Nuances of Vanguard's frequent trading policy

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johnanglemen
Posts: 618
Joined: Thu Oct 01, 2009 1:00 pm

Nuances of Vanguard's frequent trading policy

Post by johnanglemen » Thu Mar 26, 2020 2:16 pm

If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days.
I sell a Vanguard fund on February 26, 2020. Today is March 26, 2020. Including the trade date of the sale, today is the 30th day from the trade -- therefore I cannot buy that fund today. Is that correct? Or is it from the settlement date / calculated some other way?

Also, am I correct to assume that this policy holds even when the Vanguard funds are held at an outside brokerage? If so, does anyone know how that works? I assume the order would appear to submit successfully but would later be rejected. That's a bit dangerous when rebalancing or tax loss harvesting, since you'll sell the old fund but the simultaneous new purchase will fail -- leaving you out of the market for a bit.

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ResearchMed
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Re: Nuances of Vanguard's frequent trading policy

Post by ResearchMed » Thu Mar 26, 2020 2:36 pm

johnanglemen wrote:
Thu Mar 26, 2020 2:16 pm
If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days.
I sell a Vanguard fund on February 26, 2020. Today is March 26, 2020. Including the trade date of the sale, today is the 30th day from the trade -- therefore I cannot buy that fund today. Is that correct? Or is it from the settlement date / calculated some other way?

Also, am I correct to assume that this policy holds even when the Vanguard funds are held at an outside brokerage? If so, does anyone know how that works? I assume the order would appear to submit successfully but would later be rejected. That's a bit dangerous when rebalancing or tax loss harvesting, since you'll sell the old fund but the simultaneous new purchase will fail -- leaving you out of the market for a bit.
If you try to purchase that fund "too early" at Vanguard, the system should not let you complete the transaction.
There will be a warning that you are restricted from buying (perhaps giving the "until" date).

RM
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Topic Author
johnanglemen
Posts: 618
Joined: Thu Oct 01, 2009 1:00 pm

Re: Nuances of Vanguard's frequent trading policy

Post by johnanglemen » Thu Mar 26, 2020 2:42 pm

ResearchMed wrote:
Thu Mar 26, 2020 2:36 pm
If you try to purchase that fund "too early" at Vanguard, the system should not let you complete the transaction.
There will be a warning that you are restricted from buying (perhaps giving the "until" date).

RM
The funds are held at an outside broker.

DSInvestor
Posts: 11210
Joined: Sat Oct 04, 2008 11:42 am

Re: Nuances of Vanguard's frequent trading policy

Post by DSInvestor » Thu Mar 26, 2020 2:43 pm

In case Vanguard counts differently from the way IRS counts for the purposes of wash sales. If you sold shares to harvest capital loss, make sure you're outside the wash sale window (30 days prior sale, day of sale and 30 days after sale) to avoid triggering a wash sale on your FEB 26 sale.

Fairmark's wash sales 101:
https://fairmark.com/investment-taxatio ... sales-101/
fairmark wrote:General Rule

In general you have a wash sale if you sell stock at a loss, and buy substantially identical securities within 30 days before or after the sale.

Example: On March 31 you sell 100 shares of XYZ at a loss. On April 10 you buy 100 shares of XYZ. The sale on March 31 is a wash sale.

The wash sale period for any sale at a loss consists of 61 days: the day of the sale, the 30 days before the sale and the 30 days after the sale. (These are calendar days, not trading days. Count carefully!) If you want to claim your loss as a deduction, you need to avoid purchasing the same stock during the wash sale period. For a sale on March 31, the wash sale period includes all of March and April.
bold = my emphasis

FYI - Automatic transactions will allow folks to sell shares of Vanguard mutual funds and NOT trigger frequent trading restrictions.
Wiki

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