POLL: Vanguard rebalancing/exchange screen

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Should Vanguard change their fund exchange screen to enable portfolio rebalancing using percentages?

Yes
19
50%
Yes
19
50%
 
Total votes: 38

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Eric White
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POLL: Vanguard rebalancing/exchange screen

Post by Eric White »

I've been continually frustrated with Vanguard's exchange screen. It seems overly complicated for annual portfolio rebalancing. As a result, I have to plan exactly how to sequence and allocate transfers between individual funds.

This makes rebalancing more difficult. Although this may be good for Vanguard to keep costs down, I feel this ignores one of our most fundamental customer requirements. What's worse, I'd imagine many investors see the complexity and shy away from actually rebalancing.

Is anyone else frustrated with rebalancing funds at Vanguard?
gkaplan
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Post by gkaplan »

I don't find this to be a problem, since I have an Excel spreadsheet that tells me the dollar amounts to re-balance.
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nisiprius
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Post by nisiprius »

While they're at it, why not automatic rebalancing? It's just an automatic exchange. If they can do automatic exchanges as often as you like, up to once a week, for free, it shouldn't cost any more to perform them for a calculated amount.
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Dale_G
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Post by Dale_G »

I manage multiple accounts for myself and spouse: taxable. traditional IRA, Roth IRA and variable annuities + an old non-qualified account at Fidelity.

I wouldn't object to percentage rebalancing as an option, but I am unlikely ever to use it. I can usually rebalance with one transaction - and rarely with two transactions - if both domestic and international equities need to be sold for instance.

I keep the equity-bond ratio on track, but otherwise ignore small discrepancies between large, mid, small or whatever.

I find the buy/sell/exchange pages to be straightforward and intuitive.

Dale
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sscritic
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Re: POLL: Vanguard rebalancing/exchange screen

Post by sscritic »

Eric White wrote:I've been continually frustrated with Vanguard's exchange screen. It seems overly complicated for annual portfolio rebalancing. As a result, I have to plan exactly how to sequence and allocate transfers between individual funds.
What do you have to sequence? You have seven funds, say. Four funds are over target by 8k, 4k, 7k, and 1k. The other three funds are under target by 11k, 3k, and 6k (over and under have to match). You exchange 8k from 1 to 5, 3k from 2 to 5 (5 gets its 11), 1k from 2 to 6, 2k from 3 to 6 (6 now has its 3k), and finally send 5k from 3 to 7 and 1 k from 4 to 7 (7 now has its 6k).

There are many other solutions. But why do you care? By tomorrow, your balance will be out of balance anyway. Just get it roughly right and wait until it is time to rebalance again.
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tfb
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Post by tfb »

Not a problem and it should stay the way it is. Vanguard has to show how many dollars are involved. With %, the dollar amount can't be known until the day is over.
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KyleAAA
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Post by KyleAAA »

An automatic rebalancing feature would be amazing and would not be difficult to implement. In fact, for tax-deferred accounts I think the option should be shoved in your face repeatedly when you open an account. It would be good for investors. Every 401k plan I've ever had has had such a feature. Why can't my Roth IRA?
GammaPoint
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Post by GammaPoint »

I'm not frustrated when rebalancing at Vanguard, so I don't see a need for it personally. But I wouldn't be opposed to more options if others found it helpful of course.
ruud
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Post by ruud »

Interestingly, Vanguard *does* offer this feature for 401k plans (at least, mine has it).
.
livesoft
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Post by livesoft »

I disagree that an automated rebalancing plan would be trivial to implement with all the bells and whistles of looking at all your (and your spouse's) accounts across all vendors with a method that is tax-efficient, low or no cost, and optimized via asset location. For example, such an automated method might need to know about funds that you could invest in, but currently do not.

Sure, if you were only looking at a single account like one IRA or one 401(k) or one 529 plan, then it would be easy and has been done. I believe such a simplified rebalancing option prevents you from looking for better ways and achieving the best that you can get.
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Post by KyleAAA »

livesoft wrote: Sure, if you were only looking at a single account like one IRA or one 401(k) or one 529 plan, then it would be easy and has been done. I believe such a simplified rebalancing option prevents you from looking for better ways and achieving the best that you can get.
It is my opinion that achieving the best you can get isn't worth the effort. I'd rather have it rebalanced automatically based on the allocation and the funds I give it. I don't want it to offer suggestions based on other funds I could own and neither would 99.9% of other investors. I may end up with $50,000 less in retirement, but I'll have a whole lot more fun along the way.
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Post by Beagler »

nisiprius wrote:While they're at it, why not automatic rebalancing? It's just an automatic exchange. If they can do automatic exchanges as often as you like, up to once a week, for free, it shouldn't cost any more to perform them for a calculated amount.
Vanguard already offers automatic rebalancing for its variable annuity contracts.
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livesoft
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Post by livesoft »

^Then there's the solution for all those that need this tool: Use all your money to buy a variable annuity.
RadAudit
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Post by RadAudit »

The problem I have with rebalancing is that some funds (Total Stock Market [?]) have a one transaction per every two [?] months rule - so rebalancing is a two / three day process of choosing which funds to withdraw from first and which ones to deposit into in which order. And if I don't remember the proper order - something that's occurring more frequently of late - rebalancing becomes a two to three month affair.

Given I've only have three funds you'd think I could figure this thing out a little better than I do.
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grabiner
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Post by grabiner »

RadAudit wrote:The problem I have with rebalancing is that some funds (Total Stock Market [?]) have a one transaction per every two [?] months rule - so rebalancing is a two / three day process of choosing which funds to withdraw from first and which ones to deposit into in which order. And if I don't remember the proper order - something that's occurring more frequently of late - rebalancing becomes a two to three month affair
The rule isn't one transaction every 60 days; it forbids buying a fund which you sold within the past 60 days.

The way to handle the rebalance is to print out your portfolio, then compare it with the desired allocation. If you have $49K in Total Stock Market, $16K in Total International, $18K in Inflation-Protected Securities, and $17K in Total Bond Market, and you want to hold 45/15/20/20, then you need to sell $4K in Total Stock Market, sell $1K in Total International, buy $2K in Inflation-Protected Securities, and buy $3K in Total Bond Market. Now match up buys with sells; $2K from Total Stock Market to Inflation-Protected Securities, $2K from Total Stock Market to Total Bond Market, and $1K from Total International to Total Bond Market.

If you do make a mistake, you can get around the 60-day rule by making the corrective transaction by mail.
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dharrythomas
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Rebalancing

Post by dharrythomas »

Maybe I'm slow, but I don't understand why you'd need to buy and sell from the same fund in order to rebalance. It's either over or under target and may require either buying or selling shares, it doesn't require both. :?

Harry
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