Vanguard direct purchase of bond question

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Topic Author
clearwater
Posts: 131
Joined: Mon Jul 11, 2011 2:45 pm

Vanguard direct purchase of bond question

Post by clearwater »

I am currently at Schwab, and have been a very happy customer there for a long time (about 12 years). All my funds are Vanguard, Schwab is just the custodian. They have a pretty good website, and phone support is great. All the same, my 9 fund tilted-to-small cap+value+REIT fund portfolio is pretty darned easy. I just rebalanced today, and Schwab probably won't see me for a year.

I did an experiment in buying one Treasury Note, since I had a thought for a while of building my own bond ladder (this didn't happen). My only bond fund is Vanguard's Intermediate Term Treasury (VFITX) -- it suits what I need to do and I have no desire for anything else.

About a month ago I bought one ($1,000 value) note from Schwab's inventory. Could not be easier.... find the right note you want, click buy, done. Anyway, my experiment is over, not going to do the ladder, and I have this bond sitting in the account. So went to try to sell it, and to make a long story short, you *can't do it* without calling Schwab's bond desk. For $25. So although Schwab will sell you Treasuries at almost no markup (a great deal), SELLING them if you need to back into inventory costs real money. There was no way I was going to pay > 2% to sell this bond, so now it's going to sit there for 10 years.

Has anyone bought/sold Treasuries at Vanguard directly? Can you both buy AND sell with no commission, and without talking to the bond desk?

I like Schwab, but this fee for selling Treasuries was pretty hidden and is not disclosed at all during the purchase process. I can only imagine if someone built a real ladder then had to go back and start selling out the ladder if they needed cash, and Schwab would charge $25 per instrument. If you dig through the fee schedule it's there, but written in such a way it's not especially clear. But the lack of disclosure on the Bond page is what rubs me the wrong way. Maybe everyone always holds to maturity, but this still seems sneaky.

I've gone back and forth multiple times on if I should move to Vanguard, and haven't, since I've been happy at Schwab.

What say you Vanguard account holders -- can you buy/sell Treasuries at Vanguard without fees?

I've no plans to buy anymore bonds directly, but little things like this seem to be strongly in Vanguard's favor and seem to be "goodwill" points to maybe leave Schwab behind and transfer the account. If I did that, I'd sell that $1000 Note as soon as I brought it over.

Thanks!
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 11:55 pm

Re: Vanguard direct purchase of bond question

Post by lack_ey »

I've never done it, but my understanding is that Treasuries can be bought and sold commission free.

https://personal.vanguard.com/us/whatwe ... ommissions
https://personal.vanguard.com/us/conten ... ontent.jsp

Better wait for someone who has.
Coles
Posts: 119
Joined: Sat Sep 20, 2014 9:11 pm

Re: Vanguard direct purchase of bond question

Post by Coles »

clearwater wrote:Has anyone bought/sold Treasuries at Vanguard directly? Can you both buy AND sell with no commission, and without talking to the bond desk?
Yes, although you may not be happy with bid-ask spread if you're dealing with less than 10 notes/bonds.
stlutz
Posts: 5576
Joined: Fri Jan 02, 2009 1:08 am

Re: Vanguard direct purchase of bond question

Post by stlutz »

as anyone bought/sold Treasuries at Vanguard directly? Can you both buy AND sell with no commission, and without talking to the bond desk?
Vanguard, Fidelity, and E*Trade are the brokers who will allow buys/sells w/o commission.
I like Schwab, but this fee for selling Treasuries was pretty hidden and is not disclosed at all during the purchase process. I can only imagine if someone built a real ladder then had to go back and start selling out the ladder if they needed cash, and Schwab would charge $25 per instrument. If you dig through the fee schedule it's there, but written in such a way it's not especially clear. But the lack of disclosure on the Bond page is what rubs me the wrong way. Maybe everyone always holds to maturity, but this still seems sneaky.
Yep. When I made a broker switch a couple of years back, this was pretty much the main reasons I went with Fido instead of Schwab (I bank at Schwab and really like them for that). I've bought and sold Treasuries at Fidelity with no issues. Spreads have been around $.03 - $.05 per $100.
Topic Author
clearwater
Posts: 131
Joined: Mon Jul 11, 2011 2:45 pm

Re: Vanguard direct purchase of bond question

Post by clearwater »

Thanks to all for the feedback. It looks like I should finally just switch to Vanguard and be done with it. If I start thinking about a service provider, it's usually a sign I'm spending too much energy on the problem.

Many years ago I had a Fidelity account and found the resources there excellent. If they would let you buy/sell Vanguard products without commission, I'd probably switch to them immediately.

By moving to Vanguard I also can rebalance the portfolio at zero cost, so that's probably what I just need to do.
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