Trading at Schwab - same day exchanges, VG Admiral shares, SIVLX

Comments

• sfnative

  12:39PM

  If I understand your comments correctly -- and there's a chance I don't -- you're trying to do what I do all the time, today in fact: place simultaneous sell and buy orders to effect transfers between mutual funds, or between funds and ETFs, stocks, whatever. If that's not working for you I have no idea why (I assume you've never been CUFed).
• Junkster

  12:58PM edited 1:02PM

  I do not have a margin account at Schwab and do it primarily in my IRA accounts but sometimes in my taxable. For instance, got a little antsy about all this SIVLX chatter today as it is my largest position and I am very top heavy there. So I sold some today and placed the proceeds into two of my smaller OEF emerging market equity and debt holdings. But it doesn’t necessarily have to be an existing holding, You can also do it to initiate a new holding. Not sure what your problem would be.
  You make the sell first where the proceeds become readily available and then the buy.
• Mona

  1:00PM

  msf said:

  It's been posted on these boards that there is a way of doing same-day OEF exchanges at Schwab. I called Schwab since I couldn't figure out how to do that on my own. For example, placing a sell order in dollars doesn't make those dollars available to enter a same day purchase of another fund (unless margin trading is enabled).
  
  A Schwab rep suggested entering a "sell and buy another" order. But that just creates a buy order for the next day. He checked with traders who said there was no way to do what I was asking for. He added that perhaps I could find a trader would force through the order manually, but that was unlikely. If the sale proceeds turned out to be insufficient to cover the buy, they'd be on the hook personally for the deficiency. Fidelity does this routinely, though they limit the dollar amount of the same-day exchange to 90% of the current value of the current position.

  @msf: I have not posted on this before, but numerous times, I have done a same-day trade at Schwab (sold fund A from fund family A and bought fund B from fund family B so that the next day when I wake up, I am in fund B). I have only done so on the telephone, but I believe that you can do this online.
  
  It is NOT an "exchange" and it is NOT a "swap". You need to sell one and buy the other "on two separate tickets" and the transactions are in dollars, not shares. Schwab will not limit you to 90% of current value of the fund that you are selling (I have always used 90% as it is a round number and conservative). If you use 100% of yesterday's value and buying with 100% of the dollars in fund B and the NAV drops today on the fund that you are selling, then you will have to make up the difference. Of course, this can be problematic in a retirement account. Hope this helps.
  
• rmt

  1:02PM edited 1:05PM

  @junkster What are the other 2 OEF EM funds you hold? My other OEFs are GQFPX, GQGPX and WAINX. PRWCX and PONAX in another account. Hold a lot more Pimco CEFs.

  Junkster said:

  I do not have a margin account at Schwab and do it primarily in my IRA accounts but sometimes in my taxable. For instance, got a little antsy about all this SIVLX chatter today as it is my largest position and I am very top heavy there. So I sold some today and placed the proceeds into two of my smaller OEF emerging market equity and debt holdings. Not sure what your problem would be.
  You make the sell first and then the buy.
• Junkster

  1:06PM edited 1:11PM

  rmt said:

  @junkster What are the other 2 OEF EM funds you hold? My other OEFs are GQFPX, GQGPX and WAINX. PRWCX and PONAX in another account. Hold a lot more Pimco CEFs

  Junkster said:

  I do not have a margin account at Schwab and do it primarily in my IRA accounts but sometimes in my taxable. For instance, got a little antsy about all this SIVLX chatter today as it is my largest position and I am very top heavy there. So I sold some today and placed the proceeds into two of my smaller OEF emerging market equity and debt holdings. Not sure what your problem would be.
  You make the sell first and then the buy.

  ARTZX on the equity and EIDOX on the debt. But have never ever had an issue doiing this regardless of the fund involved. My only problem is with AGEYX but there it seems to be the only transaction fee fund where they want to charge me on both buying and selling. Never experienced that before. You mention PIMCO. Never had a problem with doing this with any PIMCO funds.
  
  
  
• Mona

  2:15PM

  Junkster said:

  I do not have a margin account at Schwab and do it primarily in my IRA accounts but sometimes in my taxable. For instance, got a little antsy about all this SIVLX chatter today as it is my largest position and I am very top heavy there. So I sold some today and placed the proceeds into two of my smaller OEF emerging market equity and debt holdings. But it doesn’t necessarily have to be an existing holding, You can also do it to initiate a new holding. Not sure what your problem would be.
  You make the sell first where the proceeds become readily available and then the buy.

  Hi Junkster,
  
  I’ve done this quite a bit with SIVLX and APDKX. When I think Europe will do better, I sell some SIVLX and buy more APDKX. When I think emerging markets will do better, I sell some APDKX and buy SIVLX. Even though I usually guess wrong, at least I maintain the same overall percentage of international equity the next day.
  
  
  
• rmt

  3:29PM

  @junkster I just quoted the OEF and CEF holdings in my account. No issues with Pimco CEFs.
  
• msf

  4:04PM edited 4:05PM

  I just tried to sell $3000 of a fund where I own $3200. This is what I got:
  Action: Sell
  Amount: $3000
  Order type: Market
  Trade Date
  --
  Estimated amount: $3,000.00
  Transaction Fee: $0.00
  Estimated Proceeds: $3,000.00
  
  Order messages
  1. An error has been detected. Please contact a Schwab representative for assistance.
  
  Putting in a sell order for 90% or less would go through. (I tried that earlier today to test the restriction.)
  
  -----------
  
  The same day sale (sell, then enter a buy order) did go through now. It didn't when I tried it earlier today, and the Schwab rep said it couldn't be done when I called to double check. This time I the Schwab site gave me the message I was expecting:
  
  1. Caution: This buy order was accepted without sufficient settled funds to trade in your account. If you subsequently sell this security without first delivering sufficient cash by settlement date, you may incur a trading restriction requiring settled cash up front for future purchases. (AC176)
  
  (I also rushed these orders near closing so I got some additional warning message about trades during the last five minutes of the market. Didn't have time to cut and paste that, but it was just a warning.)
  
  Thanks for the responses.
• yogibearbull

  4:18PM

  @msf, when that happens, try entering the order for share# instead of $amounts.
  
  Now that all securities settle T+1, there is still the issue that mutual fund (OEF) trades are executed only at 4pm ET. Some brokers may recognize pending orders in allowing buys, but others may not, or may require call to trading desk. Rules for IRAs are stricter than for taxable a/c, so practices may differ.
  
  There are 2 sure ways to get around this problem:
  Either convert cash a/c to margin a/c (and don't use margin if uncomfortable),
  OR,
  in cash a/c, (i) hold enough money in core/settlement a/c equivalent to your trading unit, or (ii) hold some trading money in ultra-ST ETFs (sell orders for those will be executed right away).
• Derf

  4:22PM

  WHY? If one has money in a Schwab money market fund or their cash account, could this be taken , by Chuck, to finish the buy if Nav when down?
  That's what happen in my checking account a few years back. Chuck robbed Peter to pay Paul, so to speak. Thus no over-draw.
• Old_Joe

  4:56PM

  @Derf- Schwab will not sell or use any money held in a mmkt fund to cover a purchase of another security. If a Schwab account does not have an amount held in cash sufficient to make a desired purchase, the account holder must sell enough of the mmkt fund to cover that purchase.
  
  This can be inconvenient, as mmkt fund buy and sell orders only occur after market close on the day placed, and those orders must be placed before market close on that day. Any funds obtained by such a sale are not available for use until the morning of the next trading day.
• msf

  5:36PM edited 5:38PM

  convert cash a/c to margin a/c
  
  Can't be done in a tax-sheltered account.
  
  I have my doubts about limited margin (in a tax-sheltered account) being sufficient. Limited margin allows one to trade using unsettled cash. When one sells a stock or ETF the sale occurs intraday, and at that point there's unsettled cash that the limited margin can reference. But OEF sales don't execute until end of day as OJ described (and one can usually cancel OEF orders anytime up to market close). So until close of market there's not yet any unsettled cash for the limited margin feature to tap.
  
  Your second suggestion tends to confirm this interpretation. ETFs trade intraday, generating unsettled cash. But even then, I don't think you can't trade with that unsettled cash unless you have at least limited margin for the account.
  
  I've used a small cash buffer to migrate assets from one fund to another much the way you described. Except instead of doing it all in one shot, I used a "bucket brigade" - partially selling one fund (just up to the amount of cash in account) and simultaneously buying just that much of the new fund. Rinse and repeat.
  
  all securities settle T+1
  
  Most but not all. A few OEFs take two days to settle and I don't believe that the T+1 rule has changed that.
  
  Some MMFs settle same day. I recently ran across this problem (for the second time! some things I don't learn). I wanted to move the proceeds of an OEF sale into a (high yielding) MMF the same day. Fidelity's system wouldn't let me do that. Nor would they enter that trade manually. I was told that the problem was that MMFs at Fidelity settle same day.
  
  It's not just Fidelity. About half the MMFs available at Merrill settle same day. If you have a Merrill login, you can see all of this at:
  https://olui2.fs.ml.com/Mutualfunds/MFBDCashManagement.aspx
  
  In short, the following funds, with their cutoff times for same day settlement are:
  TFDXX (5PM), TTTXX (1:45PM), GOIXX (1:45PM), TOIXX (1:45PM), GOTXX (11:45AM), UTIXX (11:45AM), FIGXX (1:45PM), FISXX (1:45PM), FSIXX (1:45PM)
• Old_Joe

  5:56PM edited 5:56PM

  I'm pretty sure that the same thing is true at Schwab- mmkt buy/sell orders must be placed before market close, are executed same day after market close, and not available for use until next day.
  
  It's been a while now, but I do remember getting being charged for small but unwanted margin loans at Schwab because of this setup. Evidently the default setup for accounts at Schwab is to use margin, and they require a specific opt-out to avoid using that. Since they make a profit on advancing margin, they prefer that you use it. Capitalism is great !! Very user friendly.