Need money in settlement account to buy a non-VG ETF?

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walletless
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Need money in settlement account to buy a non-VG ETF?

Post by walletless » Mon Oct 08, 2018 11:36 am

I was about to place an order to buy IJS on Vanguard.com. however I was surprised to find that you need money in your settlement account in order to place that order. Unlike Vanguard index mutual funds where you can use an external bank as your source.

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HueyLD
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Re: Need money in settlement account to buy a non-VG ETF?

Post by HueyLD » Tue Oct 09, 2018 10:42 am

Are you new to Vanguard brokerage? New to brokerage has nothing to do with being on the old MF platform for decades.

If so, you are required to have enough money in the settlement account before a trade.

StrangePenguin
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Re: Need money in settlement account to buy a non-VG ETF?

Post by StrangePenguin » Tue Oct 09, 2018 10:47 am

I have not tried to buy a non-VG ETF. But for a VG ETF, you should be able to:

1. place an order to transfer cash from your bank account -> Settlement
2. immediately afterwards, your settlement account will be credited and the funds will be "available to trade"
(even though the cash will not be extracted from your bank account until the next day at earliest)
3. you can immediately use those funds to buy an ETF

So the only difference compared to a Mutual Fund purchase is that you do it in 2 separate steps instead of 1. But there's no delay involved.
I assume the procedure would work the same for a non-VG ETF, but if that's not the case then please correct me.

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walletless
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Re: Need money in settlement account to buy a non-VG ETF?

Post by walletless » Wed Oct 10, 2018 2:17 pm

StrangePenguin wrote:
Tue Oct 09, 2018 10:47 am
I have not tried to buy a non-VG ETF. But for a VG ETF, you should be able to:

1. place an order to transfer cash from your bank account -> Settlement
2. immediately afterwards, your settlement account will be credited and the funds will be "available to trade"
(even though the cash will not be extracted from your bank account until the next day at earliest)
3. you can immediately use those funds to buy an ETF

So the only difference compared to a Mutual Fund purchase is that you do it in 2 separate steps instead of 1. But there's no delay involved.
I assume the procedure would work the same for a non-VG ETF, but if that's not the case then please correct me.
ooh this is really useful information. VG is puzzling - why would they have so many different behaviors is boggling!

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jhfenton
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Re: Need money in settlement account to buy a non-VG ETF?

Post by jhfenton » Wed Oct 10, 2018 2:25 pm

walletless wrote:
Mon Oct 08, 2018 11:36 am
I was about to place an order to buy IJS on Vanguard.com. however I was surprised to find that you need money in your settlement account in order to place that order. Unlike Vanguard index mutual funds where you can use an external bank as your source.
You generally don't. Is this a new account?

I pretty much never have money in my settlement account, and I place ETF buy orders all the time. After the buy executes, I can either sell something else to cover the amount or transfer money in from my linked bank account. This is true even in retirement accounts. There is no difference between Vanguard and non-Vanguard ETFs.

Vanguard is much more flexible in this regard than TD Ameritrade, where I do have to have available cash in order to place a buy. (My HSA is at Lively+TD Ameritrade.)

The only time I ever had a cash requirement at Vanguard was the first day or two after our accounts were opened. Once our six figures of assets were transferred in and bank accounts were linked, the cash requirement for trading disappeared.

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Re: Need money in settlement account to buy a non-VG ETF?

Post by robertmcd » Wed Oct 10, 2018 2:26 pm

^ +1

You can buy ETF's thru vanguard without having any money in you settlement fund. You just have to have enough funds to cover the trade in your settlement account when the trade settles at T+2. I click past the warning every time, then buy whatever $ amount my trade executed at.

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walletless
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Re: Need money in settlement account to buy a non-VG ETF?

Post by walletless » Wed Oct 10, 2018 2:45 pm

This is not a new account - its about 6-7 year old account owned by my Trust. When I place MF order I can chose bank as the source. When I place ETF order, it only allows the settlement fund as the source.

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jhfenton
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Re: Need money in settlement account to buy a non-VG ETF?

Post by jhfenton » Wed Oct 10, 2018 2:57 pm

walletless wrote:
Wed Oct 10, 2018 2:45 pm
This is not a new account - its about 6-7 year old account owned by my Trust. When I place MF order I can chose bank as the source. When I place ETF order, it only allows the settlement fund as the source.
Are being dissuaded by the standard warning? Or is it stopping you completely?

I cannot access the website right now, or I'd take a screenshot of the warning screen I see.

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walletless
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Re: Need money in settlement account to buy a non-VG ETF?

Post by walletless » Wed Oct 10, 2018 4:02 pm

jhfenton wrote:
Wed Oct 10, 2018 2:57 pm
walletless wrote:
Wed Oct 10, 2018 2:45 pm
This is not a new account - its about 6-7 year old account owned by my Trust. When I place MF order I can chose bank as the source. When I place ETF order, it only allows the settlement fund as the source.
Are being dissuaded by the standard warning? Or is it stopping you completely?

I cannot access the website right now, or I'd take a screenshot of the warning screen I see.
it's not warning.. there is just no way to chose a bank account as source. I will send a screenshot here once the site recovers...

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jhfenton
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Re: Need money in settlement account to buy a non-VG ETF?

Post by jhfenton » Wed Oct 10, 2018 6:01 pm

walletless wrote:
Wed Oct 10, 2018 4:02 pm
jhfenton wrote:
Wed Oct 10, 2018 2:57 pm
walletless wrote:
Wed Oct 10, 2018 2:45 pm
This is not a new account - its about 6-7 year old account owned by my Trust. When I place MF order I can chose bank as the source. When I place ETF order, it only allows the settlement fund as the source.
Are being dissuaded by the standard warning? Or is it stopping you completely?

I cannot access the website right now, or I'd take a screenshot of the warning screen I see.
it's not warning.. there is just no way to chose a bank account as source. I will send a screenshot here once the site recovers...
That's because you don't choose a source. It always comes from your settlement fund or available cash. It just doesn't have to be there at the time of the trade. It has to be there by the settlement date, which in the case of stocks and ETFs is T+2, two days after the purchase.

Here's the order screen for the purchase of 1 share of VSS. You will see I have $0.00 in my settlement fund. It is a six-figure account, but it is 100% invested in ETFs and mutual funds so there are no funds "available to trade".

Image

And here is the warning that pops up when I hit continue:

Image

You can just click through this warning and submit the trade on the next screen.

(There is a separate warning that you might see if you have unsettled cash in your account. You can click through it too, but you have to not sell the security you're buying before the unsettled cash you are buying with settles.)

After your purchase executes, you can transfer in money from your bank or sell something else to cover the negative cash balance.
Last edited by jhfenton on Wed Oct 10, 2018 9:42 pm, edited 4 times in total.

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Re: Need money in settlement account to buy a non-VG ETF?

Post by ray.james » Wed Oct 10, 2018 6:06 pm

StrangePenguin wrote:
Tue Oct 09, 2018 10:47 am
I have not tried to buy a non-VG ETF. But for a VG ETF, you should be able to:

1. place an order to transfer cash from your bank account -> Settlement
2. immediately afterwards, your settlement account will be credited and the funds will be "available to trade"
(even though the cash will not be extracted from your bank account until the next day at earliest)
3. you can immediately use those funds to buy an ETF

So the only difference compared to a Mutual Fund purchase is that you do it in 2 separate steps instead of 1. But there's no delay involved.
I assume the procedure would work the same for a non-VG ETF, but if that's not the case then please correct me.
Does a similar process work for funds exchange as well?
Eg: I can exchange vanguard to vanguard mutual fund. But, can I trade a Vanguard mutual fund to a third part ETF, using this 2 step process? Does the starting position being a mutual fund/ETF impact this?

Thanks.
ps: I too did not know about this and thereby used to transfer to settlement fund and wait.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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jhfenton
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Re: Need money in settlement account to buy a non-VG ETF?

Post by jhfenton » Wed Oct 10, 2018 6:21 pm

ray.james wrote:
Wed Oct 10, 2018 6:06 pm
Does a similar process work for funds exchange as well?
Eg: I can exchange vanguard to vanguard mutual fund. But, can I trade a Vanguard mutual fund to a third part ETF, using this 2 step process? Does the starting position being a mutual fund/ETF impact this?

Thanks.
ps: I too did not know about this and thereby used to transfer to settlement fund and wait.
Yes. You can do this. It is usually easier to make the ETF purchase first so that you know the exact amount you need to cover.

For example, I buy 10 shares of VSS at $105.00 for a total purchase of $1,050.00. I then sell $1,050.00 of VSBSX (Vanguard Short-Term Treasury Index Admiral Shares) to cover it.

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Re: Need money in settlement account to buy a non-VG ETF?

Post by StrangePenguin » Wed Oct 10, 2018 7:44 pm

jhfenton wrote:
Wed Oct 10, 2018 6:21 pm
ray.james wrote:
Wed Oct 10, 2018 6:06 pm
Does a similar process work for funds exchange as well?
Eg: I can exchange vanguard to vanguard mutual fund. But, can I trade a Vanguard mutual fund to a third part ETF, using this 2 step process? Does the starting position being a mutual fund/ETF impact this?

Thanks.
ps: I too did not know about this and thereby used to transfer to settlement fund and wait.
Yes. You can do this. It is usually easier to make the ETF purchase first so that you know the exact amount you need to cover.

For example, I buy 10 shares of VSS at $105.00 for a total purchase of $1,050.00. I then sell $1,050.00 of VSBSX (Vanguard Short-Term Treasury Index Admiral Shares) to cover it.
I actually did *not* know that I could do things in that order for a MF->ETF transaction. Interesting!

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Re: Need money in settlement account to buy a non-VG ETF?

Post by LadyGeek » Wed Oct 10, 2018 9:24 pm

jhfenton - Sorry to interrupt, but please check your PMs. The images you've posted contain personal info which you may not want public. I removed the images so you can fix them.
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jhfenton
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Re: Need money in settlement account to buy a non-VG ETF?

Post by jhfenton » Wed Oct 10, 2018 9:44 pm

LadyGeek wrote:
Wed Oct 10, 2018 9:24 pm
jhfenton - Sorry to interrupt, but please check your PMs. The images you've posted contain personal info which you may not want public. I removed the images so you can fix them.
Thank you and anyone who reported it for catching that. I redacted some information originally, but overlooked some more. :oops:

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Re: Need money in settlement account to buy a non-VG ETF?

Post by MotoTrojan » Wed Oct 10, 2018 11:23 pm

StrangePenguin wrote:
Tue Oct 09, 2018 10:47 am
I have not tried to buy a non-VG ETF. But for a VG ETF, you should be able to:

1. place an order to transfer cash from your bank account -> Settlement
2. immediately afterwards, your settlement account will be credited and the funds will be "available to trade"
(even though the cash will not be extracted from your bank account until the next day at earliest)
3. you can immediately use those funds to buy an ETF

So the only difference compared to a Mutual Fund purchase is that you do it in 2 separate steps instead of 1. But there's no delay involved.
I assume the procedure would work the same for a non-VG ETF, but if that's not the case then please correct me.
Do this in the backwards order and you'll know exactly what to transfer :).

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ray.james
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Re: Need money in settlement account to buy a non-VG ETF?

Post by ray.james » Thu Oct 11, 2018 4:21 am

jhfenton wrote:
Wed Oct 10, 2018 6:21 pm
ray.james wrote:
Wed Oct 10, 2018 6:06 pm
Does a similar process work for funds exchange as well?
Eg: I can exchange vanguard to vanguard mutual fund. But, can I trade a Vanguard mutual fund to a third part ETF, using this 2 step process? Does the starting position being a mutual fund/ETF impact this?

Thanks.
ps: I too did not know about this and thereby used to transfer to settlement fund and wait.
Yes. You can do this. It is usually easier to make the ETF purchase first so that you know the exact amount you need to cover.

For example, I buy 10 shares of VSS at $105.00 for a total purchase of $1,050.00. I then sell $1,050.00 of VSBSX (Vanguard Short-Term Treasury Index Admiral Shares) to cover it.
Thank you, My TLH process is much simpler now!
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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