Vanguard doesn't permit levered or inverse ETF buy orders in IRAs

[jim584672]

I could see if Vanguard said we require you to download the prospectus and click that you read it before we can do the order. But to just outright not permit it is condescending and insulting, like you are too stupid so we will protect you from yourself.

They can make whatever rules they want. And I can find a better fit for a broker.

 

[prudent_one]

I wouldn't get that worked up over it. It's not personal.

 

[RobbieB]

Yup, plenty of competition in the financial services arena, lot's of choices.

 

[OldShooter]

I wonder if this is a harbinger of things to come. With the demise of trading fees, all brokers have a larger number of unprofitable customers and will be looking for ways to shed at least some of them.

Many will probably be frequent, low dollar, traders with small account balances and no other purchases of the house's products.

Maybe VG has determined that traders in these leveraged and inverse products are some of the people they want to lose. Maybe we will also see similar moves by other houses.

 

[FIRE'd@51]

I wonder if this is a harbinger of things to come. With the demise of trading fees, all brokers have a larger number of unprofitable customers and will be looking for ways to shed at least some of them.

Many will probably be frequent, low dollar, traders with small account balances and no other purchases of the house's products.

Maybe VG has determined that traders in these leveraged and inverse products are some of the people they want to lose. Maybe we will also see similar moves by other houses.

I doubt this very much. VG's policy was put into effect well before firms started to aggressively cut their commissions. This policy can be traced back to the massive blow-up of short volatility trades in February of 2018. BTW, it was not primarily small "uninformed" retail traders who lost a lot of money in these trades. It was mainly professionals and sophisticated investors who were long XIV and SVXY to capture the roll yield from the contango in the VIX futures curve, which had been a very profitable trade for a long-time, until the massive VIX spike in February 2018.

 

[jblee2017]

I'd go to TD Ameritrade

Not being able to trade the TQQQ or SQQQ is ridiculous. I have made a decent amount of money in my IRA buying SQQQ calls and would leave any broker who wouldn't let me trade these. As some have noted in this thread - yes they are volatile and you can get burned if not watching your trading but that's an individual choice and should not be made by your broker.

 

[almost there]

Trying to protect account holders.

I am sure that they allow individual stocks, but some of these are actually more volatile and riskier than leveraged but broadbased ETFs.

Look up their fund VGPMX. Was a "precious metal fund" (not really though) until about a year ago.
Owned it for a long time. After 7-8 yrs sold in Jan. Am not too sure protecting account holders is the mission over there..... So happy I got out of VG a few yrs ago. Big and slow does not mean good or safe.

 

[pb4uski]

Look up their fund VGPMX. Was a "precious metal fund" (not really though) until about a year ago.
Owned it for a long time. After 7-8 yrs sold in Jan. Am not too sure protecting account holders is the mission over there..... So happy I got out of VG a few yrs ago. Big and slow does not mean good or safe.

I disagree... IMO there is a huge difference in the volatility of precious metals and levered or inverse ETFs.

See below... Portfolio 1 (blue line) is VGPMX, Portfolio 2 is (red line) TQQQ and Portfolio 3 (mustard line) is SQQQ.

The -11% for VGPMX is due to a bad asset class (if precious metals is even a legitimate asset class)... the others are pure speculation.

Vanguard wants customers who are long-term investors, and is happy to have speculators and traders patronize the traditional brokerage firms. I'm a-ok with that philosophy.

 

[VanWinkle]

I have no problem at all with Vanguard prohibiting or restricting trading for certain stocks and ETFs to protect their customers from themselves (be it customers who are misinformed or customers that fat-finger a ticker symbol).

The needs of the many ourweigh the needs of the few.

And for those who this upsets enough for them to leave Vanguard... don't let the door hit you in the arse on your way out.

+1

 

[REWahoo]

... that's an individual choice and should not be made by your broker.

I don't think Vanguard views itself as a brokerage house - at least not in the traditional sense.

Vanguard wants customers who are long-term investors, and is happy to have speculators and traders patronize the traditional brokerage firms.

Exactly.

 

[almost there]

I disagree... IMO there is a huge difference in the volatility of precious metals and levered or inverse ETFs.

See below... Portfolio 1 (blue line) is VGPMX, Portfolio 2 is (red line) TQQQ and Portfolio 3 (mustard line) is SQQQ.

The -11% for VGPMX is due to a bad asset class (if precious metals is even a legitimate asset class)... the others are pure speculation.

Vanguard wants customers who are long-term investors, and is happy to have speculators and traders patronize the traditional brokerage firms. I'm a-ok with that philosophy.

We do disagree. You did not look into it. It was falsely labeled a precious metals fund. From the beginning. More of a mining fund or something... Held crazy co's. And yes, Gold and silver is a real thing. Did not track any of them. (They all pretty much follow each other) Then when they switched funds held / direction and kept the same name that was too much. Not to mention all the changing of who was running the fund. No problem. If your happy with VG more power to you. Had 20 yrs and that was enough. Am happy to be out.

 

[MRG]

I don't think Vanguard views itself as a brokerage house - at least not in the traditional sense.



Exactly.

+1

They're a mutual fund company that happens to have a brokerage.

 

[OldShooter]

... Vanguard wants customers who are long-term investors, and is happy to have speculators and traders patronize the traditional brokerage firms. I'm a-ok with that philosophy.

My point exactly/post #13 and I, too, am OK with it. In favor of it, actually.

Given that speculators and traders now trade at zero cost, they are free-riding on those of us who do pay fees (mostly fund fees) at VG. It also seems that people here who talk about this kind of trading are often working with tiny amounts of money. To the extent that is the case, the free riding probably doesn't allow VG to make money from them in other ways, like the float on account balances. So, to repeat the insightful comment from @pb4, "don't let the door hit you in the arse on your way out."

 

[almost there]

Agree, they were the 1st low cost in the industry. It's just that the rest of the industry has caught up. And the big advantage's have vanished. Same fee's as everyone else, with fewer investment options. And an outdated stodgy website. All the cheerleading in the world will not change that. Still popular, just not the only game in town as it was 20-30 yrs ago. And no, it did not hit me in the azz, I was moving too fast.

 

[earlyretirement]

I too learned about this after opening a Rollover IRA and a Roth account. Their position seems to be that they believe in buy and hold only . They want you in for the long term and for the upside. Like others have said you can't short in certain accounts, as well as options besides covered calls. Every brokerage that I know of will let you trade inverse ETF's. They trade like stocks and are bought like stocks.

 

[pb4uski]

^^^ The fact that they won't let you trade inverse ETFs isn't a new thing.... it was announced over a year ago.