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Has your Vanguard portfolio gotten out of balance by a large amount? Want to gradually re-balance over several months like a good dollar cost averager? Better do it quick or they won't let you.

Vanguard has announced plans to restrict exchanges out of its funds to four per calendar year. No word yet on what happens if you've used your four exchanges and need to get additional funds out in an emergency.

Another example of over-reaction to the fund scandals, in which so far Vanguard hasn't even been accused of being involved. But Vanguard isn't taking selective steps to prevent abuses by big traders. They're just going to screw everyone.

And transferring my Vanguard IRA to Fidelity just keeps looking better.
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For me this is good news- I don't hop in and out of funds frequently, and such restrictions will improve my overall return, since they should reduce fund expenses/commissions.

And transferring my Vanguard IRA to Fidelity just keeps looking better

Just keep in mind that when Fidelity saves money by restrictions like the one above, the savings goes right into the Johnson family's pocket. When Vanguard does the same, the savings goes back to you and I, since we own the company.

I think Fidelity is reputable fund, but I wouldn't choose them over Vanguard, since I can't see how they can maximize my return while still syphoning off billions to the Johnsons.

Nick
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billjam writes,

Vanguard has announced plans to restrict exchanges out of its funds to four per calendar year. No word yet on what happens if you've used your four exchanges and need to get additional funds out in an emergency.

Is that "4 per fund" or "4 for the year"?

If I owned five Vanguard funds, would I have 20 exchanges in total or just 4?

intercst
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Better yet, don't buy any mutual funds!

TheBadger
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"Is that "4 per fund" or "4 for the year"?"

It's 4 per fund per year. If you're trying to gradually shift funds from one fund to other funds, it's still going to hit you. That's exactly what I've been doing this year. Exchanging $10,000 each month. Fortunately I think I'll finish my planned exchanges before this policy is implemented.

BTW, since I would always want the ability to move money out of a fund in the event of some unforeseen event, the practical limit on this policy would be 3 exchanges a year, saving one for emergencies.
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billjam writes,

"Is that "4 per fund" or "4 for the year"?"

It's 4 per fund per year. If you're trying to gradually shift funds from one fund to other funds, it's still going to hit you. That's exactly what I've been doing this year. Exchanging $10,000 each month. Fortunately I think I'll finish my planned exchanges before this policy is implemented.

BTW, since I would always want the ability to move money out of a fund in the event of some unforeseen event, the practical limit on this policy would be 3 exchanges a year, saving one for emergencies.


In terms of rebalancing, I don't see much of a difference in doing it once per month, once per year, or once every 2 or 3 years. If I owned any mutual funds, 4 exchanges per year would be plenty.

intercst

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The following link talks about the transaction limits that Vanguard is considering: http://flagship4.vanguard.com/VGApp/hnw/VanguardViews?FW_Event=vviewsnewsletters&chunk=/freshness/News_and_Views/news_ITVspring2004_ALL_transpolicies_ALL.html&Season2=Spring&Year2=2004
I don't think that they have finalized exactly how they will structure the limits.

Bob
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Bob...

I hate to admit it, but I'm afraid that I missed the redemption fee part when I started an account with Vanguard. Do you know what the "fees" are? Also - I wonder what they mean by a "broader use of redemption fees"? More funds will carry the penalty for frequent redemtions and/or an increase in the fee structure itself?

Regards,
Bill
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For me this is good news- I don't hop in and out of funds frequently, and such restrictions will improve my overall return, since they should reduce fund expenses/commissions.

I'll second that point. Especially in my period of accumulation, I am not changing funds on a whim and am sticking to my plan. As such, this "limitation" will not impact me and could actually benefit me as Nick mentioned.

Also, I don't view this as an over-reaction to the fund scandals. I view it as another step forward for an outstanding company and a display of the fact that they are taking steps to protect their investors. That doesn't sound bad to me.

dt
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I hate to admit it, but I'm afraid that I missed the redemption fee part when I started an account with Vanguard. Do you know what the "fees" are? Also - I wonder what they mean by a "broader use of redemption fees"? More funds will carry the penalty for frequent redemtions and/or an increase in the fee structure itself?

Some Vanguard funds currently charge a redemption fee for withdrawals if done too soon. IIRC they are imposed if a redemption is made within 1 year of purchase. I don't know off the top of my head to which funds this applies, but, Vanguard currently indicates that it applies to fewer than 25 of their funds.
My take on the announcement is that they are considering adding this fee to more funds. These fees are different than back end loads in that the fees paid get put back into the fund.

Bob
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