2 month, 2% rule


R

rob

am traveling overseas so looking for a general idea

when a fund (vanguard, fidelity) has a rule to discourage short term trades in a fund,
something similar to "shares held less than 2 months are charged 20 dollars per 1000
(2%)", does that mean literally to not initiate a share exchange until the 2 months is
up or can one initiate the exchange the day before since no exchanges are processed
same day?

literal example:

04/14/2007 (Saturday) purchase
06/14/2007 (Monday) is the 1st eligible day, but does that mean the request can be
submitted online 06/12/2007 Saturday ?
 
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A

Andrew Koenig

when a fund (vanguard, fidelity) has a rule to discourage short term
trades in a fund, something similar to "shares held less than 2 months are
charged 20 dollars per 1000 (2%)", does that mean literally to not
initiate a share exchange until the 2 months is up or can one initiate the
exchange the day before since no exchanges are processed same day?
You should probably check with your fund company about the specific rules.

Here's another question to ask them. Suppose you buy 1,000 shares and hold
them for three months. Then you buy 100 shares, and the next day you sell
200 shares. Are you charged for short-term trading of those 100 shares you
bought, or do they take the view that the shares you're selling are the ones
you bought three months ago?
 
J

jIM

You should probably check with your fund company about the specific rules.

Here's another question to ask them. Suppose you buy 1,000 shares and hold
them for three months. Then you buy 100 shares, and the next day you sell
200 shares. Are you charged for short-term trading of those 100 shares you
bought, or do they take the view that the shares you're selling are the ones
you bought three months ago?
This happens when I rebalance Vanguard accounts inside my 401k. NO
short term charges apply. 2X a month I buy VFINX, VEXPX, VEXMX,
VWNFX, VTRIX (and RYTFX). On June 1 I sold 1% of each as part of a
rebalance, and no short term trading fees applied.

Check with your plan, but I think the short answer is they use FIFO.
 
R

rob

jIM said:
This happens when I rebalance Vanguard accounts inside my 401k. NO
short term charges apply. 2X a month I buy VFINX, VEXPX, VEXMX,
VWNFX, VTRIX (and RYTFX). On June 1 I sold 1% of each as part of a
rebalance, and no short term trading fees applied.
when you write "sold", do you really mean "exchanged" ?
 
J

jIM

when you write "sold", do you really mean "exchanged" ?
sold for a new position in total market bond index. Exchanged/sold...
what would difference be?
 
E

Elizabeth Richardson

jIM said:
This happens when I rebalance Vanguard accounts inside my 401k. NO
short term charges apply. 2X a month I buy VFINX, VEXPX, VEXMX,
VWNFX, VTRIX (and RYTFX). On June 1 I sold 1% of each as part of a
rebalance, and no short term trading fees applied.
But are you prevented from purchasing new shares in those funds for a period
of time?

Elizabeth Richardson
 
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A

Andrew Koenig

But are you prevented from purchasing new shares in those funds for a
period
of time?
In general, when you sell a Vanguard fund, they prevent you from buying new
shares in that fund account online or by phone for 60 days. However, you
can still buy new shares via US Mail during that period.
 
T

tRd

jIM said:
sold for a new position in total market bond index. Exchanged/sold...
what would difference be?
quite a difference, not just semantics.

in vanguard parlance, sold means you are taking a cash position and with an
IRA or 401k plan account type, expose yourself (and they warn you before
committing the transaction) to IRS penalties & fees

exchange means that you are moving from one fund class to another, within
your IRA or 401k plan account

my guess is you did not sell, you exchanged

in fact, you would have had to select the "exchange my fund" button/link as
opposed to the "sell my fund" link
 
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J

jIM

But are you prevented from purchasing new shares in those funds for a period
of time?

Elizabeth Richardson
I purchase them every month with regular contributions and no fees
have been assessed.

I did not sell whole position, maybe that makes a difference?
 

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