Vanguard Changes Transaction Rules
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FacebookA few weeks ago, we received a letter from The Vanguard Group detailing changes that they will be implementing in order to discourage customers from flipping in and out of their funds. In short, investors won’t be allowed to buy shares of a particular Vanguard fund online or via phone, fax, or wire if they’ve sold shares of that same fund within the past 60 days. Customers will, however, still be able to make such purchases by mailing in a check. Money-market funds, short-term bond funds, and VIPER exchange-traded funds are all exempt from the new policy, which takes effect on September 30, 2005. Also exempt as are asset transfers, rollovers, check-writing redemptions and most automatic transactions. According to Vanguard, they’re taking these steps to “protect shareholders from the potentially harmful effects of frequent trading and market-timing.” All in all, I’d have to say that this is good news for buy-and-hold investors as it should help to keep costs down.
Published on August 30th, 2005 - 7 Comments
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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Will probably mean less management fees.
Comment by Jose Anes — Aug 30th 2005 @ 11:40 amIt seems more likely that fees will fail to increase, as opposed to actually decreasing. But I’m a cynic.
I agree with you — good news. Doesn’t impact me (from a negative standpoint) since I buy and hold for a long, long time.
But if fees do go down (like Jose says), I’d REALLY love this. Especially since VG is a pretty inexpensive fund family already.
Comment by FMF — Aug 30th 2005 @ 2:11 pmI think this rule was incorporated to cut down on those people who conduct a lot of trades in and out of particular funds, and also to keep management fees down, but let’s not forget that there are some legitimate reasons why someone may want to sell and rebuy a fund within 60 days. Maybe a more fair rule would be to forbid such trades within a two week period, or for people who have conducted X number of similar trades within a certain time period. Just an idea …
Comment by Ian — Sep 2nd 2005 @ 10:42 amYou can still re-buy within sixty days, you just can’t do it on the web or via phone, fax or wire. You can still send them a check (or instruct them to do a transfer in writing). So you can still do what you need, but the mailing part makes it impossible to use their funds for market-timing. Two weeks would probably still have the same effect, though.
Forget about the fees going down. There is a very good potential of the capital gains taxes going down for the investors. This is a very good news for long term buy and holders.
Comment by The Real Returns — Sep 5th 2005 @ 5:18 pmAs of December 14, 2007, American clients residing in Canada are no longer able to purchase, rollover, or exchange from their accounts. The only option left is to redeem their shares.
Comment by A.R.E. Silva — Mar 27th 2008 @ 9:17 pmAfter 32 years of building up my IRA, Vanguard, which encouraged rounding up all our accounts into Vanguard, now gives us the royal screw.This is virtual fraud!
Vanguard is not recommended for Americans planning their retirement abroad.