Indexing as a strategy implies staying invested through downturns and not trying to time the market. Selling during downturns and buying during boom times is as wrong as an investment algorithm can possibly be.

And the market might recover in 2 days and that day trader would lose money for nothing.

In reality, trying to time the market rarely works out, and when it does it can often be attributed to luck. In general, just investing every month is the best strategy.

> a day trader can cash out in a second; you and I will will have to wait two business days

Why the delay?

You can log on to your 401k account and move your position over to treasury bonds or something that looks safer, but they will wait two business days to process the transaction. I know from personal experience; don't see much information online about the phenomenon. My guess is that they are legally allowed to do this, probably because they wrote the law.

> they will wait two business days to process the transaction

This was a decision your 401(k) provider made. The proper person to gripe to is whomever in HR chose a cheap provider. (They make up for reduced administrative costs by (a) being less efficient and (b) capturing float.)

Ah, here it is in the FAQ:

"When selling a mutual fund to purchase a fund in a different family, you are selling the mutual fund you own and using the proceeds to purchase another fund in a different fund family. Since you are performing a cross family trade, the settlement date for the sale will differ from the settlement date for the purchase. Typically, cross family trades execute over two business days."

The funny thing is, even though they say "up to 2 business days", the trade was executed at 3:59:59 PM on the dot, on the 2nd business day after I made the request. I'm certain they waited until that moment to execute the trade because legally, they can.

Fidelity is a cheap provider?

> Fidelity is a cheap provider?

No, but they have different tiers of service. In my account, for example, I can sell and purchase intraday. They do what they do for my personal account, which is credit the cash intraday. TL; DR This is not a legal, but contractual, requirement.

It's a legal requirement to some extent unless you have a margin account. Funds take two days to settle. If you sell, buy, and sell again within two days, your account can be suspended for violating SEC rules.

https://www.ally.com/do-it-right/investing/what-are-unsettle...

I see! Good to know. Still, I'm inclined to believe that more people are in my tier of service than are in yours.