A 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.
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