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FNSOX vs VBIRX (S/T bond)

FNSOX is newer (and cheaper) than VBIRX/BSV. I need to park some cash at Fidelity. It’s done a bit better than VBIRX over a 1-yr period.

Anyone else know about this fund?

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Re: FNSOX vs VBIRX (S/T bond)

Both follow the same "Bloomberg Barclays U.S. 1-5 Year Government/Credit Index"; only difference is that VG version is Float Adjusted [a minor difference]. FNSOX ER is 3 bps, BSV 5 bps, VBIRX 7 bps. Go with FNSOX.

One factor to consider is Vanguard doesn't have frequent trading restrictions on its ultra-ST & ST bond funds. I will check FNSOX prospectus later; so far, I found only FCONX has no frequent trading restriction at Fido.

Edit/Add: FNSOX does have frequent trading restrictions.

Vanguard isn't playing the game of matching lower ER from competitors on a few funds on ad-hoc basis. But such fee-wars are good for investors.

YBB
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Re: FNSOX vs VBIRX (S/T bond)

@yogibearbull Yogi can you list the Fido and VG funds that do not have frequent trading restrictions? I am interested in VBIRX particularly.

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Re: FNSOX vs VBIRX (S/T bond)

I first looked at VG, Schwab and Fido prospectuses. 

VG has NO frequent trading restrictions for all its ultra-ST and ST bond funds. Just to make sure, I sent a secure mail and VG verified that it was so. Other posters have verified this too.

Schwab is vague in frequent trading restrictions. It says it has one in place but doesn't specify any numerical restrictions, only that it watches and shuts down the abusers. So, at Schwab, I now rely on ETF ICSH and Schwab's own SWSBX.

Fido has 2 round-trip limit on all of its funds except FCONX. In fact, when it closed some of its m-mkt funds, it suggested FCONX as an alternative. Of course it has ER of 35 bps.

YBB
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Re: FNSOX vs VBIRX (S/T bond)

@yogibearbull Thanks - very helpful!

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Re: FNSOX vs VBIRX (S/T bond)


@yogibearbull wrote:

I first looked at VG, Schwab and Fido prospectuses. 

VG has NO frequent trading restrictions for all its ultra-ST and ST bond funds. Just to make sure, I sent a secure mail and VG verified that it was so. Other posters have verified this too.

Schwab is vague in frequent trading restrictions. It says it has one in place but doesn't specify any numerical restrictions, only that it watches and shuts down the abusers. So, at Schwab, I now rely on ETF ICSH and Schwab's own SWSBX.

Fido has 2 round-trip limit on all of its funds except FCONX. In fact, when it closed some of its m-mkt funds, it suggested FCONX as an alternative. Of course it has ER of 35 bps.


Here's an excerpt from the VG policy:

If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days. However, this rule does not apply to:

  • Vanguard money market and short-term bond funds (with the exception of Vanguard Short-Term Inflation-Protected Securities Index Fund).

Here's an excerpt from the Fido policy. They don't mention any short-term bond funds (but see below).

We monitor the number of roundtrip transactions in shareholder accounts. A roundtrip is a mutual fund purchase or exchange purchase followed by a sell or exchange sell within 30 calendar days in the same fund and account. For example, if you purchased a fund on May 1, selling the fund prior to May 31 would incur a roundtrip violation. It is important to remember that share aging FIFO (First In First Out) is not considered when buy and sell transactions are evaluated for roundtrips.

Certain transactions are exempt from roundtrip violations. These include:

  • Trades for $1,000 or less. (Please note that if more than one buy order or sell order for a given fund is executed on the same day in the same account, the $1,000 threshold is based on the total dollar value of all orders for that fund.)
  • Any transactions in Fidelity Money Market Funds
  • Dividend and capital gains reinvestments that are sold within 30 days
  • Orders placed via Fidelity Automatic Investments or Automatic Withdrawals features

The FCONX prospectus says:

Frequent Purchases and Redemptions

The fund may reject for any reason, or cancel as permitted or required by law, any purchase or exchange, including transactions deemed to represent excessive trading, at any time.

Excessive trading of fund shares can harm shareholders in various ways, including reducing the returns to long-term shareholders by increasing costs to the fund (such as brokerage commissions or spreads paid to dealers who sell money market instruments), disrupting portfolio management strategies, and diluting the value of the shares in cases in which fluctuations in markets are not fully priced into the fund's NAV.

The fund generally invests in liquid money market and short-duration debt securities and the Adviser anticipates that shareholders may purchase and sell shares of the fund frequently. Accordingly, the Board of Trustees has not adopted policies and procedures designed to discourage excessive trading of fund shares and the fund accommodates frequent trading.

The fund has no limit on purchase or exchange transactions but may in its discretion restrict, reject, or cancel any purchases that, in the Adviser's opinion, may be disruptive to the management of the fund or otherwise not be in the fund's interests.

The fund reserves the right at any time to restrict purchases or exchanges or impose conditions that are more restrictive on excessive trading than those stated in this prospectus.

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Re: FNSOX vs VBIRX (S/T bond)

To add,

There are no restrictions at Fido, Vanguard, Schwab for multiple one-way transfers. So one can move from fund A to funds B, C, etc as many times as one wants, but if funds are also deposited into fund A, that creates the so-called round-trip(s) and restrictions kick in for fund A. One easy solution is to have multiple reservoirs of liquidity - m-mkt fund, ST-bond fund, may be IT-bond fund to separate transfers- OUT from IN for a while and avoid these round-trip traps.

This isn't specifically mentioned in prospectus, but it is implied from the language of restrictions; I have also verified it on phone with Vanguard [with most restrictive trading policies] and done it often.

YBB
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Re: FNSOX vs VBIRX (S/T bond)

I have accounts in Schwab + Fidelity.  Over the years I did ST in/out of several Schwab funds (muni, SP500, SC) and never got any warning. I always got warnings on Fidelity funds(not money market) such FAGIX,SP500,others if I sell it in less than 30 days. 

Any time I want to sell a fund and buy another on the same day in my IRA at Fidelity it takes at least 10-15 minutes while at Schwab it's seconds. At Fidelity, you enter the trade but you can't buy online, you must call a rep.  Most time I wait 5-10 minutes (At Schwab under one minute).  Then, I ask the rep to enter the buy order but before they do it, they must check it out for several minutes and then they enter it, but wait, only at 90% of the sell proceed. This ridiculous and stupid process is not mandated by SEC or FINRA.

Fidelity is a strict company and why I transferred most of my money to Schwab.

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