$0.99 per share.  Just using small round numbers to illustrate the point.)

[Heckler]

Here's the Canadian version answer.  Still a total bond fund though.

http://canadiancouchpotato.com/2017/04/26/bond-basics-2-why-your-etf-isnt-losing-money/

[Laserjet3051]

Thanks for the explanations. Makes sense.