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Re: Screw-up at Vanguard
Old 01-07-2007, 07:07 AM   #21
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Re: Screw-up at Vanguard

Quote:
Originally Posted by saluki9
1. I made a 100% factual statement, not a judgement of fault

2. Funds do incur costs when people sell them, that is why they charge early redemption fees. These fees are paid to the other shareholders because they are the ones that take the hit.


3. I wasn't aware that being old made you an investment expert

4. I've worked for a fund company in settlement, and the trading desk. How many mutual fund companies have you worked for? (Not Vanguard, but a large Chicago based company with a nautical theme) On top of that, my dayjob is running a nine figure aggregate series of portfolios. So yes, I probably could tell you something about bank transfers and settlement procedures.


First off... it was a screw up... and he contacted them in less than a day when he found out...

Most every firm will reverse a screw up...

The cost to the fund for TRADING is CHEAP for the few thousand you are talking about... this would not even be a rounding error to them to reverse... NOBODY could tell the difference

If you work in the industry, then you know that there is a lot of cash laying around in any fund... they would not have invested 'his' money within a day... it just does not happen.... ever... Now, if you are talking a million dollar deposit... then maybe it would have been invested, but more than likely it would be in overnight paper...

What they are trying to discourage is the 'hot money' that comes in for a short while and then leaves... this could be millions of dollars chasing the return.. and when they leave you have to sell stock to pay them off.... which means capital gains to the ones sticking around.... so it is there to help their return...

But, I doubt that there is much money in this either.... I just don't see a lot of people losing that one percent.... maybe someone will take a look and see how much the fund 'made' on this fee?
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Re: Screw-up at Vanguard
Old 01-07-2007, 07:15 AM   #22
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Re: Screw-up at Vanguard

Quote:
Originally Posted by Texas Proud

First off... it was a screw up... and he contacted them in less than a day when he found out...

Most every firm will reverse a screw up...

The cost to the fund for TRADING is CHEAP for the few thousand you are talking about... this would not even be a rounding error to them to reverse... NOBODY could tell the difference

If you work in the industry, then you know that there is a lot of cash laying around in any fund... they would not have invested 'his' money within a day... it just does not happen.... ever... Now, if you are talking a million dollar deposit... then maybe it would have been invested, but more than likely it would be in overnight paper...

What they are trying to discourage is the 'hot money' that comes in for a short while and then leaves... this could be millions of dollars chasing the return.. and when they leave you have to sell stock to pay them off.... which means capital gains to the ones sticking around.... so it is there to help their return...

But, I doubt that there is much money in this either.... I just don't see a lot of people losing that one percent.... maybe someone will take a look and see how much the fund 'made' on this fee?
I agree, most firms will eat the cost of a screw up. In the future the OP should let the trades settle into a MM account and not try to batch them up. When you do that you're messing with two different systems who don't always share the same priorities, hours, or holidays.

Concerning the cost. While in total the cost to the fund would be minimal, as a % of the amount deposited it does vary. If the fund was a small cap or high yield fund the total round trip trading expenses could (and would most likely) exceed 1% on the money invested. Of course because most trading costs are not explicit, shareholderd will never know. IT sounds like this was Vanguards fault, so they should reimburse the fund.



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Re: Screw-up at Vanguard
Old 01-13-2007, 01:12 PM   #23
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Re: Screw-up at Vanguard

Well, it took a week but Vanguard reversed all the transactions and then put them through as they were supposed to be as of Jan 3. No extra fees were assessed.

The lessons learned here are...make sure one transaction is settled before starting another one on the same fund. Or use a MMF as an intermediary step as others have suggested. And ALWAYS save the confirmation number.
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Re: Screw-up at Vanguard
Old 01-13-2007, 02:34 PM   #24
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Re: Screw-up at Vanguard

Quote:
Originally Posted by soupcxan
Well, it took a week but Vanguard reversed all the transactions and then put them through as they were supposed to be as of Jan 3. No extra fees were assessed.

The lessons learned here are...make sure one transaction is settled before starting another one on the same fund. Or use a MMF as an intermediary step as others have suggested. And ALWAYS save the confirmation number.
Glad to hear this.... and what was expected....

AND YES.... FOR PEOPLE WHO MIGHT READ THIS... read the lesson learned. If you want to empty out an account, move 100% to only one account, such as MM or so and THEN do your final move as dollar amounts, not percentages...
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Re: Screw-up at Vanguard
Old 01-13-2007, 04:10 PM   #25
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Re: Screw-up at Vanguard

Quote:
Originally Posted by soupcxan

The lessons learned here are...make sure one transaction is settled before starting another one on the same fund. Or use a MMF as an intermediary step as others have suggested. And ALWAYS save the confirmation number.
Yep, it will save people a big hassle in the future

Glad to hear you got this worked out

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Re: Screw-up at Vanguard
Old 01-13-2007, 11:48 PM   #26
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Re: Screw-up at Vanguard

I had a similar goof-up while rebalancing a couple of years ago and wound up overbuying REIT index to the tune of 3% of my portfolio. In the process of balancing I was moving money from multiple funds to multiple funds online in the same trading day.

I looked at what I had done and decided it was my fault and that the 3% (of port, or 30% of fund) overbuy was tolerable for the year of the redemption fee.

Next time I'll be more careful when rebalancing and probably space trades over several days.
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Re: Screw-up at Vanguard
Old 01-14-2007, 05:56 AM   #27
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Re: Screw-up at Vanguard

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Originally Posted by BigMoneyJim
I had a similar goof-up while rebalancing a couple of years ago and wound up overbuying REIT index to the tune of 3% of my portfolio.
Hindsight is perfect I suppose, but it's too bad you didn't just leave that money in the REIT fund
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Re: Screw-up at Vanguard
Old 01-14-2007, 08:02 AM   #28
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Re: Screw-up at Vanguard

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Originally Posted by KM
FWIW - I always try to do one transaction at a time for this type of stuff - just for this reason. I want to be sure the first one is complete before I start the next one.
I always take the same precaution, after several screw-ups years ago.
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Re: Screw-up at Vanguard
Old 01-14-2007, 11:56 AM   #29
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Re: Screw-up at Vanguard

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Originally Posted by saluki9
Hindsight is perfect I suppose, but it's too bad you didn't just leave that money in the REIT fund
Actually I did. It worked out great. For the amount it was off I decided I'd rather have that than pay the redemption fee. REIT went nuts, so 3% of my portfolio did much better than it was "supposed" to. I hope all my mistakes work out as well!
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Re: Screw-up at Vanguard
Old 01-14-2007, 12:54 PM   #30
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Re: Screw-up at Vanguard

I don't completely agree with everyone saying that you should not expect the transactions to be processed in the same order that you entered them. I work in software development and one of the things we take great pains to do is to process any and all financial type transactions in the order they were entered (based on date/time stamps) exactly for this reason.

Vanguard may have a flaw in their system, based on the types of transactions or whatever. I would be very surprised (and disappointed) if, once they looked into the transactions and validated the order they were entered, they did not make the appropriate adjustments to ensure the correct order of processing - unless there is something published to the contrary (i.e internal transaction will always take place first.)
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Re: Screw-up at Vanguard
Old 01-14-2007, 02:13 PM   #31
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Re: Screw-up at Vanguard

Quote:
Originally Posted by KM
I don't completely agree with everyone saying that you should not expect the transactions to be processed in the same order that you entered them. I work in software development and one of the things we take great pains to do is to process any and all financial type transactions in the order they were entered (based on date/time stamps) exactly for this reason.

Vanguard may have a flaw in their system, based on the types of transactions or whatever. I would be very surprised (and disappointed) if, once they looked into the transactions and validated the order they were entered, they did not make the appropriate adjustments to ensure the correct order of processing - unless there is something published to the contrary (i.e internal transaction will always take place first.)

You might not be understanding what the problem can be or how I feel about it... I DO expect them to do the orders in the order given... but there is a lot of potential 'problems' if they don't....

And this is usually when you say move $5,000 to this, another $10,000 to this, 25% to this other and then 100% to the last one...

If I had $115,000... I would expect the first one to reduce it to $110,000.. then the second to $100,000... the third to $75,000 and then the last move the rest of the $75,000 to the final account... but who knows what the software says They might take the 25% from the $115,000 and then I am screwed on the $75,000 transfer...

So, to make it EASY, do only $$$$ transfers and you will not have a problem..
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Re: Screw-up at Vanguard
Old 01-14-2007, 05:06 PM   #32
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Re: Screw-up at Vanguard

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So, to make it EASY, do only $$$$ transfers and you will not have a problem..
The problem is, you can't always do exact dollar amount transfers, such as in my case - when I was closing out a fund. First, because the transfer is based on the day's closing fund balance (which you can't predict), you would never be able to precisely split up the $ amounts. For example, your fund is worth $100 as of today's closing price. So you tell it to send $50 to A and $50 to B. But your transaction will run after the fund has closed at tomorrow'sprice, and let's say it's now worth $101. So you still have loose change hanging around.

The second problem is if you are closing out a bond or MM fund that pays pro-rated interest that's set to automatically re-invest. When you tell Vanguard to sell/exchange the last portion of that fund, they automatically include the month-to-date interest earned in your transfer. If you tried to allocate this by $ amount, you could never accurately predict what the amount would be, and so again you would be left with loose change in that fund.

In theory your suggestion is sound, but can't always be practiced in the real world.
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Re: Screw-up at Vanguard
Old 01-15-2007, 12:14 AM   #33
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Re: Screw-up at Vanguard

Soup...

You are right... but, in an earlier post I had said to move 100% to another fund such as MM or ST bond and then move it to the funds you want... since you would have closed out your account with only one movement it would be empty... then you move the actually dollars from the other.. who cares if there is an extra tail hanging around then as it is in an open account...

Yes, it is a two step process, but you can not get into trouble doing it this way..
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