Say you have $10000 in VTWSX with Vanguard and wish to withdraw $1000 of it. What actually happens when you place this order? Because it's not instantaneous - the shares are sold over the next two days-ish apparently. Here are the things that I think could happen:

  1. Vanguard is saying that it will personally pay you $1000 to buy back your shares of VTWSX, so you get $1000, and your balance goes down to $9000 in your account.
  2. Vanguard is saying that the market price of your fund is $10000 now, so when it sells the shares that are currently valued at $1000 in this fund, you will probably get $1000, but you might end up getting $980 or $1200 instead, who knows?
  3. Vanguard is saying that since you placed a withdrawal order for $1000, it will keep selling shares from your VTWSX account until you get $1000 worth of them. This could mean that your account balance goes way down after you place the order if the stock market goes down during the two days when it is selling the stock off.
  4. Vanguard is saying that it will try to sell your stocks for at least $1000, so if the stock market goes down right after you place the withdrawal order, then you might be waiting for days or months for your $1000.
  5. Vanguard is making a personal guarantee that you will get $1000 for your stocks which it has reported as being worth $1000, regardless of what the value of them ends up being when it actually sells them. It then eats or pockets the cost difference itself.
  6. Other?

Which one of these is correct?

2 Answers 2


None of your scenarios is correct, and some of your premises are invalid too.

First, you don't have an investment of $10K in VTWSX; you own a certain number of shares in VTWSX, and at the current price per share of VTWSX, your investment is worth $10K. The number of shares of VTWSX that you own is most likely not an integer but a number expressed to three decimal places. Now, mutual fund companies determine the price per share of mutual funds at the end of the business day when markets have closed, and all purchases and sales of shares for that day are done at that price per share. (For global investors such as VTWSX for which markets might never close -- somewhere, some place, some stock exchange is open -- the price per share might be determined at a fixed time (say 4 pm in New York). In fact, the price that you see for VTWSX shares on the Vanguard web site is the price as of yesterday. So, what is the price per share that Vanguard determines? Well, VTWSX owns stock shares in various companies, bonds, etc and it may have some cash on hand in its own "checking account". It adds up the value of all the stock shares and bonds etc that it owns, using the price of the most recent transaction on the exchanges for each item, plus the cash in the checking account, and divides this by the total number of VTWSX shares owned by the investors in VTWSX to determine the price per share for that day.

If you have sent in your request to get $1K from your VTWSX investment before 4 pm New York time today, Vanguard will execute your order by redeeming exactly enough shares of VTWSX (fractions to three decimal places, remember?) at the price that will be determined as of 4 pm that day (though Vanguard doesn't post the price per share on its website till about 9 pm) to generate $1K in cash. It will send you the money the next day by wire transfer (expensive) or by ACH transfer to your linked bank account (free but it might take two or three days to get the money) or by paper check (free but it will take them a day or two to print the check and then there is the transit time via USPS). What will be left in your account will be whatever shares of VTWSX that were not redeemed, and the value of your investment will drop not exactly by $1K; the value might be more than $9K or less than $9K depending on whether today's price per share is more than or less than yesterday's price per share.

So, what's the role of this "checking account" that VTWSX allegedly has? Well, that's the account into which all the money accompanying purchase orders is deposited, and it is the account from which redemptions are paid out. VTWSX will rarely sell shares of stock that it owns to pay redemptions (almost certainly not for a $1K redemption) unless there is a "run" with lots of people redeeming VTWSX shares and very few buying; all the immediate transactions are done in the "checking account" and actual buying and selling of investments that VTWSX owns occurs only in bull markets (lot more money flowing into VTWSX) and bear markets (lot more money flowing out of VTWSX).

Note: all the above applies to VTWSX, the traditional mutual fund, and not to its ETF counterpart VT.

  • Thank you! That's a very good explanation! Doesn't that correspond to option 3 though, provided that you change the timeframe on Option 3? Because this means that if you place an order for $1000 worth of shares at 3:00, using the prices Vanguard states at 3, then Vanguard will actually sell the shares at 4:00 using the 4:00 prices? So say Vanguard reported that your shares were worth $100 each at 3:00, so you expected that 10 of them would be sold, but then they actually end up being worth $50 at 4:00, twice as many will be sold as you expected when you actually placed the order, correct?
    – kloddant
    Commented May 17, 2018 at 20:15
  • 1
    @kloddant Sort of but not quite. Vanguard has no one to sell shares of VWTSX to except itself; it redeems some number of shares (at the price that will be determined later that day) to get you the requested $1K. It might then sell those shares to someone who placed a purchase order, but this is by no means a given. Open-ended mutual funds don't issue a fixed number of shares as companies do; they "create" and sell additional shares of the fund as purchase orders come in. Commented May 17, 2018 at 21:35

The sale order will be executed that same evening, and it will be for 1000$ in one sale.

The reason is that they collect all sell and buy request over the day, and execute them together (this saves fees for everyone, as they don't need to sell and buy the same shares on a day; only the overall total is traded).

In the evening, they calculate the ETF share price, and then execute your order with that price. You can see that share price published later in the evening.

The resulting money will be available immediately in you cash account at Vanguard (so you don't even need to wait till the evening to use it for other buys or transfers). If you want to cash it out, it will be transferred to your external bank account same day (but the transfer will take a day typically).

Regarding your account balance: you don't have a balance in $, you have a balance in number of shares. They are valued every evening with a share price, and your account shows the product of number-of-your-shares * share-price. After the sale, it will show the new number of shares times the new share price. That could be more or less than 1000 $ different than your previous days value, but that is because the share price changed.

  • So you stated that, "In the evening, they calculate the ETF share price, and then execute your order with that price." What if the share price fluctuates between the time that they calculate it and the time when they execute the order? In that scenario, do I receive the reported value or the actual value they were able to sell for?
    – kloddant
    Commented May 17, 2018 at 13:48
  • 4
    @kloddant and Aganju, "VTWSX" referenced in the OP is not an ETF; it has a NAV calculated daily but there is no separate market valuation like ETFs have.
    – user662852
    Commented May 17, 2018 at 14:00
  • 1
    VTWSX is not an ETF (exchange-traded fund) whose NAV fluctuates all day long and trades can occur at different prices during the day but a traditional mutual fund. Commented May 17, 2018 at 18:50

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .