Auto-Distribute/Balance Funds

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stungerz
Posts: 72
Joined: Sat Apr 28, 2012 12:43 pm

Auto-Distribute/Balance Funds

Post by stungerz » Sun Apr 26, 2015 9:26 pm

Hi All,

I have my Roth IRA with Vanguard and do the backdoor roth.
In order to balance out my 401K's lack of suitable REIT and Bond funds those are the only 2 funds that I have in my Roth.

When the roth is funded, I get $5500 in a MM mutual fund and I do not want to place $2750 in Bond and $2750 in REIT immediately. Every month for 11 months I would like to put $250 to each of those two funds.

Is there a way to automatically do this in Vanguard?

Cheers,

SU

DSInvestor
Posts: 11083
Joined: Sat Oct 04, 2008 11:42 am

Re: Auto-Distribute/Balance Funds

Post by DSInvestor » Sun Apr 26, 2015 9:31 pm

Yes, you can setup an automatic exchange(s) to exchange $250 from Roth IRA MMF to Roth IRA REIT every month. logon to your vanguard account, scroll down and look for a link called "account maintenance". In the section for banking and money movement, click on Automatic Exchange.
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loves2read
Posts: 136
Joined: Wed Aug 27, 2008 11:43 am

Re: Auto-Distribute/Balance Funds

Post by loves2read » Sun Apr 26, 2015 10:05 pm

Can you explain why who choose to buy in smaller amounts each month vs all-in?

DSInvestor
Posts: 11083
Joined: Sat Oct 04, 2008 11:42 am

Re: Auto-Distribute/Balance Funds

Post by DSInvestor » Sun Apr 26, 2015 10:14 pm

BTW, if you ever need to rebalance your vanguard mutual funds, you can use an automatic exchange which avoids triggering frequent trading restrictions.
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Topic Author
stungerz
Posts: 72
Joined: Sat Apr 28, 2012 12:43 pm

Re: Auto-Distribute/Balance Funds

Post by stungerz » Sun Apr 26, 2015 11:42 pm

Awesome... Thanks DSInvestor! This beats setting up 10 calendar reminders! Also, extra kudos to the auto-exchange tip to avoid frequent trading limits.

In regards to why do this one time or over a one year time period, there wasn't anything too logically or beneficial about it and I just wanted the transfers to some what mimic how often I contribute to my 401K.

Cheers

DSInvestor
Posts: 11083
Joined: Sat Oct 04, 2008 11:42 am

Re: Auto-Distribute/Balance Funds

Post by DSInvestor » Mon Apr 27, 2015 12:09 am

Another neat option is for dividends and capital gains distributions. You can tell vanguard to send dividends or capital gains from one fund to another fund. If REITs are currently below target you can direct bond dividends to your REIT fund. If REITs are above target you can direct the REIT dividends to your bond fund.
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OakPhilliesFan
Posts: 237
Joined: Mon Apr 13, 2015 8:50 pm
Location: Oakland, CA

Re: Auto-Distribute/Balance Funds

Post by OakPhilliesFan » Mon Apr 27, 2015 12:38 am

stungerz: you should perhaps read the wiki page on Dollar Cost Averaging (http://www.bogleheads.org/wiki/Dollar_cost_averaging) for the pros and cons of investing the funds monthly versus all at once now. There are possible advantages and disadvantages either way, although the differences are likely to be small barring a "black swan" event.

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