Fidelity allows users to create “baskets” of securities for ease of trading or rebalancing. It’s an interesting concept I spent over an hour exploring today. Clunky / frustrating to say the least. I wanted to see if it was easier to buy and sell from a collection of funds (all my CEFs) instead of having to sell or add to each separately.
- The option allows you to set-up / manage up to 5 portfolios, each with up to 50 securities (stocks, etfs, CEF s, etc.).
- There’s a $4.99 monthly fee for the service (after one free month)
- You can cancel at any time. If you do, the holdings will revert back into your regular account.
- When you move holdings into a designated basket they no longer appear under your main account. In my case about half my Roth IRA holdings disappeared from the Roth account. There’s a “basket” link nearby, however, so you can easily access the basket holdings.
- Settings allow you to set the “weight” of each holding or simply input “equal weight.”
- Apparently to rebalance back to your set allocations you simply press a tab and the program executes the necessary buys and sells. I’ll better understand that feature as the trading week ensues.
- Disappointingly, once you have moved existing holdings into a basket, share totals fail to appear (dollar values and other data do surface). This might possibly clear up with time? It’s still possible, however, to view total shares by clicking on a specific holding inside the basket.
If anyone uses this feature and / or has additional insights into the technicalities involved please share.
Comments
Thanks, Derf
My thoughts are that my CEF collection has 7 holdings and I’m considering expanding to possibly 8 or 10. The problem arises when you decide to raise cash by selling across the board - as I’ve found recently. Putting through 7 sales in rapid succession increases your potential for screwing up - perhaps by selling one of them twice by accident. So it might be worth the fee as one screw-up could have consequences. And it’s a headache to trade that many as well.
Hard to get a good read on how it works on a weekend. Will know more in a couple days. I think this would be ideal for folks with the time & skills to build their own equity portfolios. But that’s beyond my reach.
Here’s a road map of sorts I came across from Fidelity.
The process:
- First, I put through a single sale from the existing basket of 7 in the necessary dollar sum to fund 2 more equal weight CEFs. This worked like a breeze. The system sold roughly equal sums from each of the 7 and the cash was immediately available for investment inside the Roth..
- Using the proceeds from the sale, I purchased the 2 new CEFs in identical cash amounts. They appeared first in the Roth account listing..
- However, transferring the 2 new CEFs into the existing “basket” was difficult at first. The system required a “percentage” of some sort - but it didn’t say “of what”? You’d think that would be 100% of each of the new CEFs … No!
- I then imputed a % slightly above that of the present basket occupants. That went through and 100% of each of the new funds moved into the basket.
- At first there appears no way to observe the share totals for the various basket occupants all at once. Early on I resorted to clicking on each individual CEF to view shares held - a slow process. However, on the third or fourth day I discovered a link on the main portfolio page that allows you to switch back and forth to either view all holdings with share totals, etc. or simply view the non-basket holdings. It’s hard to spot - “Hidden in plain sight” as they say.
- In the end, everything worked. It will be a great feature provided I simply add to, withdraw from or rebalance the entire collection. All that can be accomplished in 1 easy step. However, as I’ve noted - buying a new position or selling an old one could prove trying.
Yesterday a dividend was received from one of the 9 CEFs. But it was “reinvested” into the fund (as I’d previously established) separately. In other words, the share total in the “basket” for this fund did not increase. Rather, a new position in the fund for the amount of the dividend received appeared in the more traditional folder at Fidelity (chump change). When I was unable to transfer that amount into the “basket” and merge it with the larger holding I could not. Called Fido for help. I was assured the dividend would “recycle” over night and be combined into the larger position.
The above failed to materialize after 24 hours. This morning I cancelled the free one month basket enrollment online. According to Fido’s literature, cancelling should have taken all basket holdings out of the basket and placed them into the original account folder with everything else. Did not happen. I tried moving “all” manually. No go. I tried moving some individually and was told by their robot I couldn’t move any out unless I set the allocation back to 100% for all the ones left behind in the basket. ? ?
I called Fido again today. They tried to help. We got all but 2 funds out of the basket. Two remain with target allocations of 50% each. I am assured no trades will execute as a result of this. I am a told the remaining funds will be captive to the basket until my “free trial” expires in about 25 days from now. (As far as I can tell, there’s no real significance to this.) To see where the account stood, I attempted a test sale from a couple of the former and current basket inhabitants after market open. While all the shares in question could be sold, only the option to sell a specific number of shares surfaced. No way to sell a dollar amount. As if trying to sell or buy across 9 basket funds isn’t difficult enough … it will now be even more difficult with my having to convert dollar sums into shares for each of the 9. Fortunately, this shouldn’t be necessary very often.
Ahhh - Tread carefully. If your dividends can’t be reinvested back into the Fido basket, over time it will distort the weightings and make managing the basket cumbersome.
PS - The basket approach from an investment standpoint is working as expected. It’s running 1-2% ahead of the diversified allocation fund the money came out of - albeit most of that a result of 1 fortuitous trade. The overall daily volatility is lower with the basket of CEFs compared to the previous allocation fund. But six weeks is too soon to say. The CEFs are roughly evenly divided between bonds and equities. As of this morning the bond portions are hare having a nice day.
CEFs often declare divs weeks before the payable date. Perhaps that's the issue. https://www.fidelity.com/direct-indexing/customized-investing/faqs
While all the shares in question could be sold, only the option to sell a specific number of shares surfaced. No way to sell a dollar amount
This sort of order is often called "fractional shares". Fidelity provides fractional share transactions on stocks and ETFs. Apparently not on CEFs. Are other brokerages different? For example, Schwab 's fractional shares (what it calls "Stock Slices") is restricted to S&P 500 stocks.
I’ve got a great portfolio tracker. Slices & dices with ease. So the benefits of their basket were minimal (and $4.99 monthly).
Yes, adding or withdrawing across the board takes more time - but should rarely be necessary.
PS Re fractional shares. I’ve been trading CEFs at Fido for at least a couple years. Never ever ran into an issue selling dollar amounts (fractional shares). Possibly something has changed? My first impression was that it was some sort of “get even” with me for cancelling their basket option. I’m sure, however, they would not stoop that low. At $60 a year the benefits vs the trouble of DIY are pretty close.
Generally if you held the fund post ex-dividend the dividend goes into cash. That would have been better here as I’d have reinvested the cash myself into the fund inside the basket. Now I’m in never never land. Not sure if it was in the basket before the ex.