FinallyRetired
Thinks s/he gets paid by the post
- Joined
- Aug 1, 2002
- Messages
- 1,322
Thought I'd pass on a stupid mistake I made and won't make again. This particular mistake cost me a couple of thousand, though it could have been much worse.
Vanguard, along with other fund companies, discourage frequent trading because it drives up their cost. I don't consider myself a trader, more of a hedger, increasing bonds and decreasing equities every couple of years when the market gets very weak. I realize this is a form of the much criticised market timing, but it saved me big bucks in the market crash.
I can understand Vanguard's policy and choose to live within it. Until recently, their policy was that if you moved out of a fund -- even into cash -- you could not buy back into it for a certain time period, I think it was 6 months.
Recently, Vanguard and other fund companies changed the rules. For Vanguard, the instituted a large penalty for moving out of certain funds before a certain time -- as much as 2% if you move out within 2 months. Although this appears on the fund prospectus and in their online fund description, be aware that there is no warning on their online fund transfer page. That is, once you own the fund, if you go back in within two months and sell it, the online system will let you do it the same way as you do it for a fund without the penalty, and you won't know about it until you get your statement.
So, those of you that transact Vanguard funds online, be careful that you don't take the big hit I did. That's why they say always read the prospectus but, well, this time I didn't.
Vanguard, along with other fund companies, discourage frequent trading because it drives up their cost. I don't consider myself a trader, more of a hedger, increasing bonds and decreasing equities every couple of years when the market gets very weak. I realize this is a form of the much criticised market timing, but it saved me big bucks in the market crash.
I can understand Vanguard's policy and choose to live within it. Until recently, their policy was that if you moved out of a fund -- even into cash -- you could not buy back into it for a certain time period, I think it was 6 months.
Recently, Vanguard and other fund companies changed the rules. For Vanguard, the instituted a large penalty for moving out of certain funds before a certain time -- as much as 2% if you move out within 2 months. Although this appears on the fund prospectus and in their online fund description, be aware that there is no warning on their online fund transfer page. That is, once you own the fund, if you go back in within two months and sell it, the online system will let you do it the same way as you do it for a fund without the penalty, and you won't know about it until you get your statement.
So, those of you that transact Vanguard funds online, be careful that you don't take the big hit I did. That's why they say always read the prospectus but, well, this time I didn't.