Limit orders on mutual funds

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Cara
Posts: 150
Joined: Wed Feb 28, 2018 1:02 pm

Limit orders on mutual funds

Post by Cara »

Am I wrong in remembering that, years ago, before Vanguard made me feel I was required to switch to their new "brokerage account" platform (when what I had with them was, apparently, a "mutual fund account") - I was able to buy and sell mutual funds within my IRA account with limit orders? It seems like I was able to, but I could be remembering this wrong. I DO remember being surprised that I was no longer able to, under the brokerage account.

So - do other companies (Fidelity, Schwab) allow this? I don't like putting in a request to sell or trade and then having to wait and see exactly what price I got - I liked being able to know the transaction would occur somewhere near a price I was expecting.
nalor511
Posts: 5061
Joined: Mon Jul 27, 2015 1:00 am

Re: Limit orders on mutual funds

Post by nalor511 »

Cara wrote: Mon Nov 28, 2022 2:15 pm Am I wrong in remembering that, years ago, before Vanguard made me feel I was required to switch to their new "brokerage account" platform (when what I had with them was, apparently, a "mutual fund account") - I was able to buy and sell mutual funds within my IRA account with limit orders? It seems like I was able to, but I could be remembering this wrong. I DO remember being surprised that I was no longer able to, under the brokerage account.

So - do other companies (Fidelity, Schwab) allow this? I don't like putting in a request to sell or trade and then having to wait and see exactly what price I got - I liked being able to know the transaction would occur somewhere near a price I was expecting.
I do not recall in the past 10 years anything like you are suggesting with MFs at VG. But it's a pretty easy fix: call vanguard, ask for non-taxable conversion to ETF, wait 1-2 days, enter limit order.
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Limit orders on mutual funds

Post by livesoft »

I've never heard of limit orders on mutual funds. I am sure that I have never been able to enter a limit order to only buy shares at or below a specified price.
Wiki This signature message sponsored by sscritic: Learn to fish.
brad.clarkston
Posts: 1726
Joined: Fri Jan 03, 2014 7:31 pm
Location: Kansas City, MO

Re: Limit orders on mutual funds

Post by brad.clarkston »

livesoft wrote: Mon Nov 28, 2022 2:25 pm I've never heard of limit orders on mutual funds. I am sure that I have never been able to enter a limit order to only buy shares at or below a specified price.
+1 this, you can't limit order a dollar amount MF.
70% AVGE | 20% FXNAX | 10% T-Bill/Muni
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Limit orders on mutual funds

Post by retiredjg »

I used the mutual fund platform up until about 6 or 8 weeks ago. Never saw anything about limit orders.
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: Limit orders on mutual funds

Post by sycamore »

Cara wrote: Mon Nov 28, 2022 2:15 pm Am I wrong in remembering that, years ago, before Vanguard made me feel I was required to switch to their new "brokerage account" platform (when what I had with them was, apparently, a "mutual fund account") - I was able to buy and sell mutual funds within my IRA account with limit orders? It seems like I was able to, but I could be remembering this wrong. I DO remember being surprised that I was no longer able to, under the brokerage account.

So - do other companies (Fidelity, Schwab) allow this? I don't like putting in a request to sell or trade and then having to wait and see exactly what price I got - I liked being able to know the transaction would occur somewhere near a price I was expecting.
In my experience no brokerages / custodians allow it, and never have.

The workaround is to look at the direction of the markets around 3:45 PM Eastern. Maybe the S&P 500 index or VTI (Vanguard Total Stock ETF). You can get a feel for how the market will close. Many/most stock funds are rather highly correlated with the overall stock market so that should tell you what you need.

By the way, what is the fund you want to trade? A stock or bond fund?
User avatar
nisiprius
Advisory Board
Posts: 52216
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Limit orders on mutual funds

Post by nisiprius »

I've never heard of a limit order on a mutual fund. Most of Vanguard's big index funds have ETF share classes, and you can issue limit orders on ETFs.

Now that I think about it, how would a limit order on a mutual fund even be possible? You have to place your order before market close, and the mutual fund isn't priced until after market close. How could it be done? Unofficially compute the NAV early, say at 3:50, as a basis for deciding whether to execute the order or not?
Last edited by nisiprius on Mon Nov 28, 2022 3:22 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
the_wiki
Posts: 2883
Joined: Thu Jul 28, 2022 11:14 am

Re: Limit orders on mutual funds

Post by the_wiki »

Prices of mutual funds are fixed and set once a day. How would a limit order even work?
afan
Posts: 8195
Joined: Sun Jul 25, 2010 4:01 pm

Re: Limit orders on mutual funds

Post by afan »

I can imagine how it would work for the customer: tell the company that you want to by at the NAV price for that day, after the close, as usual. Instruct that you only want the shares if the price is at or below some value you specify.

I have never heard of a company that would let you do this, so I suspect there is some reason it would be problematic for a mutual fund to take orders like that.

Even if it were possible, what would be the point?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
Northern Flicker
Posts: 15367
Joined: Fri Apr 10, 2015 12:29 am

Re: Limit orders on mutual funds

Post by Northern Flicker »

I would not invest in a mutual fund that supported limit orders. Market participants who trade the mutual fund would use it to their advantage, which would be to the detriment of buy-and-hold investors who invest in the fund. It would bleed cash out of the fund's cash position and into the trader's share holding, and the trading it would encourage might lead to capital gains distributions.

In any case, I think such a feature would violate frequent trading rules that fund companies maintain to comply with regulatory mandates.
alex_686
Posts: 13320
Joined: Mon Feb 09, 2015 1:39 pm

Re: Limit orders on mutual funds

Post by alex_686 »

I worked in mutual fund operations. I can’t figure out how this would technically work.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Northern Flicker
Posts: 15367
Joined: Fri Apr 10, 2015 12:29 am

Re: Limit orders on mutual funds

Post by Northern Flicker »

alex_686 wrote: Mon Nov 28, 2022 4:50 pm I worked in mutual fund operations. I can’t figure out how this would technically work.
Specify a price, and if the mutual fund closes below the price for a buy or above the price for a sell, complete the transaction. The problem is that other fund investors are not willing participants-- they collectively hold the other side of the trade, in effect. With an ETF, the limit order is to buy or sell from someone or some entity who already has or is wanting to buy the shares. They are voluntarily choosing to take the other side of the trade at the specified price.
alex_686
Posts: 13320
Joined: Mon Feb 09, 2015 1:39 pm

Re: Limit orders on mutual funds

Post by alex_686 »

Northern Flicker wrote: Mon Nov 28, 2022 5:00 pm
alex_686 wrote: Mon Nov 28, 2022 4:50 pm I worked in mutual fund operations. I can’t figure out how this would technically work.
Specify a price, and if the mutual fund closes below the price for a buy or above the price for a sell, complete the transaction. The problem is that other fund investors are not willing participants-- they collectively hold the other side of the trade, in effect. With an ETF, the limit order is to buy or sell from someone or sone entity who already has or is wanting to buy the shares. They are voluntarily choosing to take the other side of the trade at the specified price.
On a more specific point, by law and regulation you need all of the orders in and the books closed before you strike the NAV. New orders would change the net assets (but not the NAV) of the fund and thus would require you to reopen the books again. You don’t do this. Major overhaul of regulations and operations would be required.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
billaster
Posts: 2932
Joined: Wed Apr 27, 2022 2:21 pm

Re: Limit orders on mutual funds

Post by billaster »

This sounds like the mutual fund scandal of 2003. Some brokers and big favored investors colluded to allow "late trades" after the 4:00 PM closing. They allowed after hours trades to be pre-dated to before 4:00 PM. Prosecutor Eliot Spitzer said this was like being allowed to place bets after the horses crossed the finishing line. Billions in fines were paid by the some of the biggest brokers, investment banks and mutual fund managers.
User avatar
enad
Posts: 1581
Joined: Fri Aug 12, 2022 2:50 pm

Re: Limit orders on mutual funds

Post by enad »

Cara wrote: Mon Nov 28, 2022 2:15 pm Am I wrong in remembering that, years ago, before Vanguard made me feel I was required to switch to their new "brokerage account" platform (when what I had with them was, apparently, a "mutual fund account") - I was able to buy and sell mutual funds within my IRA account with limit orders? It seems like I was able to, but I could be remembering this wrong. I DO remember being surprised that I was no longer able to, under the brokerage account.

So - do other companies (Fidelity, Schwab) allow this? I don't like putting in a request to sell or trade and then having to wait and see exactly what price I got - I liked being able to know the transaction would occur somewhere near a price I was expecting.
You cannot place a limit, stop, or stop-limit order for a mutual fund. Mutual fund orders must be received prior to the last window for a window trade, or the market close for a market order, on days that the market is open.
What Goes Up Must come down -- David Clayton-Thomas (1968), BST
Post Reply