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Vanguard is a financial investment advisor that currently has more than $6 trillion in assets under management worldwide. Most of that is in ETFs and mutuals funds that track an index. Vanguard is the largest provider of mutual funds and second for exchange-traded funds behind BlackRock’s iShares ETF selection.
When talking about Vanguard, you have to mention legendary investor John C. Bogle. Bogle founded Vanguard in 1975 and was a former chairman of The Vanguard Group. He created the first index fund and believed that investors should “become” the market instead of owning actively managed funds that try to beat the market and lose most of the time. He was a major advocate of low-cost investing directed at individuals that we know today and played a huge role in making it happen.
This review will dive deep into Vanguard’s various brokerage (direct investing) features, pricing, fees, positive and negative aspects, and who should use Vanguard. By the end, you will have a better understanding of Vanguard, their services, and if Vanguard is the perfect provider for your future investments.
on Vanguard’s website
Quick Summary: Vanguard is a financial investment advisor that currently has more than $6 trillion in assets under management worldwide. The company has a reputation for offering below-average expense ratios on mutual funds and ETFs. Vanguard is the largest provider of mutual funds.
What Is Vanguard?
Vanguard pioneered low-cost investing for individuals. The company has a reputation for offering below-average expense ratios on mutual funds and ETFs due to its long-term investment philosophy, as well as, the volume of assets under management which brings the cost of managing the funds down.
Having said this, Vanguard is suited for long-term investors that follow the buy-and-hold strategy and are looking for low-cost offerings. The offered services are hard to beat price-wise and Vanguard’s selection of available funds is one of the best on the market.
In 2020, Vanguard finally entered the $0 commission market and dropped nearly all trading costs to zero. If you are looking for commission-free trading over multiple asset classes and an expansive lineup of low-cost mutual funds and ETFs, then this broker is for you.
However, active investors and frequent traders will prefer other services as the platform lacks features they may want to use, such as streaming data, dynamic charts, and decision-making indicators.
See Also: 12 Best Online Brokers for Stock Trading
How Does Vanguard Work?
It is easy to open an account with Vanguard and profit from the broker’s low-cost services offered to cost-conscious investors. The following account types are available:
Investing Account Types
Vanguard offers a selection of investing account types to their investors focusing on retirement or goal-oriented long-term investing.
If you are planning for retirement, Vanguard offers a traditional IRA and a Roth IRA. There are also small business owner options with a SEP IRA and a SIMPLE IRA.
Consider opening an individual or joint account if you want more flexibility than a tax-advantaged account offers.
If you are looking to invest in a bright future for your kids, Vanguard’s 529 plan might be the right choice for saving for tuition. With Vanguard, it is also possible to gift money to a minor without limiting it to education.
Opening an Account
Vanguard makes it simple for its future investors to open a new account with the low-cost brokerage firm.
Start opening an account by clicking on the “Open an account” button at the top of the website. You will be redirected and asked whether you would like to open a new account or move an existing account to Vanguard.
Rolling over a retirement account to Vanguard is painless and the questions are easy to understand. Complete the forms, and Vanguard does the rest for you.
For opening a new account, you click on the respective button, and you will be asked how you want to fund this new account. Options include electronic bank transfer or Vanguard account, a rollover from an employee plan, or transfer from another financial firm.
After stating where you want the the funds to come from, you can continue opening your new account on a secure site. Once on Vanguard’s personal investor page, you can choose the type of account you want to open. Connect, transfer funds, and you are good to go.
The online process takes about 15 minutes and an additional two to three business days for your funds to arrive at Vanguard.
The good thing is that there is no minimum deposit required when opening a new Vanguard account, so you can start with a few hundred dollars per year. If you want to invest in mutual funds, having some money ready to transfer would be a good idea.
Whether it is free-of-charge trading, investing in their bread and butter business (ETFs and mutual funds), providing IRA accounts, or enabling advisory services to investors, Vanguard has an array of features for their audience.
|Stock & ETF Fees||$0 per trade|
|Options Fees||$0 per trade + $1/contract|
|Mutual Funds Fees||$0|
|Withdrawal Fee||$0 with ACH transfers ($10 with wire transfers)|
|Investment Types||Stocks, ETFs, Options, Mutual Funds, Forex, and Bonds|
|Account Types||Individual Taxable, Joint, Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Custodial and Trust|
|Platform||Web-based, Mobile (iOS / Android)|
|Account Funding||Bank transfer|
|Support||Phone and Email|
Vanguard finally joined the zero-commission-club at the beginning of 2020 and removed commissions on most of their asset classes. This was necessary to stay competitive long-term as other brokers like Charles Schwab had already done the same.
With Vanguard, it is possible to trade ETFs, more than 3,500 mutual funds, and stocks without paying for the transactions when executed online.
Options are also free from commissions but have a high $1 per contract fee, so this is not a free investment compared to ETFs and stocks.
Mutual Funds Investing
When investing in mutual funds, mutual fund minimums are relatively common for brokers. So, Vanguard is no different from this perspective.
Most of Vanguard’s retirement funds have a minimum investment barrier of $1,000, including all target-date retirement funds and STAR Funds. Other mutual funds have a $3,000 minimum. Actively managed funds are available at $50,000 and a balance of $100,000 is necessary for specific niche and sector index funds.
If you thought that Vanguard’s fees are already low, then Admiral Shares might be interesting to you. Admiral Shares are a class of Vanguard’s mutual funds that has even lower expense ratios than the standard mutual fund class.
Admiral Shares were created to pass along savings to large accounts. This is no longer the case due to reducing the minimum investment threshold to $3,000 for many index funds. Still, $3,000 might be out of reach for beginner and low-net worth investors and those that make automated monthly investments instead of single, one-time payments.
Although Admiral Shares and reduced minimums exist, most of these are available as ETFs and can be purchased per share instead of a fixed minimum volume.
Bonds and CDs Investing
With Vanguard, investors can trade fixed-income products such as CDs and bonds. Bonds include corporate bonds, municipal bonds, and treasury bonds.
The cost of fixed-income products depends on the amount that is in your account. If you have a balance under $500,000, you will pay $2 per $1,000 for your investments. Up to $1,000,000, you have to pay $1 per $1,000; There are no commision fees for balances above $1,000,000.
IRA and Retirement Accounts
Currently, every private investor can plan for retirement using a traditional IRA or a Roth IRA with a low-cost broker.
The traditional IRA is geared towards investors that want to fund their account with pre-tax money. This will lower the taxable income and only retirement withdrawals will be taxed.
The Roth IRA is slightly different than a traditional IRA. This account is funded with after-tax money, but future withdrawals are free.
Small business owners can also qualify for SEP IRAs and SIMPLE IRAs.
It is also possible to roll over your 401(k)-retirement account and convert it into Vanguard’s traditional IRA.
Vanguard’s bread and butter business are low-cost funds such as ETFs that are significantly less expensive than the industry average with expense ratios around 0.10% compared to the industry average of 0.50%.
They offer the second-largest ETF selection in the market behind iShares (BlackRock) and provide investors with free-of-charge trading for ETFs. This vast selection makes it possible to build an entire cost-efficient portfolio with Vanguard, using only two to four ETFs set up long-term.
There are also Select ETFs, a list of 13 ETFs that can serve as building blocks for creating a diversified portfolio. Also, more than 50 ETFs are available in the same areas as the mutual funds. In these cases, it makes sense to choose ETFs over mutual funds because they are cheaper and often more tax-efficient.
Vanguard Mutual Funds
Vanguard offers more than 120 mutual funds free of commission payments and has created a shortlist of 20 Select Funds. With the help of these Select Funds, it is possible to create a worldwide, diversified portfolio.
The broker further features more than 3,500 mutual funds from outside providers with no transaction fees. This is not as much as other brokers have, but 3,500 mutual funds are enough for private investors to craft a successful long-term portfolio.
Vanguard ESG Funds
ESG investing is a trend that has gained momentum over the last few years. Vanguard also offers ESG funds to their investors who are conscious of environmental, social, and governmental issues and want to make an impact through their investment decisions.
Sometimes, it is also referred to as social investing or socially responsible investing (SRI).
When investing in ESG funds, you invest in stocks and bonds that reflect your values. Vanguard’s funds follow specific indices and exclude companies that don’t fit the underlying criteria to be featured in an ESG fund.
Vanguard offers two different advisor services. Both services help investors with retirement planning, investment management, getting rid of debt, and walking towards goals.
These two are the Vanguard Digital Advisor, Vanguards’ answer to the robo advisors out there, and the Vanguard Personal Advisor, a real person committed to you and your goals.
Both advisory services aren’t included in the brokerage services and come at an extra but affordable charge. For the Digital Advisor, you need a minimum of $3,000 to qualify with a cost of roughly $1.50 per $1,000 invested per year. This robo advisor does the heavy lifting for you once your retirement goals are set and automatically manages and adjusts your investment funds according to your preferences.
If you want to work with a financial expert instead of a robo advisor, the Personal Advisor service is for you. It requires a steep minimum investment of $50,000 and costs roughly $3 per $1,000. In turn, you get a more in-depth service with a financial advisor. You talk about your goals and set up a plan with the advisor, which they review regularly and rebalance as needed.
You can chat by phone, email, or video with your advisor. This personal advisory service is priced very well compared to other brokers. The best part is that no bonuses or commissions have to be paid because the advisors receive salaries from Vanguard.
The website is hard to navigate and so is the outdated trading platform. The platform lacks responsiveness, customizability, and analytical tools often found with brokers that are more focused on stock trading. Processes are more directed at long-term investing, Vanguard’s bread and butter business, than frequent trading.
The mobile app is simple to navigate and it is easy to sell and buy. However, it is only possible to trade mutual funds, ETFs, and stocks. Checking your account activity, monitoring investments, analyzing performance, getting market news, and researching investments are all there is to do. A watchlist, a generic feature nowadays, is not available.
To put that into perspective: Vanguard is a low-cost brokerage firm and makes it easy and cheap to invest with them. Besides, long-term investors don’t pay anything for most of the offered services. That is probably why they don’t make the platforms that fancy.
Research and Education Tools
Vanguard offers guidance to new investors with a range of educational resources for retirement planning and future goals.
However, these resources are timeless articles aimed at teaching investment basics, setting investment goals, and showing investors how to get to these goals. Investors can learn about investment options and prioritizing goals, use calculators to predict when they can comfortably retire, project what their kids’ colleges will cost, or weigh the benefits of converting a traditional IRA to a Roth IRA.
More advanced investors probably won’t have any use for this section. The news and perspective page, as well as the YouTube channel of Vanguard, provide some further information and short videos for beginners.
Customer Service and Support
Phone support is available only Monday to Friday from 8 am to 8 pm Eastern Standard Time, which covers the main trading hours. It is also possible to contact customer support through email. Unfortunately, there is no live chat available, but Vanguard operates a Twitter account that responds to customer queries within a few hours.
Vanguard Pricing and Fees
Investors can trade stocks, bonds, mutual funds, ETFs, options, and CDs on the brokerage firm’s investment platform.
All available ETFs, Vanguards own 120 plus funds, and more than 3,500 mutual funds from outside providers have no transaction fees. Stock trading costs are also zero. Options trades are $0 plus $1 per contract, which is higher than what other brokers charge. Only investors with an account balance of upwards of $1 million get 25 or more free trades.
Outside the mentioned no-transaction-portfolio, mutual fund commission is up to $50 to cover expenses and discourage trading.
Vanguard also has an investor-friendly low non-trading fee structure. There are no account closing, inactivity, or transfer fees, except for a $10 fee for outgoing wire transfers. The account minimum is $0, with the mutual fund minimum being $1,000. There is also a $20 annual account service fee for all brokerage accounts and IRAs, which is easily waived if you sign up for email delivery of statements and fund brochures.
So far, there have been no data breaches known to the public and security is up to industry standard. Vanguard offers two-factor authentication and app-login is possible with biometric recognition that includes face and fingerprint.
Vanguard carries excess SIPC insurance from Lloyd’s, and the maximum per customer is roughly $50 million (cash being limited to $1.9 million). Vanguard also protects investors against account losses from unauthorized activities.
- Commission-free stock, mutual fund, and ETF trading
- Some of the best mutual fund and ETF selection to invest in
- No account minimum necessary
- Low non-trading fees
- Investor-first philosophy
- Good education section for long-term and retirement planning and goal setting
- High options contract price with $1 per contract
- Initial mutual fund minimums of $1,000 to $3,000 are steep for low-net-worth investors, beginner investors, and investors that start with low monthly payments on an automated investment plan
- High investment minimum of $50,000 required for Personal Advisory Service
- Trading platforms are outdated, very basic, lack analytical trading and research tools, and watchlists aren’t shared across platforms
- Limited research and data possibilities, as well as limited news feeds
See Also: 7 Best Micro-Investing Apps
Having covered Vanguard’s brokerage services at length, let’s take a look at other low-cost brokers out there that offer similar services, investable assets, pricing, and fees. Check out the two options below and see if they might be of interest to you.
Robinhood and Vanguard are similar in what they offer. You can trade stocks, ETFs, and options free of charge. However, compared to Vanguard, Robinhood’s range of assets is narrower. Vanguard offers no-fee mutual funds, more free-of-charge ETFs, bonds, and penny stocks. Where Robinhood shines is that investors can trade cryptocurrencies for free.
Robinhood also offers its investors a better trading platform experience than Vanguard. In contrast, Vanguard offers an advisory service, phone support, and better educational resources, making it a broader brokerage option than Robinhood.
Robinhood offers less than what you could get at more versatile brokers such as Vanguard. Still, if you are getting your feet wet in the investment arena and would like to trade cryptocurrencies, Robinhood might be a good choice for your first steps.
Read our full Robinhood review to learn more.
Both companies are two of the largest financial firms worldwide, with Vanguard being slightly larger than Charles Schwab. Both offer the same investment vehicles, such as bonds, stocks, commission-free ETFs and mutual funds, OTCCB, and options.
Schwab offers even more thanks to its cryptocurrency, forex, and futures trading. None of these are available at Vanguard. Additionally, Schwab offers active investors and traders five platforms to work with, including better customizable tools and features than Vanguard’s two platforms, which are relatively basic and outdated.
For buy-and-hold investors, simplicity and low costs are essential. Therefore, Vanguard dispenses with everything that doesn’t cater to their target audience. Also, access to the financial advisor can be highlighted in Vanguard’s favor.
Stock and ETF Trades
$0 + ($1/contract)
$500,000 (securities up to $500,000, cash up to $250,000)
Stock and ETF Trades
$0 + ($0.65/contract)
$500,000 (securities up to $500,000, cash up to $250,000)
Who Should Go with Vanguard and Who Should Avoid It?
Not every service is for everybody, but Vanguard is one of the best options for cost-conscious investors. Investors who know they want to invest exclusively in index funds and ETFs will find an excellent partner in Vanguard. Their service is also tailored to buy-and-hold strategists and retirement investors.
Those who should avoid Vanguard are active traders because the trading platform is not as strong and robust as it needs to be for active traders, despite the free-of-charge stock trading. If you are further looking for other investments such as crypto, forex, and assets that are not at Vanguard’s core, then its service isn’t for you either.
Below you can find some of the most asked questions about Vanguard and our answers to these questions.
Is Vanguard a Good Company to Invest with?
Suppose you are a new investor, you belong to Vanguard’s target group that heavily focuses on ETFs and long-term strategies, or you’re looking to invest for retirement. In that case, Vanguard is an excellent low-cost brokerage firm to invest with. They charge low fees and offer a wide range of investments.
Is the Vanguard Financial Advisor Worth It?
Both the Vanguard Digital Advisor (robo advisor) and the Vanguard Personal Advisor (human financial advisor) aim to elevate the investor’s financial planning experience by managing their portfolio, setting retirement goals, or getting them out of debt.
Although they both require minimum investments of $1,000 and $3,000 respectively, their running costs are way lower than what other brokers charge for similar services. If you are looking for some support for your investment decisions, they are worth it.
Is Vanguard Safe?
Vanguard is a pioneer of index funds. They are one of the largest and most trusted firms globally and have a long history with their mutual funds and ETF products. In their history of 40+ years, they have come across a lot of crises and still sit at the very top.
Both are good signs for a healthy company and the odds that it will stay around for a long time are good.
One of the most important trends in today’s investing world is that people want to spend as little as possible and use convenient low-cost brokers such as Vanguard.
Ask yourself if you belong to the target audience(s) outlined in this review and how much you want to interact with the markets yourself. Vanguard is an excellent option if you’re investing for retirement, especially if you have quite some money to invest in upfront to qualify for Admiral Shares.
If you are an advanced investor and use low-cost index funds as well as exchange-traded funds as your preferred vehicles, then Vanguard is an excellent option for you. The limited web-based and app platforms might not discourage you since they cater to your basic needs and how you will use the outdated platform.
Vanguard services investors who match the firm’s investment philosophy and offers an excellent brokerage experience with their low-cost structure that is overall hard to beat.
If you are more of an active stock trader, are interested in other asset classes, or are looking for in-depth education on different topics, make better use of your time and look elsewhere.
- What are Dividends: Become a Dividend Aristocrat
- What are Short Term Investments: Grow your Money Now
- What Are Alternative Investments: Do They Fit in Your Portfolio?
- What is a Mutual Fund: Does it Belong in Your Investment Portfolio?
- What is Compound Interest and Why is it Important for Investors
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Carsten is a Freelance Copywriter with a personal interest in money management and investing. Besides taking care of his investments, he loves traveling, reading books, and working out (calisthenics & yoga).