[Lack of] Auto-rebalancing tool at Vanguard

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KyleAAA
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[Lack of] Auto-rebalancing tool at Vanguard

Post by KyleAAA »

Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's? Pretty much every 401k plan in existence seems to offer this. It's right at the top of my wish list. I can understand not auto-rebalancing for a taxable account, but I can't for the life of me think of a valid reason not to at least offer it for IRAs.

Please Vanguard!
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Post by Beagler »

It already exists for a variable annuity accounts so I don't see why not.
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Post by gkaplan »

I'm math-challenged, but I still can figure out how to rebalance my portfolio. I don't need an automatic rebalancing tool.
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Post by KyleAAA »

Math isn't the problem. It would take my portfolio management down from 30 minutes per year to 30 seconds. That's a huge benefit.
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Post by infecto »

It would be nice but I would rather pay lower fees.
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Post by DSInvestor »

I imagine that most folks have many different accounts at different firms - IRAs here, His 401k there, Her 403b somewhere else. I'm not sure an auto-rebalancing tool at vanguard would be of much help to one's portfolio if is held at 3-4 different firms. Employer plans may have high cost investments so an investor may pick one of two of the lowest cost funds in the workplace plans and use IRA to fill in the gaps.

I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.

In the absence of an auto-rebalancing tool, you could use a balanced or asset allocation fund in your IRA accounts. :)
Last edited by DSInvestor on Tue Aug 03, 2010 11:30 am, edited 1 time in total.
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Post by KyleAAA »

DSInvestor wrote:
I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
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Post by tetractys »

KyleAAA wrote:
DSInvestor wrote:
I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
It would also be a disaster for many investors (?) pushing the rebalancer/fee generator button for fun every other day, staring at the indicators going up and down. -- Tet
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Post by KyleAAA »

tetractys wrote:
KyleAAA wrote:
DSInvestor wrote:
I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
It would also be a disaster for many investors (?) pushing the rebalancer/fee generator button for fun every other day, staring at the indicators going up and down. -- Tet
I've never seen evidence this occurs in 401k plans with the feature.
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Post by nisiprius »

KyleAAA wrote:
DSInvestor wrote:I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
I agree completely. And I am unsympathetic to the knee-jerk "don't increase my costs for a service I won't use" reaction, because I think the cost would be negligible. (If it really isn't, then let 'em charge a fee).

It is not very different from work the IT system is already doing.

1) You already have automatic trades, at no fee, via the automatic automatic withdrawals, deposits and exchanges.. You can set up as many as you like (I have no idea whether there's any upper limit at all), on a variety of schedules, with four different methods of calculating the amount of the exchange (constant dollar, constant # of share, constant percentage, and "declining balance").

2) You already have automatic asset percentage calculation, in the little pie chart they display, and in the portfolio analysis tool.

For various reasons I think it would be an awful idea, but one certainly could imagine a program running on one's own PC that would robotically log in to Vanguard, screen-scrape the portfolio contents, and automatically issue the orders to rebalance.

3) While they are at it, they might give you the option of implementing the "managed payout" payout calculation, on the portfolio of a choice, using a percentage value of your own choice.
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Post by SpringMan »

Could the tool be trusted as accurate if it was offered? I point this out in light of the recent thread on the short comings of Vanguard's Portfolio Watch analysis tool.
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Post by KyleAAA »

SpringMan wrote:Could the tool be trusted as accurate if it was offered? I point this out in light of the recent thread on the short comings of Vanguard's Portfolio Watch analysis tool.
The implementation is pretty trivial, so I'd say yes.
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Post by mas »

SpringMan wrote:Could the tool be trusted as accurate if it was offered? I point this out in light of the recent thread on the short comings of Vanguard's Portfolio Watch analysis tool.
I think that the input would be the desired % of each fund, not the desired % of each asset class.
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Post by tetractys »

KyleAAA wrote:
tetractys wrote:
KyleAAA wrote:
DSInvestor wrote:
I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
It would also be a disaster for many investors (?) pushing the rebalancer/fee generator button for fun every other day, staring at the indicators going up and down. -- Tet
I've never seen evidence this occurs in 401k plans with the feature.
I've seen this happen with friends of mine, without much I could do about it. I'm fairly certain the implementation of an application like this would be more advantageous to the house than to the investor.

Maybe Vanguard would implement it with more regard to the investor, and with several safeguards in place. How can a simple rebalancing mechanism take into consideration all the account contingencies and individual circumstances of those contingencies? Certainly it could be done; but not so simply as those eye candy applications at certain brokers I won't mention.

Best regards, Tet
Last edited by tetractys on Tue Aug 03, 2010 1:19 pm, edited 2 times in total.
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Auto-Rebalancing Tool

Post by EyeDee »

.
Although I would consider using such an auto-rebalancing a tool as it could make management of our IRAs easier, especially for my wife if something happened to me, I would be concerned about the impact on Vanguard's funds.

I believe it has been posted on the forum that some Vanguard 401k plans support auto-rebalancing, but the funds involved in Vanguard 401k's are more limited than their IRAs.

If it was allowed in all IRA's it seems that it could impact the cash flow at many Vanguard funds, which I would think might cause considerable problems for the fund managers.

From the fund manager stand point it seems like such a tool would be very irritating and possibly raise fund costs considerably. Or am I missing something about this from the fund management standpoint?
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Post by Beagler »

nisiprius wrote: For various reasons I think it would be an awful idea, but one certainly could imagine a program running on one's own PC that would robotically log in to Vanguard, screen-scrape the portfolio contents, and automatically issue the orders to rebalance.
I completely concur. "Open the pod bay doors Hal...."
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Post by KyleAAA »

tetractys wrote:
KyleAAA wrote:
tetractys wrote:
KyleAAA wrote:
DSInvestor wrote:
I have taxable and tax advantaged accounts at two firms. Having an autorebalance tool at 1 firm wouldn't really help me at all. I don't think each firm having such a tool would help me either.
Okay so it wouldn't help you, but it would help me and a significant portion of other investors. And it would be super-easy to implement. I can't think of a reason not to at least offer it.
It would also be a disaster for many investors (?) pushing the rebalancer/fee generator button for fun every other day, staring at the indicators going up and down. -- Tet
I've never seen evidence this occurs in 401k plans with the feature.
I've seen this happen with friends of mine, without much I could do about it. I'm fairly certain the implementation of an application like this would be more advantageous to the house than to the investor.

Maybe Vanguard would implement it with more regard to the investor, and with several safeguards in place.

Best regards, Tet
All the implementations I've ever seen were "rebalance annually" or "rebalance quarterly." Rebalancing immediately wouldn't have to be an option. But even if it were, rebalancing daily isn't horrible. It's what the target date funds and university endowments do. And besides, Vanguard funds don't charge loads. I don't see how it could be more advantageous to the house than the investor.
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Re: Auto-Rebalancing Tool

Post by KyleAAA »

EyeDee wrote:.

If it was allowed in all IRA's it seems that it could impact the cash flow at many Vanguard funds, which I would think might cause considerable problems for the fund managers.

From the fund manager stand point it seems like such a tool would be very irritating and possibly raise fund costs considerably. Or am I missing something about this from the fund management standpoint?
This is not a new problem. It has been solved. Fund companies know how to deal with cash flows like this. They've been doing it for years. I don't see any impact at all on fund costs.
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Post by hsv_climber »

My 401K (@ Vanguard) supports auto-rebalancing, i.e. I've just checked it allows me to enter % for each fund I want to own.
But I've never used this tool and not planning to use it in the future either.

Regarding people who are concerned with the frequent use - it is not an issue, since (again I just saw it in my auto-rebalancing tool) Vanguard prohibits to buy shares of funds, which were sold within the last 60 days.

So, in my auto-rebalancing tool I see (0-5% or 0-x%) range values for most funds, since I was selling them within the last 60 days, where x% is the current % of the fund in the portfolio.
Last edited by hsv_climber on Tue Aug 03, 2010 1:27 pm, edited 1 time in total.
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Fees

Post by EyeDee »

KyleAAA wrote:This is not a new problem. It has been solved. Fund companies know how to deal with cash flows like this. They've been doing it for years. I don't see any impact at all on fund costs.
.

I think the other fund companies have solved it by charging higher fees.

It seems like it would violate things Vanguard does to keep trading down and thus fees down such as redemption fees and the requirement to not buy a fund online for two months after selling.

Please provide some more details on how the other companies avoid the trading costs associated with such automatic trading.
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Post by EyeDee »

hsv_climber wrote: So, in my auto-rebalancing tool I see (0-5% or 0-x%) range values for most funds, since I was selling them within the last 60 days.
.
Thanks - that explains things some. I was thinking that such a tool would be set up to do the re-balancing each quarter or year or month. If you have to specify things each time it is used, the restrictions you mention would address many of my concerns.

If you have to specify things each time you use it, it seem like it is not of much value. To me, to be of value would be to set it up and have it work on a periodic bases. Thanks again.
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Post by Ron »

hsv_climber wrote:My 401K (@ Vanguard) supports auto-rebalancing, i.e. I've just checked it allows me to enter % for each fund I want to own.
My wife's 401(k) - Fidelity, and her 403(b) - Kemper, have this same feature. It shows the current % held along with all funds available so you can redirect your current funds, if wished.

Not "totally automatic", but better than handling it manually.

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Re: Fees

Post by KyleAAA »

EyeDee wrote:
KyleAAA wrote:This is not a new problem. It has been solved. Fund companies know how to deal with cash flows like this. They've been doing it for years. I don't see any impact at all on fund costs.
.

I think the other fund companies have solved it by charging higher fees.

It seems like it would violate things Vanguard does to keep trading down and thus fees down such as redemption fees and the requirement to not buy a fund online for two months after selling.

Please provide some more details on how the other companies avoid the trading costs associated with such automatic trading.
This would not increase the volume of buying/selling at all. It would merely automate it. I am 100% certain there would be no impact. Nothing about this feature would violate anything Vanguard does regarding keeping trading down or redemption fees.

It would not increase your costs at all. Not even a very tiny bit.
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Post by richard »

A great advantage of auto-rebalancing is that it removes emotion from the equation. It would most likely make for more disciplined investors.

No more "markets are tanking, should I really buy more" thoughts or posts here.
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Activity

Post by EyeDee »

KyleAAA wrote:This would not increase the volume of buying/selling at all. It would merely automate it. I am 100% certain there would be no impact. Nothing about this feature would violate anything Vanguard does regarding keeping trading down or redemption fees.

It would not increase your costs at all. Not even a very tiny bit.
.
I tend to agree with you, if what you want is what hsv_climber described - a tool to re-organize your funds which takes into account the fund trading/fee restrictions and has to be set up each time it is used.

I thought you were asking for an automatic re-balancing feature that would on a periodic schedule chosen by you, re-orgainaze your funds without restrictions. Such a tool would be valuable to me, but I think it would cause too much costs to the funds.

We were talking apples and oranges as far as what we expect such a tool to provide.
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Post by FredPeterson »

If the tool at least told me what to do given an input scenario, that'd be nice.

Not everybody wants to rebalance by just moving money from one fund to another (which could hamper the growth when done during a boom time). Some may want to add money, or take it out entirely.
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Post by southerndoc »

Write a letter to McNabb suggesting it.
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Re: Fees

Post by nisiprius »

EyeDee wrote:It seems like it would violate things Vanguard does to keep trading down and thus fees down such as redemption fees and the requirement to not buy a fund online for two months after selling.
I repeat: you must never have looked at the automatic investment options Vanguard provides now. I can tell Vanguard to exchange $100 out of Vanguard Total Stock Market (VTSMX) and into Vanguard Total Bond Market VBMFX every Tuesday, once a week, 52 trades a year, and they won't charge me a penny.

And, incidentally, the frequent trading rules do not apply for trades that are placed automatically.

Finally, I completely fail to see how the internal costs to Vanguard could possibly be any different for an investor holding VTSMX and VBMFX and saying "Please rebalance monthly to keep VTSMX at 60% and VBMFX at 40%" than they are now for an investor holding Vanguard Balanced Index Fund (VBINX), which does precisely that. Except I think VBINX does it daily.
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Post by rene »

Its 2010

Vanguard is still stuck in the Middle Ages

2010
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Re: Auto-rebalancing tool at Vanguard

Post by tfb »

KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's?
Knowing how Vanguard operates, I don't think it's going to happen. Vanguard accounts don't have a cash position. Auto rebalance will have you sell some funds and buy others. A sell in Vanguard means sending money to your bank account or by check. In an IRA, that's a distribution and you don't want that.
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Re: Fees

Post by hsv_climber »

nisiprius wrote:I can tell Vanguard to exchange $100 out of Vanguard Total Stock Market (VTSMX) and into Vanguard Total Bond Market VBMFX every Tuesday, once a week, 52 trades a year, and they won't charge me a penny.

And, incidentally, the frequent trading rules do not apply for trades that are placed automatically.
The above transaction does not violate frequent trading rules.

Frequent trading rules would not allow you to buy another share of VTSMX for the next 60 days from your last sell of VTSMX.
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Post by wander »

It's like your thermostat at home. You prefer to switch to heat or cool whenever you need. You do not want auto switching. For my taxable portfolio, I prefer to sell and re-balance when it makes sense (TLH or whatever). All kind of automatic rebalanced mutual funds are already available with target date retirement funds, allocation asset funds ...
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Post by exigent »

tetractys wrote:It would also be a disaster for many investors (?) pushing the rebalancer/fee generator button for fun every other day, staring at the indicators going up and down. -- Tet
Not sure I understand the concern here. Isn't this essentially what Target Date funds do? They rebalance more or less continuously, and it's not a disaster for those holding the fund -- not that I'm a fan of Target Date funds, but still.
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Re: Auto-rebalancing tool at Vanguard

Post by exigent »

tfb wrote:
KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's?
Knowing how Vanguard operates, I don't think it's going to happen. Vanguard accounts don't have a cash position. Auto rebalance will have you sell some funds and buy others. A sell in Vanguard means sending money to your bank account or by check. In an IRA, that's a distribution and you don't want that.
Why couldn't it trigger and exchange? You can exchange fund positions without having money sent out to your bank.
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Re: Auto-rebalancing tool at Vanguard

Post by tfb »

exigent wrote:
tfb wrote:
KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's?
Knowing how Vanguard operates, I don't think it's going to happen. Vanguard accounts don't have a cash position. Auto rebalance will have you sell some funds and buy others. A sell in Vanguard means sending money to your bank account or by check. In an IRA, that's a distribution and you don't want that.
Why couldn't it trigger and exchange? You can exchange fund positions without having money sent out to your bank.
Because there are too many ways to do the exchanges. Say for a rebalance, you have to:

sell $300 from fund A
sell $200 from fund B
buy $100 into fund C
buy $400 into fund D

How many ways can you come up with an exchange scheme? If a computer does it automatically in one way, one can always say that's not how they wanted to do the exchanges.
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Re: Auto-rebalancing tool at Vanguard

Post by KyleAAA »

tfb wrote:
exigent wrote:
tfb wrote:
KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's?
Knowing how Vanguard operates, I don't think it's going to happen. Vanguard accounts don't have a cash position. Auto rebalance will have you sell some funds and buy others. A sell in Vanguard means sending money to your bank account or by check. In an IRA, that's a distribution and you don't want that.
Why couldn't it trigger and exchange? You can exchange fund positions without having money sent out to your bank.
Because there are too many ways to do the exchanges. Say for a rebalance, you have to:

sell $300 from fund A
sell $200 from fund B
buy $100 into fund C
buy $400 into fund D

How many ways can you come up with an exchange scheme? If a computer does it automatically in one way, one can always say that's not how they wanted to do the exchanges.
Why would one even care so long as the result was correct? It would be easy to implement it to take redemption fees, etc into consideration so that you wouldn't pay them unless absolutely necessary. I'm really struggling to understand the objections on this board to a simple auto-rebalancing tool. It would have absolutely no impact on fund costs or returns and it wouldn't be mandatory.

Besides, in the end it's just a tool. If you want to rebalance yourself and fine-tune it for whatever reason, don't use the tool. What's the objection, seriously?
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Re: Fees

Post by nisiprius »

hsv_climber wrote:
nisiprius wrote:I can tell Vanguard to exchange $100 out of Vanguard Total Stock Market (VTSMX) and into Vanguard Total Bond Market VBMFX every Tuesday, once a week, 52 trades a year, and they won't charge me a penny.

And, incidentally, the frequent trading rules do not apply for trades that are placed automatically.
The above transaction does not violate frequent trading rules.
That's true, that particular transaction does not.
Frequent trading rules would not allow you to buy another share of VTSMX for the next 60 days from your last sell of VTSMX.
No, you have not read the rules.

You can sell VTSMX and then buy another share within 60 days if you place the buy order by mail, or if it is placed as an automatic trade. (The earliest an automatic exchange can take place is two or three days from when you set it up--it will not let you enter today one that orders a trade for tomorrow.)

This isn't theory, I've done it. I've used a "one-shot" automatic trade to buy within 60 days of selling. After reading the rules carefully, and after discussing it with a rep, who confirmed my understanding. The issue with "frequent trading" is apparently not trading frequently as such, it's market timing.

The rule is stated in the mutual fund prospectus and I do not know whether it is necessarily identical for every Vanguard mutual fund, but here is the exact language from the VTSMX prospectus, page 52. Emphasis supplied:
The frequent-trading policy does not apply to the following:

• Purchases of shares with reinvested dividend or capital gains distributions.

Transactions through Vanguard’s Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online®.

• Redemptions of shares to pay fund or account fees.

Transaction requests submitted by mail to Vanguard from shareholders who hold their accounts directly with Vanguard. (Transaction requests submitted by fax, if otherwise permitted, are not mail transactions and are subject to the policy.)

• Transfers and reregistrations of shares within the same fund.

• Purchases of shares by asset transfer or direct rollover.

• Conversions of shares from one share class to another in the same fund.

• Checkwriting redemptions.

• Section 529 college savings plans.

• Certain approved institutional portfolios and asset allocation programs, as well as trades made by Vanguard funds that invest in other Vanguard funds. (Please note that shareholders of Vanguard’s funds of funds are subject to the policy.)
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Post by nisiprius »

KyleAAA wrote:I'm really struggling to understand the objections on this board to a simple auto-rebalancing tool.
Me, too.

But the real question is, how to communicate this to Vanguard. If there's some excellent reason they can articulate for not dong it, I'm willing to accept it.

Have you asked Vanguard? I'm going to go to their messaging system right now and drop in a message asking for this service. I'm going to suggest that they pass it along via their "Voice of the Customer" system. I personally doubt it will be effective, but I think it will be at least as effective as talking about it among ourselves, and it isn't going to take me very long to do it.

)I figure: 90% chance of a blah-blah-thank-you-we-care boilerplate response, a 9% chance I might actually learn something about why they don't offer it, and a 1% chance someone who's been trying to get the feature prioritized for years will use it as ammunition in their next meeting).

(Added) Just sent:
In a message to Vanguard, I wrote wrote: Subject: I wish accounts offered automatic rebalancing

A wishlist item, for your "Voice of the Customer" program. You offer many automatic exchange features already. I would like to have one more: an automatic rebalancing feature. As I envision it, it would let you attach a percentage figure to each mutual fund within an account, and have the system automatically make the appropriate exchanges to rebalance to those percentages.
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Re: Fees

Post by hsv_climber »

nisiprius wrote:You can sell VTSMX and then buy another share within 60 days if you place the buy order by mail, or if it is placed as an automatic trade. (The earliest an automatic exchange can take place is two or three days from when you set it up--it will not let you enter today one that orders a trade for tomorrow.)

Yes, you are correct about that type of automatic investments. I am aware of that, since my 401K (@ Vanguard) is setup in such a way that my payroll deductions automatically go to Vanguard funds, but when I sell shares, Vanguard prohibits me to (manually) buy shares of the fund that I've sold within 60 days, while my payroll deductions still go into that fund.
So, I work around the 60 days issue by changing % of where the new $$ are invested.

But there is another tool for semi-automatic exchanges at Vanguard, which is available to 401K users, which I wrote about in this thread already and which is the closest thing to auto-rebalancing that KyleAAA wants. In this tool, you can specify % you want for each fund and Vanguard does the rebalancing automatically. And this tool does not allow you to buy shares of the fund that you've sold within the last 60 days.

So, Vanguard is not really consistent in that regard.
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rcshouldis
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Re: Auto-rebalancing tool at Vanguard

Post by rcshouldis »

KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's? Pretty much every 401k plan in existence seems to offer this. It's right at the top of my wish list. I can understand not auto-rebalancing for a taxable account, but I can't for the life of me think of a valid reason not to at least offer it for IRAs.

Please Vanguard!
There is something very unsettling about automatic rebalancing. I personally thinks it better if one takes the time to do it themselves manually. It will force your to look deeper into you own investments.
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Re: Auto-rebalancing tool at Vanguard

Post by KyleAAA »

rcshouldis wrote:
KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's? Pretty much every 401k plan in existence seems to offer this. It's right at the top of my wish list. I can understand not auto-rebalancing for a taxable account, but I can't for the life of me think of a valid reason not to at least offer it for IRAs.

Please Vanguard!
There is something very unsettling about automatic rebalancing. I personally thinks it better if one takes the time to do it themselves manually. It will force your to look deeper into you own investments.
Well then don't use it. I prefer to spend as little time dealing with investments as possible.
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Re: Auto-rebalancing tool at Vanguard

Post by dbr »

KyleAAA wrote:
rcshouldis wrote:
KyleAAA wrote:Do you think if we complain loud enough that Vanguard will implement an auto-rebalancing tool, at least for IRA's? Pretty much every 401k plan in existence seems to offer this. It's right at the top of my wish list. I can understand not auto-rebalancing for a taxable account, but I can't for the life of me think of a valid reason not to at least offer it for IRAs.

Please Vanguard!
There is something very unsettling about automatic rebalancing. I personally thinks it better if one takes the time to do it themselves manually. It will force your to look deeper into you own investments.
Well then don't use it. I prefer to spend as little time dealing with investments as possible.
If the tool existed I would probably spend more time checking to see what the tool was doing and whether it was doing it right than I would spend just exercising the function myself no more frequently that I wanted to.
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Re: Auto-rebalancing tool at Vanguard

Post by 555 »

You don't know this. I bet some smart people at Vanguard have analysed this thoroughly and have a very good idea of the impact on fund costs and returns under a range of conditions. I think you've just decided what is personally convenient to you, and you're just asserting that it's no harm to anyone else without regard to what the truth really is. It's just like saying "I want to play my drumset at 3am. I'm sure the neighbors won't mind."
KyleAAA wrote: It would have absolutely no impact on fund costs or returns and it wouldn't be mandatory.
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Re: Auto-rebalancing tool at Vanguard

Post by KyleAAA »

555 wrote:You don't know this. I bet some smart people at Vanguard have analysed this thoroughly and have a very good idea of the impact on fund costs and returns under a range of conditions. I think
I would be willing to bet a large sum of money this isn't the case. That just isn't how large organizations (especially not-for-profits) work. It's far more likely they implemented this feature for 401k plans because they had to do so in order to remain competitive in that market, but haven't in IRA's because they haven't needed to in order to remain competitive in that market. I would bet a large sum of money it's as simple as that.

Besides, Bogle himself has said cash management is easy these days with index futures and all that. And besides, it wouldn't cause any more fund trading than already exists. Trade volume would not change. People would still rebalance the same amount they do now.
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Re: Auto-rebalancing tool at Vanguard

Post by 555 »

Yes, Vanguard sometimes succumbs to pressure and sometimes they don't. That doesn't meant there aren't costs or impacts to doing so. FWIW I can't prove you're wrong about costs and impacts in this case (though I suspect you are), but I'm saying I don't think you can be so sure you're right.
KyleAAA wrote:
555 wrote:You don't know this. I bet some smart people at Vanguard have analysed this thoroughly and have a very good idea of the impact on fund costs and returns under a range of conditions. I think
I would be willing to bet a large sum of money this isn't the case. That just isn't how large organizations (especially not-for-profits) work. It's far more likely they implemented this feature for 401k plans because they had to do so in order to remain competitive in that market, but haven't in IRA's because they haven't needed to in order to remain competitive in that market. I would bet a large sum of money it's as simple as that.

Besides, Bogle himself has said cash management is easy these days with index futures and all that. And besides, it wouldn't cause any more fund trading than already exists. Trade volume would not change. People would still rebalance the same amount they do now.
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Re: Auto-rebalancing tool at Vanguard

Post by KyleAAA »

555 wrote:Yes, Vanguard sometimes succumbs to pressure and sometimes they don't. That doesn't meant there aren't costs or impacts to doing so. FWIW I can't prove you're wrong about costs and impacts in this case (though I suspect you are), but I'm saying I don't think you can be so sure you're right.
I am extremely certain.
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Post by LazyNihilist »

Bumping this thread up. Anyone know if this feature is implemented? or Anything similar to this?

Would love to see this kind of tool so I can 'set and forget'.
The strong do what they can and the weak suffer what they must -Thucydides
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Random Musings
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Post by Random Musings »

Vanguard already has a rebalancing tool in place.

It's their target retirement funds.

As other's have already stated, implementing this (even just for IRA's) would cause ER's to drift up slightly.

Plus, some funds have penalties if you "sell" to soon, and what about ETF's or individual stocks and bonds?

RM
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Post by yobria »

It's not a bad idea, but:

-It would only be useful to small segment of Vanguard customers

-It would increase trading costs. As we know Vanguard tries hard to minimize these, with fees, waiting periods, etc.

Nick
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Post by KyleAAA »

Random Musings wrote:Vanguard already has a rebalancing tool in place.

It's their target retirement funds.

As other's have already stated, implementing this (even just for IRA's) would cause ER's to drift up slightly.

Plus, some funds have penalties if you "sell" to soon, and what about ETF's or individual stocks and bonds?
People keep claiming costs would go up, but they wouldn't. Vanguard already offers this for OTHER forms of accounts, such as their 401k's. It's not like this would be a new feature for Vanguard. It would just be new FOR IRA's. Why would costs increase? I keep asking and all I keep getting are vague theories that don't stand up to scrutiny. There are already no rebalancing restrictions or redemption fees on most of their funds. What, EXACTLY would cause costs to increase? I don't see any reasonable reasons because there are ALREADY no restrictions on doing this. And what about ETFs or individual stocks/bonds? This wouldn't apply to them, obviously, just like it doesn't at every other financial institution that offers automatic rebalancing.

I'm beginning to think people are repeating the "costs would go up" excuse as a matter of doctrine and not for any real reasons. Why would they go up? I am VERY confident that they would not and even if they did (which they won't) it would not be a measurable amount.
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