Question about buyx and sellx transactions.

Unknown

Do buyx and sellx transactions need to be reviewed or only scheduled transaction? When Vanguard implemented the new SEC rules about having market money in government insured funds, they created a "settlement" fund which is a federal money market fund within the brokerage account. When I added this account to Quicken I made it a brokerage type account because it was in the brokerage account. BIG mistake. All of my ledgers look OK but reports are bogus. Quicken reaches out to any old fund that was a cash type and uses it. I have three ledger pages of transactions that are involved.


Note: This conversation was created from a reply on: Is it possible to change an account type from "brokerage" to "banking?" thank yo....

RickO

Shares owned within a brokerage account, even if a settlement fund within the account, should not be entered in Quicken as a separate account but instead as shares held within the brokerage account. This may be your problem.

Unknown

Vanguard's klutzy method of meeting the SEC's requirement for insurance was to create the Federal MM  mutual fund within the brokerage account as the settlement fund. When I need to make funds from my regular money market fund available to purchase a stock I have to transfer funds from it to the Federal MM within the brokerage account and then to my Portfolio to complete the buy. When a dividend is issued by one of my holdings it goes into the Federal MM as cash and is "automatically" swept to a purchase of funds in the Federal MM. To use the dividend I have to transfer it out of the fund by actually issuing a Buy of the Federal MM in my regular money market. They couldn't have made it more complicated.

Unknown

I've found my problem. Quicken allows transfers IN to non-cash accounts but does NOT allow transfers OUT of non-cash accounts unless there is FREE cash in the account. In the Federal MM, any cash that is deposited into it is AUTOMATICALLY invested in the account and is no longer available as cash.  What masked this was a large rock on my part. I tried to transfer the money for a buy from my Federal MM with a BuyX in my Portfolio. That didn't work so I turn it around and made a SellX from my Federal MM into my Portfolio. I didn't delete the first transaction before making the second. Neither of these transactions created an error report. You must have a buy action related to the stock and that requires, as far as I can see, that the buy be made in the Portfolio account which either of these two transactions would accomplish. On the surface things looked OK except for the impossible event of both transferring out and transferring in the same bundle of cash. The reason there was no error reported is that the transfer of cash into the Portfolio was made by Quicken, by itself and arbitrarily, selecting a cash account from my list of accounts. The fact that there was no cash in the account and the account was not active and was hidden didn't have any effect. I ended up doing a SellX of the necessary cash out of the Federal MM into the Portfolio and buying from the Portfolios free cash. I am a Vanguard depositor so other financial accounts may not have the same relationships between accounts. There's certainly got to be a better way.

RickO

You're making me glad I'm with Fidelity, not Vanguard. However, I'm still not really understanding why you have made the Federal MM a separate account rather than just a holding within the primary brokerage account.

Unknown

This in fact has a bit of a history that predates the Federal Money Market fund.
Originally Vanguard only allowed trading of its funds.
When they decided that they were going to allow people to trade non Vanguard securities they did it by creating a separate account.

Most brokers do not really have a "cash balance", especially in an IRA.
The "cash" is kept in some kind of "fund".  And this is true of Vanguard.

So given this arrangement the "cash" was in a fund that was in the primary account.
If one was to buy a Vanguard fund, they would sell some of that fund, and purchase shares in the Vanguard fund.  But if the purchase was a non Vanguard security, they need to sell the "cash fund" shares, and then transfer that money to the secondary brokerage account and then purchase the security.  And of course the reverse on a sell of the a non Vanguard security.

And to make this more complicated Quicken doesn't have a clue about the "to account" for that transfer.  So the bottom line is with this setup you are always either changing the selling of the "cash fund" to SellX, or putting in the transfer.  Vanguard would send all three transactions Sell Cash fund, and in the secondary/brokerage account a transfer and a buy.  (and the transfer account would be updated manually).

Note that Vanguard is one of the few (if only) brokers that will allow the user to select to have all the funds of an account download into one account, or download into a separate account for every fund.  If someone has selected to have separate accounts for every fund, that makes everything extremely complicated.

Now when the SEC rules changed Vanguard, they were about the fact that Vanguard was allowing people to park their cash in funds the SEC didn't like for the purpose.  And that is really the only thing that had to change.  So for that it is nothing more than changing from one fund to another.

But at the same time Vanguard decided that they were should just allow people to buy non Vanguard securities in their primary account.

Of course though they couldn't just flip a switch and all the accounts are converted over.
So there is the fact that they encourage, but not require this consolidating of accounts.

That means that with any given user they might have some accounts using one system or the other.
Needless to say this has caused a lot of confusion, and some of that confusion is in how they are encoding the transactions sent to Quicken.  Not to mention that old funds can stay in the old cash fund, but new funds have to go into the Federal Money Market Fund.

What I did with all of this is to tell Vanguard to consolidate all my accounts.  And I have exchanged all of my fund out of the old cash fund into to the Federal Money Market fund.

The result is that it basically works the way you would expect in any broker.  For a purchase Federal Money Market Fund shares are sold (one transaction downloaded), to make a buy of some other security (the second transaction downloaded).

There is still one part that they don't have coded right, and that is the reinvest.  What it should be encoded as is XX amount and XX shares, so that it comes out to $1 per share.  For the Federal Money Market fund only they are sending just the amount and not the number of shares.

So I have to edit that transaction to set the shares properly.

Unknown

Great explanation! I've had funds in Vanguard for many years and started with a separate account for each fund. It has been easy until now. The one thing I see that isn't so nice  about throwing everything into the brokerage side and using the Federal Money Market is that it only pays .48 whereas the regular Prime account pays .79. Not a lot of difference but if you let some of your cash rest you're not going to do as well if you're on the brokerage side.

Jim_Harman

If you consolidate everything into a Vanguard Brokerage account you can have a Prime money market account in the brokerage, it just isn't the brokerage settlement account, i.e. the one that is used for buys and sells and where dividends are deposited.

Note that there are some things you can do in a legacy Vanguard mutual fund-only account that you can't do in a brokerage account and there is no way to switch back, so you may not want to make the change until you are forced to. One difference IIRC is that in legacy account you can direct distributions from one VG fund to another 

Unknown

Thank you a lot for pointing out the hidden rocks in the road!! I have three mutual funds that have dividends automatically transferred to my Prime account to use either to pay bills through my PFM connection to my bank or buy stock. I guess the PFM account would be shot down also. That would be a huge change for me. That should have been apparent to me but wasn't. In the days before the Federal MM I had all dividends transferred to my Prime MM also. I found I couldn't do that with the Federal fund. Now I have to watch the dates for the dividends and manually move them out of the Federal and into the Prime. Thanks SEC or whom ever.