Screw-up at Vanguard

[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. 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.

 

[saluki9]

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

 

[CyclingInvestor]

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.

 

[BigMoneyJim]

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!

 

[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.)

 

[Texas Proud]

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..

 

[soupcxan]

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.

 

[Texas Proud]

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..