Definition
When you buy a security there is time between when you buy the security and when you pay for that security. The date you buy is the buy date. The date you pay the money is the settlement date. The inverse is also true. If you sell a security, you won’t get the money right away. The value of knowing how long it takes for a transaction to settle is that you don’t need the money when you buy, you just need the money when you settle.
For Example
Let’s say I have no money but I know I will have money tomorrow. I can buy a security now (even though I have no money) because I know there will be enough money in my account before the settlement date.
Importance of Settlement Dates
Different types of securities have different settlement dates. That information that is essential to know to ensure you always have enough money to pay for what you buy. Stocks and ETFs settle t+3. That means a stock’s settlement date is the third day after the stock was bought. So if you buy on Monday, it settles on Thursday. Mutual funds settle t+1. So if you buy on Monday, it settles on Tuesday. So if you simultaneously sell a stock and buy a mutual fund thinking the proceeds from the stock will cover the mutual fund, your plan will fail because the mutual fund will require that money earlier than the stock provides it.
Fee Structure
| Rate | Assets Under Management |
| 1.44% | Below $125,000 |
| 1.00% | Between $125,000 and $750,000 |
| .85% | Between $750,000 and $1,250,000 |
| .80% | Between $1,250,000 and $1,750,000 |
| .75% | Between $1,750,000 and $2,500,000 |
| .70% | Between $2,500,000 and $3,250,000 |
| .65% | Between $3,250,000 and $4,250,000 |
| .60% | Above $4,250,000 |
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. If you would like to submit a post to my blog, please contact me.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
E-Book Download
Questions for the comments
Did my explanation make sense? Do you agree or disagree with what I said?
