Vanguard and investment rules

[Lusitan]

So, not that I'm a dirty market timer or anything, but if I needed to adjust my asset allocation by purchasing additional shares in some of my Vanguard equity mutual funds, what's the deal with rules on share price?

E.g. if I make a transaction tonight, what share price do I get - tomorrow's closing price? And if I make a transaction at, say, 3pm tomorrow, what share price do I get?

I know I saw this information on Vanguard's website before, but (surprise) now that I'm interested in it, I can't find it.

Just curious ... I'm still on the fence, but it'd be nice to know what price I will be buying into this market at ...

 

[Urchina]

Lusitan,

Can't answer your question, but have another one for you -- is this your regularly-scheduled, yearly AA rebalance? If not, why not wait?

 

[cute fuzzy bunny]

You should get tomorrows closing price whether you order tonight or early tomorrow. Check the funds trading rules to see what the cutoff time is.

For some reason, it seems to me that it takes TWO days for them to settle a trade made even before the trading deadline. Its never really worked out hugely for or against my favor, so I never looked into it...but it does seem to me that when I've made a fund purchase its not settled at the COB like its supposed to be.

 

[W2R]

Last time I bought a Vanguard fund, I copied this from their webiste:

Your Vanguard fund exchange will be processed using the closing share price on the business day on which Vanguard receives your request. Requests received after the close of the New York Stock Exchange (usually 4 p.m., Eastern time) will be processed using the next business day's closing price. Your Vanguard account balance will reflect the exchange the day after it's processed.

Of course, this is an exchange of Vanguard MM funds for a Vanguard equity fund. If you have to upload the money from your bank, that takes longer. Hope this helps.

 

[cute fuzzy bunny]

Ah, so my perception that it didnt hit my account for 2 days was right. They make the buy on the same day if its <4pm, but dont credit until a day after the processing is done.

So if you buy now, you'll get tomorrows closing price and see the money show up on the web site on wednesday. If you buy tomorrow at 5pm, you'll get wednesdays close and see it show up on thursday.

 

[Lusitan]

Thanks Want2 ... I remember reading that now.

I don't have a set annual rebalance, but this was actually for my 2008 IRA which I had not started DCA'ing into yet. In the long run it won't mean much I know, but with the bumpy ride we're in for, I was just curious. I made speed up or slow down my DCA'ing into the IRA (since it's not on autopilot like to 401K) depending on what's happening in the market any given day, but my overall asset allocation is staying pretty much the same.

 

[W2R]

You're welcome, Lusitan... and Bunny, their timing was a source of constant confusion for me too!! That is the only reason why I copied and saved that paragraph, actually. Now I will at least know why my exchange isn't showing up.

 

[BigMoneyJim]

I'm pretty sure the deadline has been moved earlier, like 2pm or so. It's a relatively recent (< a year?) change. I think it tells you the info when you start telling it which funds you want to buy or sell...as part of the confirmation process. IIRC they were trying to cut back on day-to-day market timing trades.

 

[W2R]

I'm pretty sure the deadline has been moved earlier, like 2pm or so. It's a relatively recent (< a year?) change. I think it tells you the info when you start telling it which funds you want to buy or sell...as part of the confirmation process. IIRC they were trying to cut back on day-to-day market timing trades.

Hi Jim. I copied that on August 13, 2008 (just last month). Maybe they moved the time back again. Anyway, I do not know of any changes since that time.

You're right - - I got this info from their website (as part of the confirmation process). I couldn't find it elsewhere on their website, which was the reason for copying it. The following sentence, which I omitted, says what time and day I made my purchase.

 

[cute fuzzy bunny]

I'm pretty sure that here are different deadlines for some funds. FYI. Read the trading rules on the funds you're looking to get into or out of before trading.

 

[FinanceDude]

I'm pretty sure the deadline has been moved earlier, like 2pm or so. It's a relatively recent (< a year?) change. I think it tells you the info when you start telling it which funds you want to buy or sell...as part of the confirmation process. IIRC they were trying to cut back on day-to-day market timing trades.

I don't think so. All mutual fund orders received by the close of the markets will get whatever that fund closed at at the bell. Funds are priced after the market close..........and you should get THAT day's price if the trading desk got the order in time to process it (usually 5 or more minutes before close). If they rip ya and say they couldn't get the order in, that's BS........

 

[W2R]

I'm pretty sure that here are different deadlines for some funds. FYI. Read the trading rules on the funds you're looking to get into or out of before trading.

I was buying both VTSAX (Vanguard Total Stock Market Index) and VFWIX (FTSE All-World Ex-US Index). I think they're all the same, although I don't own ALL of their funds, so I'm not 100% sure!

 

[crazy connie]

When I want to buy MF shares I wait for a down market day and look at the funds top 10 holdings. I do that in the late am and make my decision and put in the order. If the day looks like a bouncing day I may cancel before close of trading. It feels like better value that way.

 

[riskadverse]

I don't think so. All mutual fund orders received by the close of the markets will get whatever that fund closed at at the bell. Funds are priced after the market close..........and you should get THAT day's price if the trading desk got the order in time to process it (usually 5 or more minutes before close). If they rip ya and say they couldn't get the order in, that's BS........

Generally it is what FinanceDude has described for all fund families. There are some minor time differences in when your order may be received . . . usually 15 minutes before market close is a safe cutoff. There is no advantage to putting in the order the night before or any time prior to that cutoff.

There also are some other things you should be aware of. Some fund families will use a method of pricing called "fair market value" where they set an arbitrary value on some of their "less liquid" and/or foreign investments. On a day like today, an international (or world) fund is likely to discount the value of any asian or european stocks they hold in anticipation that both of those markets will follow the US market down. While this may sound very arbitrary and unfair, it is blessed by the SEC and can work to your disadvantage with no recourse. Also, I seem to remember that Vanguard has some minimum holding periods for some of their funds, and you may pay a penalty for an early redemption.

 

[cute fuzzy bunny]

I just have this funny recollection about buying a fund or two over the last few years where it gave me a popup telling me that the deadline time on that fund was 1 or 2pm instead of 4pm.

 

[Linney]

I just have this funny recollection about buying a fund or two over the last few years where it gave me a popup telling me that the deadline time on that fund was 1 or 2pm instead of 4pm.

Could it just be that the 4pm Eastern closing time = 1pm Pacific closing time and that is what you are remembering?

This year I've made several purchases of Vanguard mutual funds at 12:30pm Pacific, 30 minutes ahead of market closing. Each time I've done this I checked the completed transaction the next day and confirmed that I got the purchase day's price. No problems thus far. This includes 1 purchase made late last week. Too bad it wasn't today, which just goes to show that I'm a lousy market timer and thank goodness the majority of my investing is DCA with an automatic purchase twice a month.

--Linney

 

[cute fuzzy bunny]

Nope, my recollection was getting a popup when trading telling me that some fund or other that I was buying had an earlier closing time than the rest of their funds.

Unfortunately I cant find a dang thing with google. Just make sure if you're timing a fund that you know what its closing time is.

 

[Animorph]

Check the prospectus. It should discuss any trading limitations. I've never run into a fund that closed orders before the market closed, but Vanguard seems full of odd trading rules.

 

[FUEGO]

In my experience at vanguard, they have two different cutoff times. If you are buying the funds using money held in at vanguard in one of their mutual funds (they call it an exchange), you must place your trade by 4 pm to get that day's closing price. If you are buying a fund with money from an outside bank account using ACH funding, you must place your trade by 10 pm on day 1 to get the closing price on day 2 (and they debit your account on day 3). So to get the 10/1/2008 closing price, you must place your buy order today (9/30/2008) by 10 pm if your money is at your bank or by 4:00 pm on 10/1/2008 if your money is in a VG money market fund.

Or to make sure you are getting the date you want, put the trade in and go all the way to the next to last trading screen (where the bottom right hand buttom says "submit" or something like that) and it will tell you their trade execution policy for the fund you are buying and method of funding.

It is a headache for me to buy using ACH funding from a bank since I am guaranteed stale pricing of at least a day. If I want to rebalance from a different institution, I have to place the order at least a day ahead of time.

 

[Lusitan]

Thanks Fuego. I figured there might be some additional delay if you're buying with funds sitting outside of Vanguard ... that's why I'm keeping a little dry powder in my VMMX.