Vanguard stole $0.01?

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shawn_lad
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Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:17 pm

I was a little surprised by my first mutual fund purchase at Vanguard.

I asked them to buy $14,000 worth if VTSAX on Jan 23. They did withdraw $14,000 and bought 213.18700 shares at $65.67000 according to the transaction confirmation statement as well as current holdings, but instead of charging 13,999.99, the statement says the total cost was $14,000, the full amount withdrawn from my bank.

The "Brokerage transaction confirmation" has on the same line:
Quantity: 213.18700
Price: 65.67000
Net amount: $14,000.00

Well, if you multiply the first two, you will NOT get the last one...

At the time of the transaction, Vanguard page in fact showed 13999.99 but now I can't find that page. So what happens to these odd $0.01 amounts? Why don't they show up in the sweep account?

There was a famous fraud where someone was stealing fractions of pennies from many transactions to make millions. I assume that's not happening here but just curious if others have seen the same outcome.

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8foot7
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Re: Vanguard stole $0.01?

Post by 8foot7 » Fri Jan 25, 2019 1:21 pm

Surely you and I have both wasted more than a penny typing words into the screen to converse on this thread.

02nz
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Re: Vanguard stole $0.01?

Post by 02nz » Fri Jan 25, 2019 1:22 pm

Yep they stole your cent. It’s so they can reduce expense ratios by 0.000000000000001%. Gotta compete with Fidelity’s Zero funds.

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JoMoney
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Re: Vanguard stole $0.01?

Post by JoMoney » Fri Jan 25, 2019 1:23 pm

8foot7 wrote:
Fri Jan 25, 2019 1:21 pm
Surely you and I have both wasted more than a penny typing words into the screen to converse on this thread.
It's not worth a penny if nobody would be willing to pay a penny for it.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

livesoft
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Re: Vanguard stole $0.01?

Post by livesoft » Fri Jan 25, 2019 1:23 pm

I got your $0.01 and, of course, the $0.01 of many other people.

Here's proof: Vanguard sells shares at 42% discount!
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JoMoney
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Re: Vanguard stole $0.01?

Post by JoMoney » Fri Jan 25, 2019 1:25 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
...
The "Brokerage transaction confirmation" has on the same line:
Quantity: 213.18700
Price: 65.67000
Net amount: $14,000.00

Well, if you multiply the first two, you will NOT get the last one...
....
And yet, if you divide the last by the first you do get the price...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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jhfenton
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Re: Vanguard stole $0.01?

Post by jhfenton » Fri Jan 25, 2019 1:26 pm

That's a bit melodramatic.

With rounding, sometimes you end up with a penny or two extra value and sometimes you end up with a penny or two less. The math on your transaction looks right. $14,000 / $65.67 = 213.187147. All mutual fund transactions are rounded to the nearest thousandth, so you end up with 213.187 shares. Yes, if you multiply 213.187 by $65.67, you end up with $13,999.99, but that happens with rounding. Sometimes it works out the other way.

In fact, when I ended up with an odd $0.02 in my settlement account yesterday, I placed an order for VFVSX. The closing price was $38.41. $0.02 / $38.41 = 0.000521, which rounds up to 0.001. So I made 1.8 cents!

corysold
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Re: Vanguard stole $0.01?

Post by corysold » Fri Jan 25, 2019 1:26 pm

Perhaps they only show 5 digits after the decimal and you in fact own 213.187004 shares?

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:27 pm

8foot7 wrote:
Fri Jan 25, 2019 1:21 pm
Surely you and I have both wasted more than a penny typing words into the screen to converse on this thread.
True, and surely it's not the 0.01 that I am concerned about. I am just surprised to see that their statement does not multiply the numbers correctly. I already go above and beyond to check brokerage statements, but it never occurred to me to check simple math that they do! Could similar mistakes be happening on larger scales too then?

I just have not seen similar things with other brokerages I've used, but I've mostly used ETFs in the past and so my question is whether this is something specific to Vanguard or to mutual funds?

lukestuckenhymer
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Re: Vanguard stole $0.01?

Post by lukestuckenhymer » Fri Jan 25, 2019 1:28 pm

Rounding, the silent thief. I was shorted $0.04 of my salary last year too. I'm incensed! :o

livesoft
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Re: Vanguard stole $0.01?

Post by livesoft » Fri Jan 25, 2019 1:29 pm

It is specific to all transactions with fractional shares. In particular, small dollar amounts of re-invested dividends of ETFs are particularly susceptible to round-off problems.
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Re: Vanguard stole $0.01?

Post by jhfenton » Fri Jan 25, 2019 1:30 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:27 pm
8foot7 wrote:
Fri Jan 25, 2019 1:21 pm
Surely you and I have both wasted more than a penny typing words into the screen to converse on this thread.
True, and surely it's not the 0.01 that I am concerned about. I am just surprised to see that their statement does not multiply the numbers correctly. I already go above and beyond to check brokerage statements, but it never occurred to me to check simple math that they do! Could similar mistakes be happening on larger scales too then?

I just have not seen similar things with other brokerages I've used, but I've mostly used ETFs in the past and so my question is whether this is something specific to Vanguard or to mutual funds?
They did not make a mistake. Their math is absolutely 100% correct. Brokerages only track mutual funds to thousandths of a share. There are some funds where a thousandth of a share is more than 20 cents, so you can easily "make" or "lose" up to 10 cents on any purchase. That's just the way it works.

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:31 pm

corysold wrote:
Fri Jan 25, 2019 1:26 pm
Perhaps they only show 5 digits after the decimal and you in fact own 213.187004 shares?
Even if I did, 213.187004 * 65.67 is still 13999.99

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Re: Vanguard stole $0.01?

Post by knpstr » Fri Jan 25, 2019 1:32 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
There was a famous fraud where someone was stealing fractions of pennies from many transactions to make millions. I assume that's not happening here but just curious if others have seen the same outcome.
Are you referring to Superman III?

I have never seen Superman III but that was the movie referenced to in the great move "Office Space" which they attempted to do the same thing and hilarity ensues.

:beer
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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:33 pm

jhfenton wrote:
Fri Jan 25, 2019 1:26 pm
That's a bit melodramatic.

With rounding, sometimes you end up with a penny or two extra value and sometimes you end up with a penny or two less. The math on your transaction looks right. $14,000 / $65.67 = 213.187147. All mutual fund transactions are rounded to the nearest thousandth, so you end up with 213.187 shares. Yes, if you multiply 213.187 by $65.67, you end up with $13,999.99, but that happens with rounding. Sometimes it works out the other way.

In fact, when I ended up with an odd $0.02 in my settlement account yesterday, I placed an order for VFVSX. The closing price was $38.41. $0.02 / $38.41 = 0.000521, which rounds up to 0.001. So I made 1.8 cents!
Thanks! I'll chalk it up to that.
Last edited by shawn_lad on Fri Jan 25, 2019 1:35 pm, edited 1 time in total.

Frankieg48336
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Re: Vanguard stole $0.01?

Post by Frankieg48336 » Fri Jan 25, 2019 1:34 pm

The movie office space comes to mind.

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munemaker
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Re: Vanguard stole $0.01?

Post by munemaker » Fri Jan 25, 2019 1:35 pm

It is an old scam. There is probably a rogue programmer at Vanguard who is accumulating the partial cents in his expense account. This clip from Superman III explains it.

https://www.youtube.com/watch?v=N7JBXGkBoFc

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Re: Vanguard stole $0.01?

Post by KyleAAA » Fri Jan 25, 2019 1:37 pm

Ahh, so that's how Vanguard keeps expenses so low. They use the Office Space strategy.

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GoldStar
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Re: Vanguard stole $0.01?

Post by GoldStar » Fri Jan 25, 2019 1:40 pm

Everytime I was splitting the bill with someone else at a restaurant and the bill was an odd amount somehow I ended up paying the extra penny (e.g. wait-staff puts $101.44 on their card and $101.45 on mine) so now whenever I throw down a credit card with someone else with us agreeing to split I tell the wait-staff "Make sure you put the extra penny on their card this time". Maybe next time the rounding will give you a penny!

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:41 pm

jhfenton wrote:
Fri Jan 25, 2019 1:30 pm
They did not make a mistake. Their math is absolutely 100% correct. Brokerages only track mutual funds to thousandths of a share. There are some funds where a thousandth of a share is more than 20 cents, so you can easily "make" or "lose" up to 10 cents on any purchase. That's just the way it works.
Thanks, I understand this is the way it works, but the math is NOT really correct.

Normally, in similar situations (e.g. ESPP purchases and such), all "left over" money gets deposited to sweep account. That's what I've been used to. I don't mind them purchasing 213.18700 shares if that's the precision they want, but then why not leave the left-over amounts for the owner? Just seems a bit strange I think.

At the end of the day, they gave me precisely 213.18700 shares as far as I understand at precisely the $65.67 price, and instead of giving the leftover penny me, they took it away. I'll have to redo my budget now! :-)

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:47 pm

livesoft wrote:
Fri Jan 25, 2019 1:23 pm
I got your $0.01 and, of course, the $0.01 of many other people.

Here's proof: Vanguard sells shares at 42% discount!
Haha.. Thanks!

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 1:53 pm

JoMoney wrote:
Fri Jan 25, 2019 1:25 pm
shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
...
The "Brokerage transaction confirmation" has on the same line:
Quantity: 213.18700
Price: 65.67000
Net amount: $14,000.00

Well, if you multiply the first two, you will NOT get the last one...
....
And yet, if you divide the last by the first you do get the price...
No, you don't. You get 65.670045, while their statement says 65.67000

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jhfenton
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Re: Vanguard stole $0.01?

Post by jhfenton » Fri Jan 25, 2019 1:56 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:41 pm
jhfenton wrote:
Fri Jan 25, 2019 1:30 pm
They did not make a mistake. Their math is absolutely 100% correct. Brokerages only track mutual funds to thousandths of a share. There are some funds where a thousandth of a share is more than 20 cents, so you can easily "make" or "lose" up to 10 cents on any purchase. That's just the way it works.
Thanks, I understand this is the way it works, but the math is NOT really correct.

Normally, in similar situations (e.g. ESPP purchases and such), all "left over" money gets deposited to sweep account. That's what I've been used to. I don't mind them purchasing 213.18700 shares if that's the precision they want, but then why not leave the left-over amounts for the owner? Just seems a bit strange I think.

At the end of the day, they gave me precisely 213.18700 shares as far as I understand at precisely the $65.67 price, and instead of giving the leftover penny me, they took it away. I'll have to redo my budget now! :-)
No brokers do that. If they gave you back the pennies when they round down, they would have to stop rounding up.

I do think the industry should go to ten-thousandths at this point. The computing power is definitely there. But it would require rewriting every brokerage system in the industry, and I don't think there is any prospect of doing so.

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ResearchMed
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Re: Vanguard stole $0.01?

Post by ResearchMed » Fri Jan 25, 2019 1:56 pm

GoldStar wrote:
Fri Jan 25, 2019 1:40 pm
Everytime I was splitting the bill with someone else at a restaurant and the bill was an odd amount somehow I ended up paying the extra penny (e.g. wait-staff puts $101.44 on their card and $101.45 on mine) so now whenever I throw down a credit card with someone else with us agreeing to split I tell the wait-staff "Make sure you put the extra penny on their card this time". Maybe next time the rounding will give you a penny!
And indeed that sometimes happens.

We've been "shorted" (per OP's terminology, so to speak) by up to 3 cents, but when it happens, it's almost always 1 cent.

And we've MADE OUT LIKE BANDITS, I TELL YOU!!! when we get something like $10,000.01 worth of "x fund" :happy

RM
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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 2:07 pm

livesoft wrote:
Fri Jan 25, 2019 1:29 pm
It is specific to all transactions with fractional shares. In particular, small dollar amounts of re-invested dividends of ETFs are particularly susceptible to round-off problems.
jhfenton wrote:
Fri Jan 25, 2019 1:56 pm
No brokers do that. If they gave you back the pennies when they round down, they would have to stop rounding up.

I do think the industry should go to ten-thousandths at this point. The computing power is definitely there. But it would require rewriting every brokerage system in the industry, and I don't think there is any prospect of doing so.
Well, I am thinking of ESPP where I get round numbers of shares of a company stock. There, everything always matches to the penny and everything left over goes to the sweep account.

I think you and livesoft effectively are saying that all fractional shares for mutual funds (and ETFs?) work with these types of rounding errors (even though IMO they don't have to - it's very easy to correct for them). That's exactly the answer I was looking for. So, thank you, again!

One related (I guess, mostly theoretical) issue: filing taxes for these lots. When rounding all numbers on tax returns to $1, this would NOT come up in most cases, but if error in one transaction is large enough to push rounding to next dollar, I suppose IRS computers could find the incorrect math if we state number of shares and price purchased vs incorrect basis assigned to that purchase. I guess I better not purchase anything for $XXX.50 since I might end up with #shares * price being $(XXX-1) and IRS computer may not like that stated basis (as per brokerage) does not match the price * #shares.
Last edited by shawn_lad on Fri Jan 25, 2019 2:21 pm, edited 3 times in total.

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JoMoney
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Re: Vanguard stole $0.01?

Post by JoMoney » Fri Jan 25, 2019 2:09 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:53 pm
JoMoney wrote:
Fri Jan 25, 2019 1:25 pm
shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
...
The "Brokerage transaction confirmation" has on the same line:
Quantity: 213.18700
Price: 65.67000
Net amount: $14,000.00

Well, if you multiply the first two, you will NOT get the last one...
....
And yet, if you divide the last by the first you do get the price...
No, you don't. You get 65.670045, while their statement says 65.67000
What currency are you using that goes out three or four decimal places?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 2:10 pm

JoMoney wrote:
Fri Jan 25, 2019 2:09 pm
What currency are you using that goes out three or four decimal places?
The currency displayed in the statement out to 5 decimal places.

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Re: Vanguard stole $0.01?

Post by jadedfalcons » Fri Jan 25, 2019 2:13 pm

knpstr wrote:
Fri Jan 25, 2019 1:32 pm
shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm

I have never seen Superman III
Keep it that way. Seriously. Don't change that.

Nobody should ever have to see Superman III.

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Re: Vanguard stole $0.01?

Post by pdavi21 » Fri Jan 25, 2019 2:16 pm

Try selling an ETF; they will "steal" much more than one penny. It could be tens or even, dare I say, hundreds of pennies.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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Cosmo
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Re: Vanguard stole $0.01?

Post by Cosmo » Fri Jan 25, 2019 2:21 pm

Wow, I just assumed this wasn’t a serious post but evidently it is, with more than 20 people responding! I don’t really have anything to add so please consider this my two cents worth. There. You are now a penny ahead. Problem solved.

Cosmo

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Abe
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Re: Vanguard stole $0.01?

Post by Abe » Fri Jan 25, 2019 2:30 pm

I had a customer one time who told me that he would shop with me, but his total bill had to be $20 even. I'm not making this up. If it was $19.99 or $20.01, he would walk out. Back then we sold penny candy, so I always made his bill come out to 20 dollars even. Sometimes his bill would be over $20, so we would put something back. Goes to show you how bad I needed the business. Times were tough back then. :happy
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Re: Vanguard stole $0.01?

Post by Doom&Gloom » Fri Jan 25, 2019 2:34 pm

8foot7 wrote:
Fri Jan 25, 2019 1:21 pm
Surely you and I have both wasted more than a penny typing words into the screen to converse on this thread.
I got far more than a penny's worth of entertainment reading the thread.

Eye of the beholder!

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Alexa9
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Re: Vanguard stole $0.01?

Post by Alexa9 » Fri Jan 25, 2019 2:43 pm

It’s kind of like the penny jar at a gas station. Sometimes you leave a penny, sometimes you take one but it all averages out.

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Re: Vanguard stole $0.01?

Post by KJVanguard » Fri Jan 25, 2019 3:03 pm

Pennies are so utterly worthless that you could pour them on the ground and nobody would bother to pick it up. It might be considered littering.

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Re: Vanguard stole $0.01?

Post by barber » Fri Jan 25, 2019 3:40 pm

Maybe it's time to move to EDJ

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Re: Vanguard stole $0.01?

Post by Grasshopper » Fri Jan 25, 2019 3:51 pm

KJVanguard wrote:
Fri Jan 25, 2019 3:03 pm
Pennies are so utterly worthless that you could pour them on the ground and nobody would bother to pick it up. It might be considered littering.

Where did I read about the guy that drilled holes in pennies because washers were 4 cents. :sharebeer

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Re: Vanguard stole $0.01?

Post by nisiprius » Fri Jan 25, 2019 4:26 pm

I agree that it would be interesting to know the explanation.

I would keep watching your account, though, sometimes weird things happen that take a few days to settle down. Like maybe the extra penny will appear in your settlement account on the settlement date, or something.

Now, if you would really like a challenge, run up a finance charge on your credit card account and then see if you can manage to calculate the finance charge yourself and come up with the same number. I tried that once and gave up, defeated. Although one of the keys was a tip I got from my father-in-law, a farmer with a distrust of banks, from whom I learned that when a bank owes you money, a year is a year, but when you owe a bank money, a year is 360 days.
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Re: Vanguard stole $0.01?

Post by nedsaid » Fri Jan 25, 2019 4:33 pm

jhfenton wrote:
Fri Jan 25, 2019 1:26 pm
That's a bit melodramatic.

With rounding, sometimes you end up with a penny or two extra value and sometimes you end up with a penny or two less. The math on your transaction looks right. $14,000 / $65.67 = 213.187147. All mutual fund transactions are rounded to the nearest thousandth, so you end up with 213.187 shares. Yes, if you multiply 213.187 by $65.67, you end up with $13,999.99, but that happens with rounding. Sometimes it works out the other way.

In fact, when I ended up with an odd $0.02 in my settlement account yesterday, I placed an order for VFVSX. The closing price was $38.41. $0.02 / $38.41 = 0.000521, which rounds up to 0.001. So I made 1.8 cents!
Yep, it is just math. When shares are rounded off to three places, sometimes the transaction is a penny over or a penny under. I don't think there is a room full of pennies at Vanguard stolen from their clients. I used to reconcile mutual fund trades for a regional bank and saw this effect many times.
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shawn_lad
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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 5:13 pm

nedsaid wrote:
Fri Jan 25, 2019 4:33 pm
Yep, it is just math. When shares are rounded off to three places, sometimes the transaction is a penny over or a penny under. I don't think there is a room full of pennies at Vanguard stolen from their clients. I used to reconcile mutual fund trades for a regional bank and saw this effect many times.
Understood. I just did not realize there would be a difference between 0-place rounding and 3-place rounding. Both could be handled exactly the same way.

When ESPP program accumulates say $1025.37 and needs to buy as many shares as possible at $100.00/share, they find the max number of shares they can buy, i.e. 10, and deposit the leftover $25.37 into sweep account. If they chose to go to 3 places and buy 10.253 shares, they'd just deposit $0.07 into a sweep account using the same program presumably. The math and all calculations would be the same. Just a matter of how far to round.

But I understand from the answers here that's not the industry practice with mutual funds and perhaps ETFs it seems.

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Re: Vanguard stole $0.01?

Post by shawn_lad » Fri Jan 25, 2019 5:15 pm

knpstr wrote:
Fri Jan 25, 2019 1:32 pm
Are you referring to Superman III?
No, I forget where I heard it from, but here is one link: https://en.wikipedia.org/wiki/Salami_slicing

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Epsilon Delta
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Re: Vanguard stole $0.01?

Post by Epsilon Delta » Fri Jan 25, 2019 5:20 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:41 pm
jhfenton wrote:
Fri Jan 25, 2019 1:30 pm
They did not make a mistake. Their math is absolutely 100% correct. Brokerages only track mutual funds to thousandths of a share. There are some funds where a thousandth of a share is more than 20 cents, so you can easily "make" or "lose" up to 10 cents on any purchase. That's just the way it works.
Thanks, I understand this is the way it works, but the math is NOT really correct.
The math is really correct, it's just not the math you expect.

Various accounting standards define exactly how rounding should be done. Auditors get really jumpy if you don't follow the standards exactly.

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nedsaid
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Re: Vanguard stole $0.01?

Post by nedsaid » Fri Jan 25, 2019 5:23 pm

shawn_lad wrote:
Fri Jan 25, 2019 5:13 pm
nedsaid wrote:
Fri Jan 25, 2019 4:33 pm
Yep, it is just math. When shares are rounded off to three places, sometimes the transaction is a penny over or a penny under. I don't think there is a room full of pennies at Vanguard stolen from their clients. I used to reconcile mutual fund trades for a regional bank and saw this effect many times.
Understood. I just did not realize there would be a difference between 0-place rounding and 3-place rounding. Both could be handled exactly the same way.

When ESPP program accumulates say $1025.37 and needs to buy as many shares as possible at $100.00/share, they find the max number of shares they can buy, i.e. 10, and deposit the leftover $25.37 into sweep account. If they chose to go to 3 places and buy 10.253 shares, they'd just deposit $0.07 into a sweep account using the same program presumably. The math and all calculations would be the same. Just a matter of how far to round.

But I understand from the answers here that's not the industry practice with mutual funds and perhaps ETFs it seems.
It evens itself out I suspect, I notice that if the fourth decimal point is rounded up. So you could get as much as .00049 extra share on a purchase or dividend reinvestment. Just as there must be a storage room for those pennies, there is a supply room for those "extra" fractional shares. :wink:
A fool and his money are good for business.

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Re: Vanguard stole $0.01?

Post by H-Town » Fri Jan 25, 2019 5:26 pm

shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
I was a little surprised by my first mutual fund purchase at Vanguard.

I asked them to buy $14,000 worth if VTSAX on Jan 23. They did withdraw $14,000 and bought 213.18700 shares at $65.67000 according to the transaction confirmation statement as well as current holdings, but instead of charging 13,999.99, the statement says the total cost was $14,000, the full amount withdrawn from my bank.

The "Brokerage transaction confirmation" has on the same line:
Quantity: 213.18700
Price: 65.67000
Net amount: $14,000.00

Well, if you multiply the first two, you will NOT get the last one...

At the time of the transaction, Vanguard page in fact showed 13999.99 but now I can't find that page. So what happens to these odd $0.01 amounts? Why don't they show up in the sweep account?

There was a famous fraud where someone was stealing fractions of pennies from many transactions to make millions. I assume that's not happening here but just curious if others have seen the same outcome.
LOL thank you for a good laugh!!!!

1 cent!!!!

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Stinky
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Re: Vanguard stole $0.01?

Post by Stinky » Fri Jan 25, 2019 5:34 pm

DW thinks that Bogleheads are weird.

If DW ever sees this thread, she will think that this thread proves her point.

I will make sure that DW never sees this thread.
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knpstr
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Re: Vanguard stole $0.01?

Post by knpstr » Fri Jan 25, 2019 5:45 pm

shawn_lad wrote:
Fri Jan 25, 2019 5:15 pm
knpstr wrote:
Fri Jan 25, 2019 1:32 pm
Are you referring to Superman III?
No, I forget where I heard it from, but here is one link: https://en.wikipedia.org/wiki/Salami_slicing
Interesting, that link references Superman III and all of the mentioned crimes happened after the movie was released in 1983. I wonder if there are any instances of such a crime or attempted crime before the movie or if the movie started it all?
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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alpenglow
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Re: Vanguard stole $0.01?

Post by alpenglow » Fri Jan 25, 2019 5:48 pm

Stinky wrote:
Fri Jan 25, 2019 5:34 pm
DW thinks that Bogleheads are weird.

If DW ever sees this thread, she will think that this thread proves her point.

I will make sure that DW never sees this thread.
Thanks for a good laugh.

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Re: Vanguard stole $0.01?

Post by willthrill81 » Fri Jan 25, 2019 6:04 pm

knpstr wrote:
Fri Jan 25, 2019 1:32 pm
shawn_lad wrote:
Fri Jan 25, 2019 1:17 pm
There was a famous fraud where someone was stealing fractions of pennies from many transactions to make millions. I assume that's not happening here but just curious if others have seen the same outcome.
Are you referring to Superman III?

I have never seen Superman III but that was the movie referenced to in the great move "Office Space" which they attempted to do the same thing and hilarity ensues.

:beer
Beat me to it! :wink:
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Re: Vanguard stole $0.01?

Post by ccieemeritus » Fri Jan 25, 2019 6:11 pm

Perhaps you could mail them a letter to complain about the 1 cent?

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Re: Vanguard stole $0.01?

Post by fortyofforty » Fri Jan 25, 2019 6:57 pm

I do find it amusing that a group that obsesses over expense ratios of .06 versus .05 would belittle a poster trying to understand why her purchase wasn't handled in a manner she understands. I doubt anyone here would accept if the local grocery store kept a cent on a purchase, without giving her the opportunity to drop it in the "Leave a Penny/Take a Penny" dish. But, hey, it's Vanguard so...
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Vanguard stole $0.01?

Post by nisiprius » Fri Jan 25, 2019 8:08 pm

Sorry, I agree with shawn_lad that there is something interesting to understand here, although "Vanguard stole $0.01" is justifiably raising hackles. I have enough trust in Vanguard to assume that they are following standard procedures, but it would be interesting to know what those procedures are.

I'm guessing something like this happens. I think it makes sense if you think in terms of rounding shares to thousandths of a shares, rather than rounding money.

1) You place an order for $14,000.00

At the instant you place the order, Vanguard takes $14,000.00 out of your account in order to be completely sure it can complete the transaction. It wants the money before it executes the order. The order might be hours before close of trade. At the time it commits to taking the order and taking the money, it doesn't know what the NAV will be so it doesn't know that only $13,999.99 will be needed.

Only at close of day does it discover that the exact NAV is $65.67. $14,000 / $65.67 = 213.187147860514695. They apparently can only give you integral thousandths of a share, so they round the number of shares to 213.187. They give you 213.187 shares.

As shawn_lad observes, $65.67 x 213.187 = 13999.99029.

At the instant it gave you the shares, the shares have a NAV that is 0.00971 lower than the amount you paid.

(Shame on Shawn_lad for claiming Vanguard stole $0.01 when they only stole $0.00971! Such exaggeration!)

I think probably the idea is that you aren't a little short on money, it's that you are a little short on shares. You deserved 213.187147860514695 and you only received 213.187 shares.

People in the thread seem to be saying that it sometimes works the other way--sometimes they order, say, $14,000.00 worth and get a penny or two more than they ordered.

That is, if the NAV at close of day had been $65.66 instead of $65.67, you would have deserved 213.219616204690832 shares. Perhaps Vanguard would have rounded that to 213.220 shares. In that case, $65.66 x 213.220 = $14000.0252 and you'd have been a little bit ahead of the game.

If that's how it works, then the roundoff errors could be more than a penny, could go either way, and would even out in the long run.

And, if that's how it works, then the correct thread title would be "Vanguard stole 0.00014786 shares?"

shawn_lad feels that since the value of the shares he received was only $13,999.99029, Vanguard should have refunded a penny.

Now, there are two ways to handle that.

2a) One is to round the fund purchase to the nearest thousandth of a share, and then settle the stray fractions of cents later. If the NAV had been $65.66, then Vanguard should have given shawn_lad $14,000.0252 worth of fund shares and billed him for three cents? two cents?

2b) Another is always to truncate the number of shares (round down) so that you never get more than the number of dollars you ordered, and each tiny shortfall should be rounded to the nearest penny and go into your settlement account.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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