The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: BarkyardBQ on January 13, 2015, 03:39:52 PM
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I looked but couldn't find a similar topic.
So my my recent deferred contribution went in on Friday and I noticed a 4 cent loss. After market, price already set, the contribution is missing 2 cents per share. I called Fidelity, they took 24 hours to investigate and then told me that the loss was due to rounding. That based on rounding the [4 cents of] shares are still owned but it cannot display that. Has anyone ever experienced this? I've never seen this with my other contributions.
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Never heard of it before. In my experience share prices are calculated to the penny, and fractional shares are tracked down to the thousandth (0.001), and my numbers and their numbers nearly always match and are always within a penny of the total amount of the account value.
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It's pretty common for these transactions to be a few cents off due to rounding.
As an example, suppose you contribute $500 for a fund that has a per-share price of $56.03 on the date of purchase. They'll calculate the number of shares like so: $500.00 / $56.03 = 8.92379... They'll round it off to the nearest thousandth of a share, so they'll credit your account with 8.924 shares. 8.924 * $56.03 = $500.01, so you actually made a penny off the deal.
If the share price was instead $56.02, the calculation would go $500.00 / $56.02 = 8.92538... They'll round it off to 8.925 shares purchased. 8.925 * $56.02 = $499.98, so you lost two cents by rounding in this case.
Sometimes the rounding will be a few cents in your favor, sometimes it will go the other way. In the long run it will even out to about zero. Don't worry too much about it.