Contingency Plans For A Digital Bank Run

Do you have contingency plans fo a digital bank run? If not, perhaps you should. The markets are extremely frothy again and another downturn could happen. If there is a downturn, there will be another digital bank run that will put pressure on the money market system. It happened in March 2020, it may happen again.

Beware Of The Digital Bank Run

When the S&P 500 futures were pointing to another -5% opening on February 6, 2018 I got excited. After all, the S&P 500 closed down 4.5% on February 5. I get aggressive whenever the stock market corrects by 10% or more because history has shown positive returns in subsequent days and months.

Historical stock market corrections

The initial down 5% move was blamed on the 10-year bond yield jumping to 2.85%. But since the 10-year bond yield declined from 2.85% to 2.75% after the 5% stock market drop, and futures were signaling another 5% drop in the stock market, I figured it was time to deploy some significant cash. Fundamentally, corporate earnings growth and economic indicators were still sound.

Armed with $200,000, my plan was to use $100,000 to buy the morning gap down. I would then deploy the remaining $100,000 throughout the day just in case the stock market panicked even further. My focus was on buying growth stocks for further capital appreciation.

I set my alarm clock for 6:15am just in case, brushed my teeth, sat on the toilet, and fired up my Fidelity account to put in my $100,000 buy order.

Preventing A Digital Bank Run

Contingency Plans For A Digital Bank Run
Tried to log on between 6:25am – 7:30am and couldn't

Of course, when I tried to log onto Fidelity, I couldn't! I remember this happening to me several times in the past. So, I just kept on trying, all to no avail. While all the previous times, failure to be able to log on immediately was simply annoying, this time it was important because I had some serious cash to put to work compared to my usual $5,000 – $20,000 buy orders.

As you probably already know, the market went from down ~4% at the opening to finish up ~2% that day. We're talking a 1,000+ point swing on the Dow. My inability to place timely buy orders caused me to lose out on potential gains of up to $16,000. Once I finally got online, I ended up investing only about $20,000, or 10% of my original plan for that day as prices were not as attractive.

I wondered whether other people had the same issue of not being able to log onto their online brokerage account. From the feedback I got over social media, it looks like Fidelity, Merrill Lynch, and some robo-advisors went down as well.

Banks Shutting The Digital Doors!

Could it be that financial institutions are purposefully shutting their digital doors to prevent a bank run? I run a website and have had many talks with my system administrator on how to keep Financial Samurai up 99.9% of the time. You would think with multi-million dollar technology budgets, online brokerage firms wouldn't have frequent outages anymore.

The only time Financial Samurai was down for more than several hours was when a construction worker accidentally sliced a main internet cable underground. Whenever there is a traffic surge or anticipated traffic surge on Financial Samurai, we have proper caching in place. I could tap some keys to shut down my site as well, but I won't.

If the online brokerage firms are not purposefully shutting their digital doors, then there is some serious incompetence going on because people's livelihoods are being affected. A digital bank run feels scary because your stocks are crashing and you start imagining losing all you money.

Merrill Lynch trading down - Contingency Plans For A Digital Bank Run

If you are an investor, you've got to ask yourself this question: during a large and sustained market correction, will you be able to place trades or access your capital?

Based on the historical track record of online brokerage accounts, it's hard to say yes with full confidence. Therefore, it's important to develop a contingency plan in anticipation of the next bank run.

Please note I'm not a trader. I'm a long term investor who is trying to build a risk-appropriate portfolio to provide a financial tailwind for my family. Given I have dependents, I need assurances my money will be there if truly needed.

If you are a trader, having a contingency plan is important as well because you could miss out on big gains or get wiped out if you cannot exit. Day traders tend to get wiped out in a digital bank run.

Contingency Plans When Market Freaks Out

During a digital bank run, things get bad. Have these contingency plans.

1) Have two or more investment accounts.

During the Fidelity outage fiasco, I kept trying to log on to their site for 45 minutes until I gave up and decided to do something else. I could have bought stock in my Citibank wealth management account, which was accessible, but by the time I remembered to do so, the stock market was already in the green and I didn't want to chase.

Therefore, the next time there is some huge market move, have all your investment accounts ready to go at once. Unless there is some type of online brokerage conspiracy, hopefully at least one of your accounts will work.

During the Gamestop mania in 2021, many online brokerages, including Robinhood, shut down its trading business in the stock and other names. During a digital bank run, may online brokerages tend to follow suit, so beware!

Average correction and recovery
Average correction is -13%, takes 4 months to correct, and 4 months to recover

2) Create staggered limit orders before the market is open.

I could have potentially bought the gap down on February 6, 2018 if I had put in staggered limit orders the night before or way early in the morning. For example, if the futures were portending to a 5% gap down, I could simply put a limit order on a S&P 500 index fund 5%, 4%, and 3% lower.

The same goes for buying individual securities, but their opening prices will be harder to gauge. I just don't like putting in large limit orders because things change so quickly.

3) Make a phone call.

It never occurred to me in this digital age that I could just call Fidelity to place a trade. Perhaps they would have jammed me with a 10 minute hold period, but I don't know for sure. Again, everything was moving so fast that by the time I could have gotten hold of a live person, the markets would have moved.

Therefore, the strategy is to call before the market opens to deliver the trading instruction before things get too hectic. It's just hard to know exactly what the market will do because the futures market isn't a 100% reflection of normal market trading.

Dow Jones intraday chart during Feb 6, 2018 panic
Feb 6, 2018 DJIA intrada day chart. Tried to buy the open but couldn't, then the Stocks app on my iPhone froze, hence the straight line.

If There Truly Is A Digital Bank Run

So far, we've just discussed three no-brainer things we can do if we wanted to make a trade, add capital, or withdraw capital. You're never going to get your timing right, even if you are a full-time trader. Therefore, don't beat yourself up too badly if you miss things.

But if you can envision things getting really bad, then it's probably a good idea to spread around your capital across various banks, and limit each account to $250,000 per person.

The standard FDIC deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.

For example, a revocable trust account (including living trusts and informal revocable trusts commonly referred to as payable on death (POD) accounts) with one owner naming three unique beneficiaries can be insured up to $750,000. This is straight from the website.

Contingency Plans For A Digital Bank Run
If you shorted volatility, you got taken out on a stretcher

Cas Management Is Key

During times of uncertainty, everybody needs to do a thorough rundown of their cash holdings. It's cash that allows you to survive a prolonged downturn without having to sell anything at fire sale prices.

It's cash that allows you to take advantage of panic selling. And it's cash that allows you to sleep better at night so you can be energized to take care of your family every day. Cash management is really stress management if you think about it more.

As for the future of the stock market, I'm still relatively bullish. If the 10-year bond yield doesn't breach 2% until 2022 we should be fine. I don't want to see another 5%+ gap down again, but if there is, I'll be ready to buy during another digital bank run.

Is February 2018 finally the beginning of the end of our long bull run?

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Personal Capital Retirement Planner Tool - digital bank run

Invest In Real Estate For Stability

A digital bank run will happen again. Consider diversifying your investments into real estate. Real estate is my favorite way to achieving financial freedom. It is a tangible asset that is less volatile, provides utility, and generates income.

Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuation and higher rental yields. Further, 18-hour cities potentially have higher growth due to demographic trends.

I've invested $810,000 in real estate crowdfunding. The capital is spread across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000. 

53 thoughts on “Contingency Plans For A Digital Bank Run”

  1. That is definitely suspicious. I guess it is time to open up accounts in multiple institutions to ensure that I’ll be able to access what I need as necessary.

  2. Morgan is really suspending aggregation? That is a severe overreaction and only serves to fan the flames. This is NOT that big a time when you look at past history. It is a simple correction. Even if it becomes a bear market, people should be buying, not selling. Then again, this is why people cannot obtain real money.

  3. I know what a limit order is, but can someone explain a staggered limit order? If you setup 3, 4, and 5%, how do you prevent all three from executing if it goes down 6%?

    I setup a Conditional for a low point, and then a trailing stop loss, meaning that when it starts to go up by a certain amount, then I’ll buy.

      1. Thank you very much for explaining the idea of the staggered limit orders. Now the market is going up a bit, I have placed a number of them myself at really low prices. This is the same money that I got from selling my house in Florida (we’ve talked about it) that I hesitated or didn’t invest enough of because I was afraid the market would crash in 2016. BTW, through my work, I was talking to someone whose dad was a property managed in that part of Florida when he was growing up. He convinced me that selling my house in Florida, on the company dime, was the very right move to do. Now let’s see that money go up if/when the market continues to recover.

  4. Got this warning from Personal Capital…I imagine they’re not the only ones.

    “Due to the recent market volatility on February 7th, Morgan Stanley Online has requested that we suspend account aggregation. These issues have been reported to our aggregation team who are currently working with Morgan Stanley Online to enable account refreshes again.”

  5. Exactly why I have multiple accounts. Vanguard, E-Trade and TD Ameritrade plus 2 different bank accounts on-line.

    This correction was long overdo. While we might not be at March 00 levels of froth in regards to valuation, we are quite high. Further, the prices of bonds have been kept artificially high by central banks for almost a decade through extraordinary measures. Getting back to equilibrium won’t be without some pain. However, I do think the market will reset and be OK with higher rates, eventually. At some point, people will realize that 3.75 or 4% on the 10 year is still way below what you can expect from equities on a long term basis. On a shorter term outlook, when rates reach that level, a min of 3% GDP will be crucial or we really could be in for some significant pain. I actually think we will reach that level.

    So, I am not worried. Regrettably, I was at the Eagles SB parade yesterday and my phone was working well, so I had no idea what was happening in the market. I would have bought in since I have a lot of cash waiting for a home. I have a hunch I will get another chance soon since the late comers to the market are getting nervous. This always happens. History does repeat.

  6. I have Scottrade – soon to be TD and Robinhood. I’ve never had issues with access to the accounts so this is very surprising to hear especially during days where trading could be so high.

    During days of large corrections, I just hope those are the days my 401k is buying via DCA :-)

  7. I also had to deal with Fidelity being down and it makes no sense to me. It’d be one thing if this was the first time this happened, but it seems like any time the markets are especially volatile the site goes down. The optimist in me wants to think that the site truly did just get overloaded with traffic and that it was just incompetence that led to the issues, but the cynic in me thinks it was done on purpose. Even worse was that the response from Fidelity via the chat was less than encouraging. I’ll definitely be giving some serious consideration to moving some funds around.

  8. Sam,

    Long time reader and first time commenting.

    I work in IT and was a project manager over a voice team for one of my roles. I am not saying this is the case, but if my company used this “standard” calculation, I am confident others do as well. I think this can be a good concept for how voice and network capacity is calculated.

    There is a calculation called erlang. I don’t know the math behind it or history, but long story short it is a ratio of active calls for a number of people at a given moment. An easy example I have is that we had to install voice circuits into a new office building. These circuits are like 30k a month to rent plus usage time. You don’t want to overbuy or it seriously impacts operation cost. We had 700 people in the building. Each circuit allows 24 concurrent connections. The point of erlang is to calculate how many “external” calls would be placed at once during peak use (8am when everyone gets in and returns previous day calls). For that building of 700 people we only bought 2 circuits allowing for 48 active calls at one time. It is too expensive to allow all 700 to call at once and you would not expect them too 99% of the time. The erlang calculation we used was 6% of total would be available call capacity.

    Long story short you buy capacity for average plus a bit extra for average peak but do not buy for extreme times. Getting from 99% to 99.9% is 19x the cost. Each .9% you add to uptime is exponentially more expensive than the previous decimal point. During an ice storm when everyone got stuck in the office, the lines got filled and the 49+ person would hear a busy tone. It was a once in 8 year occurrence at that building when capacity was hit.

    Now this example was telecommunications, but conceptually would be applied to network or web connections as well.

    I am sure the brokerage sites have capacity for a certain number of active connections. Once they surpass that, they probably lease extra above peak capacity from telecommunications companies or amazon web services at a rate easily 10x the cost. Once they hit that limit they set, the next person hitting the system will get the “busy signal.”

    I’m sure there are statistics somewhere showing that more than average volume occurred in average daily login due to the crazy news after a long lull with fat grazing bulls. We likely hit the company’s capacity and more. It is possible they had an outage due to other things internally as well.

    I would imagine this would impact mainstream brokers but likely not obscure brokers where no one uses them.

    My TD was also slammed but I put in tranch 1 limit order. After it didn’t rebound right away, I know the market has changed in the short term.

    Now I’m waiting for the dust to settle to put 2nd round in.

  9. I think the limit order is a good idea (keep it as good until cancelled) in case you can’t access your account. Hopefully it’ll go through!

    I had no idea Fidelity was out earlier in the week! Personally, I have multiple brokerage accounts and haven’t used my Fidelity account yet.

  10. I like the staggered limit buy orders. In fact, every order people make should be a limit order. I’ve had a limit order to buy IBM at $142.50 for over a month now. Another couple down days and I think it will hit.

    Having limit orders in forces you to be disciplined about your price point. Had I gone to the “market” to buy IBM over the last month, I might have paid $165 a share.

  11. Reminds me of October 1987. Tried calling Schwab all day and no one would pick up except for their damn recording(back then all you could do was call in).

    Ever since then been using 4 different brokerage houses.

  12. Yup. I bought about $20k from Betterment, but no visibility on actually when the purchase was made (in the morning or afternoon). I did it the night before. Going to maybe buy more tonight due to the additional decline. Sucks that you had technical issues. I’d switch. I would have expected Fidelity having a high SLA (service level agreement). Good you had a backup though.

  13. Well looks like Fidelity being closed worked in your favor with the market being even lower now at close. I predict it’ll tank another 300-400 in the morning, and then recover modestly in the afternoon.

    1. Hopefully you and other readers will focus on the message of a contingency plan and not timing the market.

      But yes, I am a buyer during the markets sell off. Futures were showing an even further decline than today. Who knows when it will end.

      How are you deploying your capital?

      1. Thanks for the reply, and congrats on a really great site.

        Agreed about thinking about a contingency plan, and I don’t time the market or even day trade. It did make me think. Because I moved my wife’s and my checking, savings, IRA’s, brokerage accounts over to Charles Schwab. And I have had a pretty great experience. If it went down for a day or more, I think for me it’d be more annoying than anything else because of how I tend to invest.

        As far as capital deployment …

        Almost all of my investable capital comes from a regular, day-job paycheck:
        1.) contribute about 40% of the max allowable to a 401k. I do plan to increase contributions about 1% every 6-9 months to get there. My wife is not working, and we’re expecting our first child, so maxed out savings seem like a luxury.
        2.) I’ve got about 25% of my net pay going toward debt repayment (avg. rate of about 10.5%)
        3.) I had been contributing about 5% of net pay to a Roth IRA. Then I read about your opinion about roths, and I realigned a little because I agreed with your points. I recently reduced my Roth IRA contributions by about 40%, and redirected to debt repayment and to increase my after-tax brokerage account contributions. I’ll probably continue to invest, but could feasibly see myself reducing this stake even further.
        4.) I put about 4% of net pay into a taxable, brokerage account
        5.) Another 4% I put into cash savings. I have about 1 month worth of living expenses saved as cash, my plan is to build it up to 3 months and then reduce it to 3% savings, and once I’m up to 6 months to not contribute anything to cash savings. As I reduce cash saving, my plan is to redeploy future capital to my taxable, brokerage.
        Everything else pays the living expenses and isn’t deployable capital.

        I also drive some Lyft just to bring in some extra above and beyond:
        1.) 25% of gross goes into savings for taxes.
        2.) 5% goes into my taxable, brokerage account
        3.) 70% goes to debt repayment.

        Windfalls like tax refunds, cash rebates from credit cards, cap gains/dividends in my taxable account get divied up:
        1.) 25% cash savings
        2.) 25% back into the brokerage
        3.) 25% into debt repayment
        The rest is fun, spending money that I don’t invest

        Within my accounts, I just “set it and forget it” on retirement accounts using a target date fund to run the show. But in my brokerage I end up spliting new investment about 1/3 into a large cap growth fund, 1/3 into a dividend growth fund, and 1/3 into tax-free muni bond fund. But the total, current allocation is about 65% large cap growth fund, 30% dividend growth fund, and 5% tax-free muni fund.

        I had thoughts about starting a portfolio with Fundrise to invest indirectly into real estate, but didn’t feel I could comfortably water down any of my existing strategies. I also stopped myself when I had a thought to invest in digital currencies, and have stayed out of it entirely. So I am a little light on Alternatives – other than my house as a primary residence.

        I like to think of myself as just ever so slightly above the average in terms of financial literacy. But I also have a lot to learn. I do think that I was incredibly late to the game, and got myself into trouble when I was younger with credit cards and car payments, and not saving enough for a conventional loan on my home and instead opting for an FHA. That ended up being a wonderful decision financially …. only because of real estate appreciation eventually allowing me to refi to a conventional loan. Thanks for the perspective and the continued insights.

  14. I missed on many similar opportunities when buying Crypto… Now, I just transfer fiat $$ to Coinbase/Gdax, let the money sit in the account, so I can take advantage when there is selloff (like last week). I also place limit orders weel in advance, as you’ve indicated…

  15. I don’t think you would have fared much better with a phone call.

    I got a notice in my inbox from iTrade (Scotiabank) that there were unusually longer wait times on their phone lines due to the large volume of calls.

    At least they notified me electronically of problems with their old-school technology. haha

  16. Recovering Engineer

    Considering you used to work in finance I’m surprised to see your speculation about preventing a bank run. I expect that belief from people who don’t really understand the financial world but not from somebody who has been there. There is no reason a brokerage would intentionally refuse client access to their money.

    A bank run is a very specific issue and is not at all applicable to a brokerage account. A bank run occurs because banks borrow money (your deposits) short term and lend money (loans, mortgages, etc.) long term. The creditors of the bank (all those depositors) can show up and demand their money back at any time. But the bank doesn’t actually have the cash if everybody does it because they have loaned that money out to other people on a multi-year or even multi-decade basis. That’s what causes a bank run, people are afraid if you aren’t the first person to get your money out the bank will run out of cash before they get to you.

    A brokerage firm doesn’t do that. They aren’t making long-term business loans, they aren’t underwriting mortgages. They are hold cash and securities which you are investing. If every member when to Fidelity today and said, give me my money back, Fidelity would sell their holdings and give them cash.

    The only reason they could get in trouble is if they gave egregious margin loans and didn’t execute margin calls quickly enough. But that is highly unlikely at a large institution and even still it isn’t a bank run.

    1. Surprise! When you not only work in finance and operate a website that faces the same challenges of traffic spikes, you tend to see things behind the curtain.

      An online brokerage’s responsibility is to remain up and be a place of transaction. When it constantly goes down, that is when trust is lost and things go very bad very quickly.

      What do you do and do you run your own website as well? I’d love to check it out and learn about its operations.

      1. Recovering Engineer

        I think there must be a miscommunication somewhere since both you and Andrew seem to think I was saying the websites going down is ok even though I never once said that. I think it is unconscionable that an online brokerage would crash and not let customers in. Their one purpose is to provide digital access to customer accounts.

        What I was trying to say is that the theory that the companies all did this to prevent a bank run makes no sense. There can’t be a bank run in this scenario because that isn’t how the business model works for these companies. A more plausible explanation is simply gross incompetence on the part of the IT departments.

        And to be clear I work neither for a bank or an online brokerage. I was just trying to explain how bank runs work and why this couldn’t be one.

        1. I’m actually surprised you think I don’t know how panic and bank runs work and what goes on behind the scenes of managing a website given I’ve run several for the past nine years. This is good feedback as I wonder if I have not been promotional enough in explaining my background. Would you be interested in more articles on running a website and learning how to make money online?

          Your trust in the system is commendable. That is exactly what the government and financial institutions want people to have.

          What is your background and occupation? I need some color so I understand where you’re coming from. This article talks about contingency plans when things get really bad for sustained period of time. Thanks

    2. Which bank or online brokerage do you work at to not understand the importance of having a working website at all times if it is accepting funds for transaction purposes?

      1. Maybe locking out the little guy to allow the big players and premier clients to front run the moves?
        Just a thought. Didn’t even try to log in those days. Time in the market and all that….

  17. All valid points and good advice. So far this is not cool but probably normal. Sad to see my portfolio diving, but I am sure in the long run this will be a small blib.

  18. Literally the exact same thing happened to me Sam. I was at the gym and saw the futures market.. planning to buy in the first 10 mins. Couldn’t get fidelity to work until 9:50 ish. By that time market was about even. I still plopped in to my plan ($30k)… and ended positive on the day. But that was luck. Missed out on ~2% of upside

  19. Oh wow that is nuts their website was down and several of the others too! I would have been so ticked off if that happened to me. I know what you mean about forgetting they have phone service. I’m used to doing everything online nowadays that I rarely pick up the phone.

  20. That’s ridiculous. Do I smell a class action lawsuit coming?
    I was busy with my rental so I missed the big drop, but it’d be annoying if I can’t log on.
    Even if they didn’t take it down on purpose, aren’t they liable for screwing thousands of investors?

  21. Yeah, we all need a contingency plan… several plans actually…

    I find it useful to separate the long-term investments from the short-to-mid-term investments/trading. They require different plans.

    Also, there are contingency plans about how to execute a trade or investment… and there are contingency plans regarding how to handle a real “catastrophe”… and so on…

    Better yet is to have all plans written down and easily accessible :-)

  22. I had the same experience and the same brokers you and everyone has mentioned. Additionally, Personal Capital was not able to update Fidelity and Merrill. On the PC website they said Fidelity and Merrill stopped allowing connections due to the market volatility on February 7th, 2018.

    I even sent a screenshot to a friend as I thought it was crazy.

    The whole thing smells a bit fishy. I have no doubt institutional investors were able to buy what they wanted.

    If they are trying to prevent runs, then this needs to be above and across the board.

    For example, if the market dropped by x% in y time, the market shuts down for everybody. This would need to be announced and have oversight.

    At this point, it seems reasonable that there were some dirty dealings yesterday.

    1. I agree and if anyone truly believes there were some dirty dealings I would urge you to call your congressional rep and tell them how you were locked out of your accounts and blocked from making trades when the market was not shut down for everyone.

      I called my rep to ask what happened and the response was…..”There was no gov intervention, this was a decision made within the brokerage firms. It is typical not to allow sales when the market is in a rapid decline.”

      I didn’t realize it was typical. I now know my money is not safe and the brokerage firm can deny me the opportunity to buy or sell stock.

      1. Very interesting response! So you see the problem: how much power do you give others to decide the fate of your money? And at what point do the markets have to decline for other people to start stepping in and controlling your destiny?

        This is not free markets. And if people are OK with this, and they are setting themselves up for some great disappointment in the future.

  23. Damn Millennial

    Same experience here for Fidelity. TD Ameritrade was working though. It is pretty amazing that these large sites go down. Trading volume was high but enough to crash the sites?

    Not really a market timer although I do it with small waves of money. When I get a windfall though I make sure to put it to work ASAP.

    “Time in the market is more important then timing the market.”

    Always can call in too and try to find a human.

  24. I think the game is rigged and this was eye opening, it is clear to me that I will not be a winner in the end. I think the central banks tied in with the SEC has the ability to flip a switch and stop all transactions, or at least for the little fish, the wealthy will always get their money. I think they flipped the switch to stabolize the market and allow market to be liquid again. There was not enough buyers and sellers to balance.

  25. I tried calling a local Fidelity brokerage about an unrelated request and they’ve been jammed full since Tuesday:(

  26. I had the same experience with Fidelity, it was most definitely not attributed to my connection. I’m also not convinced it was any sort of planned “outage” on their part. At some points, I could pull up the homepage, then I couldn’t. Sometimes I could pull up a quote, then couldn’t. At no time did I ever get a response hitting the “buy” button, as I was trying to do.

    I was able to place a few orders at Schwab without any difficulties.

    Thanks for the article, certainly something to think about, in terms of keeping multiple accounts. I do some dabbling with Robinhood, but don’t keep much money there, as I like to utilize automatic dividend reinvestment. Maybe it’s time to think about splitting available funds more evenly.

  27. Another trick for a market correction is to set up a few Buy Limit order on your favorite stocks with absurdly low limit prices (say, a 20% to 30% discount) and a Good ‘Til Canceled (GTC) time in force. This way, the orders remain active until they’re executed (or canceled) and you don’t have to log in when markets are tanking.

  28. Hi Sam,
    I had the same experience on Vanguard – my workaround was to make the same trade on USAA’s platform, the only opportunity cost being commission fees and the pain of owning the same asset in two places.

  29. I couldn’t access my Fidelity account either that day for several hours. It does present a big problem because its not only if you are trying to buy in, but what if you want to get out of a position and the market is going down. I also use Fidelity for my checking account, banking, paying my bills, credit card and I couldn’t get in to see that either.

    Sometimes having everything centralized makes things easier, but in this case I couldn’t access most of my financial data which is scary.

  30. I had an issue with my bank having a “glitch” when I wanted to transfer money to my brokerage account.

  31. You would have most certainly been on hold over the phone. I have been dealing with Fidelity lately and have been less impressed with their ease of use Vangaurs. I do agree having 2 accounts is helpful and I just placed.more into money markets in both ends so I can keep investing over the next few weeks to months. Not so much timing the market, more about deploying cash that was already planned to be invested.

  32. Hey FS,

    Great post! But I don’t understand why a financial institution would deny people from accessing their accounts to make transactions. Is it because they are only allowed to make a certain number of trades per hour/minute and they want to ensure their “big fish” get guaranteed trades?

    I agree with you that there shouldn’t be any issue in letting people log into their accounts for organizations with their budgets and resources. Keeping a site up and letting people log into their accounts does indeed take computer power and connection resources, but maintaining up time for these things is what entire careers are based around, like mine.

  33. I’m pretty sure we’ll have some more minor corrections like these in the spring. People are turning fearful, but there is such good news (good company earnings) in the real economy that there simply isn’t enough support for a good correction.
    The autumn will be a total different kettle of fish. I keep on wondering, there are a few big companies already with problems worldwide. There have been some pretty big bankruptcies at the beginning of the year and store closures. I wonder if the economy has already changed and we’re not realizing it yet.

  34. Charleston.C

    Good advice on not putting all your eggs in one basket being applied to more than just what you invest in, but who to invest it with. I’m always paranoid that one day the bank will lose ALL financial record whether it’s due to a deliberate cyber attack or accidental outside of anyone’s expectation.

    Perhaps someday a public blockchain ledger will be erase that fear for me. Until then I will continue to keep hard copies of all of my statements for several years, would hate to be involved in a dispute with financial establishments over what was lost in the event of a technical failure.

  35. Tuckerman Jones

    Don’t fight the Fed. Markets do not fare well while money supply is being tightened, and the Fed rarely gets it “just right”. Maybe this time will be different – an oft cited sentiment but possibly true here.

  36. No issues here but then again I always buy with limit orders as a protection from a flash crash and I don’t normally sit on funds until a dip. That being said for insurance purposes I do keep accounts at different brokerages

  37. Funny, I never thought about “make a call” as an option to get your trade in, either. We’ve all become conditioned to our e-dependency!

    I certainly hope they wouldn’t close the doors intentionally, that would cross the “unethical” line and I really can’t imagine their mgmt teams would approve something so blatant. Then again….

    PS – I used to trade the VIX in my “fun money” trading account. After crushing my first two trade, I got burned after thinking I had it all figured out. I don’t play with that Fire anymore….

  38. Thank you for this post. I too was not able to make a transaction. In my case it was the bank that had a “glitch” and I was unable to transfer money from my bank account into my brokerage account. I felt it was on purpose, my husband said I was paranoid and that these things happen. On a money board site I read a posting of someone who could not log on to her Fidelity account. That made me even more suspicious.

    It is bad enough when you miss a buying opportunity, but in the event of a massive decline what if there is a “glitch ” that doesn’t allow you to sell when the market is imploding? This was eye opening and confirms that you may not be able to get out when you need to get out.

  39. Douglas Litke

    In the mid-80’s (I am dating myself), S&Ls had problems. The S&L in the town I was living in, went under. People were insured with the equivalent of FDIC, but it can take months before you have access to your money again.
    The funny thing – people who had mortgages with the same S&L were writing checks to pay the mortgage with checking accounts from the same S&L (the checks were not accepted anywhere else as the S&L was bankrupt). After 3 months Lincoln S&L stopped taking their own checks.

    Moral of the story. You must have checking accounts in two different institutions. Make sure they are not related.

  40. Wealthfront was also down a few hours, but it was actually one da in the afternoon, not the morning. It didn’t prevent me from putting in any deposits, though.

    I intentionally keep only the cash I need so that I can keep as much money in the market as possible.

    Time in the market is better than timing the market. So, I only put in $1,900.

  41. “If you shorted volatility, you got taken out on a stretcher”

    Lol!!! Holy moly, look at that VIX chart! I thought those news stories were hoaxes but man that’s a lot of money to say bye bye to. I still can’t believe it. Day trading is gambling plain and simple. It’s only good times and rainbows in a bull run.

    It wasn’t only Fidelity that was down. Vanguard and another brokerage was down as well. I believe they were trying to prevent a bank run too. My husband put in some limit orders last night for our IRA and we’ll see how that goes when the markets open. I never called in to place an order before, that’s so old school haha! :)

  42. ” I set my alarm clock for 6:15am just in case, brushed my teeth, sat on the toilet, and fired up my Fidelity account to put in my $100,000 buy order.”

    The wonders of technology…it’s amazing what you can do in the morning. Just make sure you’re awake (and that you don’t fall asleep – especially your legs…).

    On your questions:

    – Yes, I’ve been unable to access online investment accounts. But it was due to poor connectivity (I was traveling and only had my phone app; I prefer desktop over app any day, but that’s all I had).

    – No, I don’t believe the investment shops purposely deny access for that particular reason. I do believe they might have contingency plans to limit traffic if it poses a wider risk to the whole platform. That said, there needs to be robust controls and additional capacity abilities in place.

    – To you earlier point, I think you have multiple accounts. Having some immediate cash on hand at home (I’m not talking about stuffing a mattress) for a few days of emergencies / essentials helps. For wider capital, I’d spread it out across a few accounts or investment vehicles (bank checking / savings, money market fund, etc.) at different institutions.

    – Re: end of the bull run? Who knows.

    Overall, good points covered. Thanks for sharing. – Mike

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