Youth Account App Inconsistencies
Summary:
- The main problem reported by the user is the misleading “available to invest” value, which can lead to confusion and warnings when trying to invest with unsettled funds.
- Fidelity explains that it generally takes 2-6 business days for deposited funds to fully collect in the account, and that stocks and ETFs take two business days (T+2) to settle.
- Despite warnings, users can still place trades with uncollected or unsettled funds, but they should be cautious of potential cash trading violations.
- After selling an investment, proceeds are deposited into the account’s core position, usually the Fidelity Government Money Market Fund (SPAXX), which holds uninvested cash.
- Fidelity encourages the user to review the provided link for more information on avoiding cash trading violations.
Here’s the full thread
I recently opened a youth account for purposes of investment, and my experience has been fine, aside from one main thing:
The “able to invest” value seems misleading in multiple ways. While I think I do understand what it does, it’s only done this in the last couple days and had not done this the last couple weeks.
My main problem is the fact that my “available to invest” number does display a number above my cash rate (which it adds the pending transactions from recent investments/trading to, listed under “credit/debit”).
Whenever I invest, the only number available to me is the “available to invest” number, and whenever I try to invest knowing the number given, it usually says something along the lines of “you’re paying more than currently in your spending money, bad things could happen and you could violate certain agreements if you sell before it’s fully paid”.
This leads to one thing I’m presenting: I sold a stock last Friday and the resulting money still hasn’t shown up in my account. Though there was a “morning trade” with SPAXX this morning in my account (which I’m not really sure what that did because it seemed to be an unrelated amount of money), the amount sold is still listed in the credit/debit section and the SPAXX transaction has no settlement date. Any help? I could provide more information if needed.
Hi, @Thebro57. Thank you for opening a new account with us!
When you deposit money, it generally takes 2-6 business days for the funds to fully collect in your account. Fidelity generally allows clients to trade with uncollected funds; however, you will need to be aware of cash trading violations.
Additionally, it’s important to understand trade settlement timeframes. Stocks and Exchange Traded Funds (ETFs) take two business days (T+2) to settle. Other securities, like mutual funds, settle in one to three business days. If you sold your stock while the market was open on Friday, your funds should be settled today; however, if you input your trade after market close (4 p.m. ET), then the trade may not have occured until Monday, in which case it won’t settle until tomorrow.
When trading, you’re allowed to use the “available to invest” balance, despite some of the funds possibly being uncollected or unsettled due recent deposits or a recent trade.
When trading with all or a portion of uncollected/unsettled funds, you may encounter a warning message, like you’ve mentioned. The warning message appears to alert clients that buying a security with unsettled funds and selling it before the funds used to buy it have settled could potentially trigger a Good Faith Violation. Although the warning will appear, you can still place a trade, but you need to be aware of encountering a violation.
Check out this link for more info on cash trading violations: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations
With this said, after selling an investment, the cash proceeds will be deposited into your account’s core position, which is usually the Fidelity Government Money Market Fund (SPAXX). SPAXX acts as a wallet for your account. It holds all of your uninvested cash.
This was a lot of information! Feel free to follow up here with other questions so we can help get to the bottom of this.
If it normally takes 2+ days for stocks to go through, how did my stocks buy and sell immediately my first week or two with the app….?
Good question!
Although the trades may go through, the funds from the trades may not be settled. This could result in a good faith violation.
A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as “settled funds.”
You can view a couple examples in the link below.
Good faith violation https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations