Fidelity Automatic Account Builder changes

msf

This is the feature that lets you buy additional shares of a TF fund at Fidelity for $5. Has anyone used it recently?

It used to be that you could schedule automatic investments of funds monthly or quarterly. But now, you must schedule automatic investments weekly, every two weeks, or monthly. I suppose that's helpful if one is making investments from periodic paychecks, but otherwise this seems excessive.

If there was an announcement about this change, I missed it.

The interface used to look like this:


Fidelity has also added the ability to schedule automatic (weekly, biweekly, or monthly) ETF and stock investments. They are executed as market orders on the specified dates. I don't know the time of day that the orders are executed.
https://www.fidelity.com/trading/recurring-investments

Sven

Thank you for the update. Always wonder how Fidelity execute ETFs versus OEFs (end of the day’ NAV)?

hank

Sven said:

Thank you for the update. Always wonder how Fidelity execute ETFs versus OEFs (end of the day’ NAV)?

I think I know what @Sven is asking … Yes, ETF’s sell at whatever the current intraday ”offering” price is. That’s generally a little below the current bid price. And when you sell one, it’s at the current “bid” price. Both prices are displayed before you put through the order. Since prices fluctuate continuously, they could change a bit by the time your order processes. But, in essence, the transaction is near instantaneous. You can also set a “limit” price for buys or sells which Fido then honors thru day’s end (and you can change that to “ongoing”). Fido seems to do a good job finding the most attractive prices for its clients.

Note: I’ve had some problems buying or selling larger quantities of shares (etf, CEF, stocks) after setting a “limit” price. Sometimes Fido goes ahead and partially fills the order. Not nice! I suspect there is a setting somewhere that I’m not seeing that would direct them not to process a limit order unless / until all shares requested can be purchased or sold within the limit price set … …

The second part of @Sven’s question: OEF buys or sells are processed at that day’s NAV based in the 4 PM close. So orders to buy or sell an OEF are displayed as “pending” or “open” until processed. You can actually cancel them up until 4 PM if you wish.


I have a question if anyone wants to chime in …

When Fido calculates the 60-day holding time for load-waived fund purchases, are weekends and holidays included in that 60 day period? I have a few shares remaining of a fund I mostly unloaded last week. When I pull up the “order history” and set it to 60-days it no longer displays any share purchases. By the calendar, it has been 61 days since the last purchase was made. Just double-checking before pulling the plug on those few remaining shares.

Mark

@hank - My understanding and experience is that the 60-day limitation encompasses all days not just 'business' days.

yogibearbull

Times for holding periods, margin availability for funds, and wash sale periods are CALENDAR days.

hank

Thank you @Mark and @Yogibearbull. A relief to hear that.

msf

@Sven is asking what price is received when a purchase is made automatically, as opposed to being entered by the investor. It's a good question.

Most automatic investments are via DRIP plans. "True" DRIPs are set up with the companies themselves. In these plans, investors often receive shares from a company based on its closing price on the day of reinvestment, frequently at a discount. For example:

common stockholders may now receive a number of shares based on 95% of the market price per share of common stock at the close of regular trading on The Nasdaq Capital Market on the valuation date fixed by the Board for such distribution

https://ir.ofscreditcompany.com/shareholder-services/dividend-reinvestment-plan

However, for "synthetic" DRIPs, where the brokerage is reinvesting the divs, it's not clear what price the investor is paying for the additional shares. Likewise, when the brokerage is automatically purchasing shares (with investor cash, not divs) on scheduled dates, what price is paid for those shares?

What Fidelity does when reinvesting divs (I don't know about scheduled investments):

Note ... that the stock price at which your reinvestment occurs is not necessarily the same as the price that is in effect on the dividend payable date. This is because we generally buy the shares of domestic companies two business days before the dividend payable date [likely now one day before with T+1], at the market price(s) in effect at the time, in order to help ensure that we have shares on hand to place in your account on the dividend payable date.

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/brokerage-retirement-cust-agree-and-commission-sched.pdf

Related: what price does M* use for purchases in calculating total return including reinvested dividends?

Reinvestments are made using the actual reinvestment price,

https://admainnew.morningstar.com/directhelp/Glossary/Performance/Total_Return.htm

msf

I suspect there is a setting somewhere that I’m not seeing that would direct them not to process a limit order unless / until all shares requested can be purchased or sold within the limit price set … …

Under "conditions" you can specify "all or none". You may have to use what Fidelity calls an "expanded trade ticket".

hank

Thanks @msf. I’ll remember to look for that option the next time I’m logged in. Good to know that.

yogibearbull

I don't use "All or None" option.

Limit-orders that get partial execution may get filled more during the day, or the next day, or next...

In the old days with commissions, there was a rule that all partial executions on a single day will be under the same commission, but a new commission would apply the next day. So, if there was, say, only a handful of residual shares left, one could cancel the order overnight. This factor is no longer relevant.

With "All or None", a risk is that you may miss the order trigger entirely.

Who said that a partial loaf in hand is better than a full loaf in the bush?

BaluBalu

The changes to Fidelity automatic investment features have been implemented many months ago, may be even in 2023. That feature is not as good as it used to be, say in 2022. That feature used to be very flexible and you used to be able to use it for a next day trade.

Fidelity wants maximum number of $49-50 commissions not $5 commissions.

Sven

This is a nice feature I learned from @msf years ago. In the long run, it help to build sizable positions in institutional shares of OEFs. The $5 spend pays itself many times over from having lower expense ratio.

Does Schwab offers similar fearure ?

msf

I wrote: If there was an announcement about this change, I missed it.

Yup, missed it. I don't generally frequent reddit. From a Fidelity moderator, 10 months ago:

It’s here! We’ve added the ability to automate your stock, ETF, and basket trades on a recurring basis–weekly, every two weeks, or monthly. (Yes–stocks and ETFs!
... today’s the day we start rolling it out to some of our users. Over the next few weeks, we’ll continue the rollout ...

Orders for equities, Exchange Traded Funds (ETFs), and other Exchange Traded Products (ETPs) will be placed as market orders at approximately 10am EST on the planned investment date subject to market and other conditions. If the investment date falls on a weekend, holiday, or beyond the end of the month (29th, 30th, 31st), your purchase will occur on the next business day.

You can learn more by expanding the "Important disclosure information" at the bottom of the trade ticket.

https://www.reddit.com/r/fidelityinvestments/comments/17pglm6/its_here_weve_added_the_ability_to_automate_your/