Vanguard Allows Same-Day Trades With Bank Transfer Funding

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If you have an account with Vanguard, you may have noticed them rolling out improvements to their online interface this month. If not, try logging in and see if you notice anything different. Today, I received an e-mail that they are also improving their funds availability rules when buying mutual funds with online bank transfers:

Same-day trades with electronic bank transfers
Now you can get today’s trade date if you use our electronic bank transfer service to buy a Vanguard mutual fund. Just submit your request on business days before the close of regular trading on the NYSE (generally 4 p.m., Eastern time) and you’ll receive that day’s closing price.

Finally! I placed at trade and it appears to have worked. The previous rule was that if the purchase was before 10pm Eastern of Day 1, then you will get the purchase price as of closing on Day 2. So even if I wake up at 6 am in the morning on Thursday and place a trade, I would get the price as of market close at 4pm Eastern Friday. Your bank account is debited on Day 3.

Others have reported receiving this notice weeks ago, and while I’m happy to see it in my account, I also think it was long overdue. You can already get the same-day closing price if you exchange from another mutual fund already in the account, like a money market fund. So basically what they were saying is that they don’t trust that your bank funds would clear. However, it takes 3 business days (T+3) for things to clear anyway, so it’s not like you could run off with the money. I have been able to initiate a money transfer into my Scottrade account and start buying stocks seconds later for years. This way, I don’t have to keep money sitting around in a money market fund earning zero interest.

You could argue that if I’m not timing the market then I shouldn’t really care when the trade clears. But the way I see it, I am rebalancing my account and buying what has been dropping. I would be highly annoyed if the stock market bounced up 5% the next day, meaning I shouldn’t have rebalanced at all.

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  1. That’s interesting.

    They kind of already had this official rule. If I executed a buy early enough in the morning, it would go through same day. By far the fastest of any brokerage I use. BUT, in recent months, it has been taking DAYS to get a buy through. I have been really frustrated. Like, they went from fastest to slowest of the bunch.

    So, reading this is GREAT news.

  2. I put in a trade yesterday morning as I was rebalancing and increasing my bond and REIT holdings. I was surprised to find this email a few hours later. I had expected the usual wait time which is always frustrating. Yes, it might not be a big deal, but the fact that it makes you feel out of control when everything else is “instant” these days is the real problem. So, it’s very good news.

  3. Regarding your last paragraph about trying to rebalance and getting frustrated by a move in the other direction while waiting an extra day…

    During the turbulent times of late 2008 and early 2009, my girlfriend and I tried to rebalance on big move days like you described a few times. While I used money from my money market and the trade went through right away, she would ACH from her bank and have to wait until two days later. I thought for sure she was going to miss out on the best prices because of this.

    Guess who ended up making the better trade every time except maybe once?

    She did. Even on days when a fund dropped more than 5%, she usually ended up buying at a better price the following day.

    Although it’s still tempting to try, I no longer believe I can time my rebalancing transactions the way you described. The market is smarter than me, and anything can happen.

  4. it’s about time. Vanguard is definitely behind the competition when it comes to their website/online experience.

  5. @Dan – I agree, you never know what will happen the next day, but at least getting exactly “what you ordered” is more satisfying even though when made to wait you might get something better. I think buying and selling ETFs has also spoiled me.

  6. This is great news. In addition to automatic purchases, I usually add a couple hundred dollars to my accounts a few times during the month when I have “extra” cash. These are long term investments, and with the recent market volitility it always makes me feel better buying on a day when the market is down 1% or more (cheaper fund shares). Lately it seems that more often than not I put my “buy” in on a down day and I actually get the shares on an up day.

    In the big scheme of things it’s not a lot of money, but psychologically I think it’s more fun to know I’m doing the transaction on a day when the shares are cheaper.

  7. hard to beat IB when it comes to brokers, at $2 a trade and low margin costs is a sealer for me

  8. @Dan – If you like the old system better because you get better pricing, whenever you want to rebalance, just wait a day.

  9. Haha, @TFB! But no, my point was that I’m not going to even try. This recent thread yesterday on bogleheads is timely for this point.

  10. I initiated a Vanguard purchase last week. My bank account was debited on day 2, not day 3.

  11. Same day, no way! Vanguard should admit that this service is a joke. I sold stock on October 18 today is the 24th, and I have yet to receive a single dime of my money. The original deposit was supposed to take place within 2-3 business days. On day four I called to check on the status and after three associates tried to figure out the issue, I concluded that someone used the wrong routing number, one not even close to what is on my account. A few days later after no one returned my calls, I discovered that my money had been returned to them, yet no one was attempting torectify the issue in the interim. Now, after speaking hwith five (5) associates, one of whom left a message assuring me the problem was rectified through an immediate, I am still without my pay out.

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