VFIDX up .83% in one day?

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HuckFinn
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VFIDX up .83% in one day?

Post by HuckFinn » Fri Jan 22, 2016 9:16 pm

VFIDX (VG Intermediate Term Investment Grade Bond Fund) went up .83% today. I'm not complaining mind you I'm just curious if anyone has an idea how this could occur. None of the other VG intermediate term bond offerings funds seem to have any correlation to what occurred with this fund today.

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Re: VFIDX up .83% in one day?

Post by stlutz » Fri Jan 22, 2016 9:53 pm

High yield bonds had a big day today. Investment-grade bonds were flat to down.

The price VG is showing for this fund suggests: a) some type of pricing error; b) that they have acquired a lot of bonds in the energy sector; c) that they have added more non-investment grade bonds.

My guess is (a), unless they have gone big into some non-standard segment of the "investment-grade" bond market.

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Re: VFIDX up .83% in one day?

Post by Call_Me_Op » Sat Jan 23, 2016 7:26 am

Credit risk and equity risk have a high correlation. Therefore, a rising equity market will often lift bonds that have credit risk - although 0.83% is higher than one would expect for investment grade. As slutz suggested, they may be dabbling in some bonds below IG.
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Re: VFIDX up .83% in one day?

Post by Geologist » Sat Jan 23, 2016 8:33 am

I don't own the Investment Grade Bond Fund and have no insights into its changes, but I would say that worrying about the causes of 1-day fluctuations in NAV of any fund is a path to near insanity. You'd better off if you didn't even look at daily changes in value. One of the major reasons to invest in funds is so you can live the rest of your life.

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Re: VFIDX up .83% in one day?

Post by Valuethinker » Sat Jan 23, 2016 8:53 am

HuckFinn wrote:VFIDX (VG Intermediate Term Investment Grade Bond Fund) went up .83% today. I'm not complaining mind you I'm just curious if anyone has an idea how this could occur. None of the other VG intermediate term bond offerings funds seem to have any correlation to what occurred with this fund today.
There was an equity market rally, and even investment grade bonds have equity risk in them.

In essence, the market became less concerned about default risk for corporate bonds. Hence the surge in prices of same.

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Re: VFIDX up .83% in one day?

Post by SpringMan » Sat Jan 23, 2016 9:04 am

I had the same question as an owner of VFIDX. Makes me wonder if it was a pricing error. I kept checking a variety of sites and it was not revised. As the OP stated, it is nothing to complain about. It is still a mystery, maybe it will drop Monday to average out.
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Re: VFIDX up .83% in one day?

Post by Coles » Sat Jan 23, 2016 11:36 am

Geologist wrote:I would say that worrying about the causes of 1-day fluctuations in NAV of any fund is a path to near insanity. You'd better off if you didn't even look at daily changes in value. One of the major reasons to invest in funds is so you can live the rest of your life.
Valuethinker wrote:There was an equity market rally, and even investment grade bonds have equity risk in them.

In essence, the market became less concerned about default risk for corporate bonds. Hence the surge in prices of same.
Then can you explain why the NAV of Vanguard's similar but not identical Intermediate-Term Corporate Bond Index Fund (VICSX) declined -0.13%?
Short-Term Corporate Bond Index (VICSX) down -0.05%
Long-Term Corporate Bond Index (VSCSX) down -0.13%
Even Fidelity Corporate Bond (FCBFX) which holds lower quality bonds was only up 0.09%

OP's was clearly questioning the 0.83% NAV change in VFIDX within the context of similar funds. It is a very legitimate question. Your condescending and pedantic responses are of no help.

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Re: VFIDX up .83% in one day?

Post by supersharpie » Sat Jan 23, 2016 11:45 am

Call_Me_Op wrote:As slutz suggested, they may be dabbling in some bonds below IG.
Typo alert! :-)

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Re: VFIDX up .83% in one day?

Post by chx » Sat Jan 23, 2016 11:49 am

Geologist wrote:I don't own the Investment Grade Bond Fund and have no insights into its changes, but I would say that worrying about the causes of 1-day fluctuations in NAV of any fund is a path to near insanity. You'd better off if you didn't even look at daily changes in value. One of the major reasons to invest in funds is so you can live the rest of your life.
Although I agree that a long-term investor should not worry about day-to-day price fluctuations, I disagree in this case. It's important for any investor to understand what he or she is investing in. If one of my investments is out of step with my understanding of how it should be behave under various conditions, then I want to know why. In investing, as in many other walks of life, facts that are in disagreement with your model of the world are important indicators.

Having said this, I have no explanation for yesterday's jump in VFIDX. For the most part, it tracks the similar index fund, VICSX, but it certainly did not do so yesterday: https://ca.finance.yahoo.com/q/bc?t=1m& ... vicsx&ql=1.

xxChip

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Sat Jan 23, 2016 11:59 am

Then can you explain why the NAV of Vanguard's similar but not identical Intermediate-Term Corporate Bond Index Fund (VICSX) declined -0.13%?
Short-Term Corporate Bond Index (VICSX) down -0.05%
Long-Term Corporate Bond Index (VSCSX) down -0.13%
Even Fidelity Corporate Bond (FCBFX) which holds lower quality bonds was only up 0.09%

OP's was clearly questioning the 0.83% NAV change in VFIDX within the context of similar funds. It is a very legitimate question. .
Those were some of the funds that I reviewed before posting the question. I think stlutz probably was correct on some type of pricing error which I find a little disconcerting as "pricing errors" could certainly affect people who bought in or sold out within the last few days. This is a Fund with a $50k minimum to purchase so if it is a pricing error that could be... well... pricey.

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Re: VFIDX up .83% in one day?

Post by grabiner » Sat Jan 23, 2016 5:32 pm

HuckFinn wrote:Those were some of the funds that I reviewed before posting the question. I think stlutz probably was correct on some type of pricing error which I find a little disconcerting as "pricing errors" could certainly affect people who bought in or sold out within the last few days. This is a Fund with a $50k minimum to purchase so if it is a pricing error that could be... well... pricey.
The fund has Investor shares with a $3000 minimum as well, and they report the same 0.83% gain.

So is this a pricing error, or did the fund hold a defaulted bond which came back from the dead, or a bond which was unexpectedly called or not called?
Wiki David Grabiner

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Re: VFIDX up .83% in one day?

Post by stlutz » Sat Jan 23, 2016 7:33 pm

As slutz suggested...
Typo alert! :-)
I'm of course treating that a deliberate slur and am never returning the forum again. :wink:

On the actual question, perhaps somebody who holds this fund could send Vanguard a secure message asking about the anomaly? Would be interesting to hear their explanation (assuming it's anything beyond boilerplate).

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Sat Jan 23, 2016 10:44 pm

stlutz wrote:On the actual question, perhaps somebody who holds this fund could send Vanguard a secure message asking about the anomaly? Would be interesting to hear their explanation (assuming it's anything beyond boilerplate).
I'll go ahead and do that and report back on this post when I receive a response.

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Re: VFIDX up .83% in one day?

Post by saltycaper » Sat Jan 23, 2016 11:11 pm

FWIW, long-term investment grade (VWETX) was also up--0.70%--while long-term corporate (VLTCX) was down 0.13%.
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Re: VFIDX up .83% in one day?

Post by Aspen » Mon Jan 25, 2016 11:19 am

HuckFinn wrote:
stlutz wrote:On the actual question, perhaps somebody who holds this fund could send Vanguard a secure message asking about the anomaly? Would be interesting to hear their explanation (assuming it's anything beyond boilerplate).
I'll go ahead and do that and report back on this post when I receive a response.
Unless someone has heard back from Vanguard on whether a pricing error or other, I guess we'll know later after today's closing fund prices are posted.

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Re: VFIDX up .83% in one day?

Post by Geologist » Mon Jan 25, 2016 7:15 pm

But they can fix transactions based on pricing errors even after the fact. It could even be that the pricing error was just in the posting and the correct price was actually used for transactions.

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Re: VFIDX up .83% in one day?

Post by Coles » Mon Jan 25, 2016 7:16 pm

Today's results:

Intermediate-Term Investment-Grade Fund (VFIDX) -0.82%

Intermediate-Term Corporate Bond Index Fund (VICSX) +0.18%
Short-Term Corporate Bond Index (VSCSX) +0.00%
Long-Term Corporate Bond Index (VLTCX) +0.22%
Fidelity Corporate Bond (FCBFX) +0.09%

My confidence that Friday's move in VFIDX was a pricing mistake?: 99%
My confidence that Vanguard will address this issue (especially for the people who bought on Friday)? less than 10%
Last edited by Coles on Mon Jan 25, 2016 7:26 pm, edited 1 time in total.

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Mon Jan 25, 2016 7:19 pm

Coles wrote:Today's results:

Intermediate-Term Investment-Grade Fund (VFIDX) -0.82%

Intermediate-Term Corporate Bond Index Fund (VICSX) +0.18%
Short-Term Corporate Bond Index (VSCSX) down +0.00%
Long-Term Corporate Bond Index (VLTCX) down +0.22%
Fidelity Corporate Bond (FCBFX) +0.09%

My confidence that Friday's move in VFIDX was a pricing mistake?: 99%
My confidence that Vanguard will address this issue (especially for the people who bought on Friday)? less than 10%
I saw the pricing as well. I sent a secure e-mail on 1/24/16 asking for information about the price anomaly. It is supposed to take 1-2 business days to hear back from them.

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Re: VFIDX up .83% in one day?

Post by Kevin M » Mon Jan 25, 2016 8:33 pm

I have seen and posted about a number of strange mutual fund price and SEC yield changes over the years. For one of the really bizarre ones, I sent Vanguard a message about it, and their explanation was that it had to do with futures or swaps or some other kind of contracts being settled. In that case, the drop and recovery weren't as quick as the 2-day increase and relapse of VFIDX price--I think it happened over a couple of weeks--but I wouldn't be surprised if the explanation for this one were similar.

Note that the SEC yield for the fund actually increased a bit on the day the price increased, and SEC yield dropped a bit today when price decreased.

Code: Select all

01/21/2016  $9.68  2.87%
01/22/2016  $9.76  2.88%
01/25/2016  $9.68  2.85%
Not surprising that there is some disconnect between price and SEC yield (compared to the inverse relationship we might expect), since the latter is a 30-day average, but worth noting that the duration rule of thumb doesn't work for fund price and SEC yield on a daily basis.

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Re: VFIDX up .83% in one day?

Post by SpringMan » Tue Jan 26, 2016 10:30 am

This kind of pricing error where it is incorrect one day and fixed the next is concerning. It introduces luck into investing. Just luck if you happen to sell when the price was incorrectly priced up or lack of luck if you happened to buy. I have seen this happen more often at Fidelity than Vanguard. There have been cases where Spartan Advantage shares move in different directions than Spartan Investor shares for the same fund. Called Fidelity and they had no explanation other than it would be fixed the next day which it was.
Best Wishes, SpringMan

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Tue Jan 26, 2016 4:59 pm

I had sent a secure message to Vanguard over the weekend. The automated response I received was:
"Our goal is to respond within one business day."

We'll see if a response arrives later today which is the second business day.

Honestly, I am not harping on VG. They earned my service a long time ago. However, I do not make major portfolio moves often but will likely be making a pretty large exchange involving VFIDX (Intermediate Term Investment Grade) in the next two months though. That little blip (yet undefined) could have cost me in excess of $3,000.

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Re: VFIDX up .83% in one day?

Post by JDDS » Tue Jan 26, 2016 8:40 pm

Right, it's a blip. We do not know enough to know whether it was legitimate or a mistake. Both share classes showed the same though.
SpringMan wrote:This kind of pricing error where it is incorrect one day and fixed the next is concerning. It introduces luck into investing. Just luck if you happen to sell when the price was incorrectly priced up or lack of luck if you happened to buy. I have seen this happen more often at Fidelity than Vanguard. There have been cases where Spartan Advantage shares move in different directions than Spartan Investor shares for the same fund. Called Fidelity and they had no explanation other than it would be fixed the next day which it was.
This sure seems much more concerning.

What does the 1940 act or the SEC regs say about mutual fund pricing errors? I'm curious about the obligations on fund companies and what the remedies might be.

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Re: VFIDX up .83% in one day?

Post by 92irish » Tue Jan 26, 2016 10:39 pm

However, I do not make major portfolio moves often but will likely be making a pretty large exchange involving VFIDX (Intermediate Term Investment Grade) in the next two months though.
In light of occasionally anomalies like this, it might make sense to dollar cost average over a few days/weeks for big investments. One thing I don't like about ETFs is wacky pricing moves which can occur, but it seems even mutual funds are not totally immune. I remember several years ago now Total Bond Market Index had a big tracking error mix-up and the performance went off kilter a bit. Absolute perfection and consistency is not guaranteed in most investment vehicles.

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Re: VFIDX up .83% in one day?

Post by stlutz » Tue Jan 26, 2016 11:25 pm

A few things to keep in mind here:

1) Many bonds don't trade every day, which means that their daily prices have to be estimates based on how other bonds traded that day. Valuing an S&P 500 index fund is a relatively precise endeavor; a corporate bond fund not as much.

2) They get these bond prices from external providers. So, if there was a mistake it may not be something Vanguard did.

3) Funds have a very limited amount of time after market close to calculate their NAV. If there was something unusual in their pricing feed, they don't have 12 hours to get it worked out with the vendor.

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Re: VFIDX up .83% in one day?

Post by Call_Me_Op » Wed Jan 27, 2016 11:19 am

supersharpie wrote:
Call_Me_Op wrote:As slutz suggested, they may be dabbling in some bonds below IG.
Typo alert! :-)
Sorry - aging eyes.
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Re: VFIDX up .83% in one day?

Post by HuckFinn » Wed Jan 27, 2016 4:33 pm

HuckFinn wrote:I had sent a secure message to Vanguard over the weekend. The automated response I received was:
"Our goal is to respond within one business day."

We'll see if a response arrives later today which is the second business day.
Well, almost three business days later and still no response. I'll wait until mid-morning tomorrow (the 4th business day) and contact my representative.

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Re: VFIDX up .83% in one day?

Post by BlueEars » Thu Jan 28, 2016 10:46 am

It's nice when one can look at the corresponding ETF to try and get some answers. Doesn't exist for VFIDX yet.

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Re: VFIDX up .83% in one day?

Post by JDDS » Thu Jan 28, 2016 10:54 am

Since this is an actively managed fund, an ETF is unlikely.

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Re: VFIDX up .83% in one day?

Post by Coles » Thu Jan 28, 2016 11:01 am

On Vanguard's site, they have restated the Jan. 22 prices of VFIDX and VFICX to a more reasonable value.

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Re: VFIDX up .83% in one day?

Post by Kevin M » Thu Jan 28, 2016 11:43 am

Coles wrote:On Vanguard's site, they have restated the Jan. 22 prices of VFIDX and VFICX to a more reasonable value.
Yup:

Code: Select all

Date        Price  Yield

01/21/2016  $9.68  2.87%
01/22/2016  $9.67  2.88%
01/25/2016  $9.68  2.85%
EDIT: Looks like a transposition error: 9.67 -> 9.76.

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Thu Jan 28, 2016 1:53 pm

Kevin M wrote:
Coles wrote:On Vanguard's site, they have restated the Jan. 22 prices of VFIDX and VFICX to a more reasonable value.
Yup:

Code: Select all

Date        Price  Yield

01/21/2016  $9.68  2.87%
01/22/2016  $9.67  2.88%
01/25/2016  $9.68  2.85%
EDIT: Looks like a transposition error: 9.67 -> 9.76.

Kevin
Thanks for finding that -
I just do not know how that can happen with integrated computing systems. It's not 1979 where you might have some secretary squinting through their readers re-typing from one document to the other but than again there are always some unexpected manual entry necessary due to systems issues. I did resend my note to Vanguard noting that we are now approaching the end of the 4th business day and I am still awaiting an explanation.

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Re: VFIDX up .83% in one day?

Post by stlutz » Thu Jan 28, 2016 8:52 pm

Looks like a transposition error: 9.67 -> 9.76.
There were multiple funds that had the pricing issue. I think the numeric transposition is coincidence.

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Re: VFIDX up .83% in one day?

Post by Kevin M » Thu Jan 28, 2016 9:03 pm

stlutz wrote:
Looks like a transposition error: 9.67 -> 9.76.
There were multiple funds that had the pricing issue. I think the numeric transposition is coincidence.
Yeah, I agree; just caught my attention.

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Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by OldSam » Thu Jan 28, 2016 11:11 pm

[Thread merged into here, see below. --admin LadyGeek]

The Vanguard VFICX and VFIDX Bond Funds are Intermediate Term Bond funds with average effective maturity of 6.2 years. It is not s Junk Bind fund. 99.4% Bonds in the portfolio are Baa3 or higher. About 77% Bonds are A3 or higher.

I have followed it and invested in it for couple years. As expected, the NAV moves up/down in the same direction as the 10 Year Tbill though not by the same amount.

However, it seems that their algorithm or the data feed for End Of Day Bond prices went haywire on Friday to me that a drastic error was made in determining the NAV last Friday 22 Jan 2016. The 10 year TBill rate closed slightly higher 2.05 vs. 2.02 on Thu 21 Jan '16 , which should have resulted in slight drop in NAV. Instead the VFIDX NAV shot up by .08 (0.82%).

On Monday 25 Jan 2016 the 10 year TBill rate closed slightly lower. It went back down to 2.02 - same as Thu 21 Jan '16. Again when the rate goes down, one expects the NAV to move slightly higher. Instead it went down by the same amount, i.e. .08. In other words, the error made on
Friday was corrected on Monday.

The net impact on those who bought the fund on Friday or sold it on Monday based on the prior day closing price and the 19 year Tbill rate just before the market close time was pretty bad.

Has anyone seen this before? Does anyone know how Vanguard NAV is calculated?

Thanks,

Old Sam

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Re: Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by Kevin M » Fri Jan 29, 2016 12:22 am

Duplicate post. The price error has been corrected on the Vanguard website.

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Re: Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by saltycaper » Fri Jan 29, 2016 12:23 am

Hi OldSam. Welcome to the forum!

There's an ongoing thread about the pricing issue here: VFIDX up .83% in one day?
Quod vitae sectabor iter?

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Re: Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by OldSam » Fri Jan 29, 2016 1:11 am

Thank you for providing link to the discussion already started.

I am newbee to this forum. I searched for VFIDX NAV error and did not find the other discussion thread. Will add my two cents to the other thread.

Thanks again,

Old Sam

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Re: VFIDX up .83% in one day?

Post by OldSam » Fri Jan 29, 2016 1:34 am

Does anyone know when exactly Vanguard restated (corrected retroactively) the Friday NAV from 9.76 to 9.67?

The first post pointing out the correction is by Coles on Thursday 11:01 AM (EST I think).

As has been pointed out already, VFIDX Admiral Fund requires minimum $50K balance. To keep the arithmetic simple, if someone looked at the Friday 1/22/16 NAV of $9.76 few minutes before 4 PM EST Monday 1/25/16 and the fact that 10 year TBill rate had dropped from 2.05% to 2.02%, a rational conclusion would be that the NAV for Monday 1/25/16 will be $9.76 or a bit higher.

If the person then decided to sell $100K VFIDX (based on $9.76 NAV) to settle other trades or whatever reason, s/he will end up with a loss of $820, i.e. s/he will receive only $99,180 instead of $100K.

VFIDX is not a long term investment. It is a semi-liquid Bond Fund to park money with reasonable return - about 3% annual rate. Loss of .83% is not trivial. It is more than 3 months dividends.

One can accept the loss if it is due to market event such as rapid interest rate movement, which was not the case here. This was clearly a posting error by Vanguard.

Can one expect Vanguard to cancel the trade in such cases?

Thanks,

Old Sam

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Re: Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by Kevin M » Fri Jan 29, 2016 3:39 pm

Typically a moderator will merge new similar threads into the prior existing thread, so don't be surprised if you see that happen.

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Re: VFIDX up .83% in one day?

Post by Kevin M » Fri Jan 29, 2016 3:42 pm

I would expect Vanguard to correct all trades that used the incorrect price. Could get messy for people who were trying to do very precise things. Will be interesting to see reports from people who were affected.

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Re: Erroneous Vanguard VFIDX/VFICX NAV calculation

Post by LadyGeek » Fri Jan 29, 2016 4:32 pm

Kevin M wrote:Typically a moderator will merge new similar threads into the prior existing thread, so don't be surprised if you see that happen.

Kevin
Surprise! I merged OldSam's thread into here, which is in the Investing - Theory, News & General forum.

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Re: VFIDX up .83% in one day?

Post by HuckFinn » Fri Jan 29, 2016 7:36 pm

I did receive a response from the inquiry I sent Vanguard last weekend concerning this issue. The response reads:

Thank you for taking the time to contact us.

Thank you for expressing your interest on this topic and your patience as
we respond. Vanguard overstated net asset values (NAVs) for Vanguard
Long-Term Investment-Grade Fund and Vanguard Intermediate-Term
Investment-Grade Fund (VFIDX). The NAVs for both funds were overstated by
$0.08 and $0.09 per share (less than 1% of NAV), respectively, on January
22, 2016. The NAV for the Long-Term Investment-Grade Fund was also
overstated by $0.08 on January 25, 2016.

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