3 day wait for rebalancing
3 day wait for rebalancing
In my perpetual ignorance, please bear with me. I have an ira with vanguard that had 6 or 7 etfs and it got out of balance in these last months. I thought I'd like to forget the whole mess so I sold (over the phone with vanguard assistance) the etf's on Monday and have to wait until Friday before I can put the whole mess into a LifeStrategy fund. Is this normal... Should I have done it differently to avoid being out of the market for that week or is this par for the course? Kinda was hoping for a mild economic collapse until Friday but oh well. S
Re: 3 day wait for rebalancing
We hold our 401k and Roths at Fidelity, and it does take some time for the accounts to clear. I have some money sitting there "pending" and it's been days now. I wonder if Fidelity or their agents make money off the float? Or are small retail investors last in line to get everything executed and finalized? Or some other reason? I really don't know. In any case, there's not much I can do about it, and no huge worry as the cash account is FDIC insured.
As an aside, I suppose this is an argument for keeping my 5% rebalancing band, as I have less cash sitting out of the market than I would with a larger band. OTOH, a larger band might capture momentum better. It would be interesting to torture the data to see which method was better.
As an aside, I suppose this is an argument for keeping my 5% rebalancing band, as I have less cash sitting out of the market than I would with a larger band. OTOH, a larger band might capture momentum better. It would be interesting to torture the data to see which method was better.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
Re: 3 day wait for rebalancing
If there's an ACH transfer involved then three business days is pretty normal. I think they use carrier pigeons or something.
Re: 3 day wait for rebalancing
They're waiting until the ETF trades settle, i.e, you actually get the money from the person you sold your ETFs to. This takes 3 business days. This is normal.
Re: 3 day wait for rebalancing
Another pro for mutual funds over ETFs, you can sell and by the same end of day.
Re: 3 day wait for rebalancing
This is a quirk of Vanguard because Vanguard Brokerage and Vanguard mutual fund company are separate business entities with separate accounting. Vanguard Brokerage cannot transfer the funds to Vanguard mutual fund company until the three-day settlement of the ETF sale. This three day settlement is an SEC rule.
If you had decided to purchase more ETFs, you could have done it the same day, because both the sale and the purchase would have occurred within the same Vanguard brokerage. But since you decided to buy traditional mutual funds from the separate Vanguard mutual fund company, you have to wait for funds to transfer between companies.
You don't have this problem in other firms like Fidelity, because Fidelity is just one big brokerage that also happens to sell mutual funds. It does not have a separate brokerage and mutual fund company. For Fidelity, there is no transfer between companies.
If you had decided to purchase more ETFs, you could have done it the same day, because both the sale and the purchase would have occurred within the same Vanguard brokerage. But since you decided to buy traditional mutual funds from the separate Vanguard mutual fund company, you have to wait for funds to transfer between companies.
You don't have this problem in other firms like Fidelity, because Fidelity is just one big brokerage that also happens to sell mutual funds. It does not have a separate brokerage and mutual fund company. For Fidelity, there is no transfer between companies.
Re: 3 day wait for rebalancing
scone above says that he has the problem at fidelity also. annoying. s
Re: 3 day wait for rebalancing
If he stuck with ETFs, he could have bought the replacement immediately.runner9 wrote:Another pro for mutual funds over ETFs, you can sell and by the same end of day.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep