The single most important trend in investing today is the trend towards passive, low-cost index fund investing.
Legendary investor, John Bogle founded the first index fund in 1975 with $11 million dollars. Today, that Vanguard 500 Index Fund (VFINX) has over $400 billion dollars under management for retail investors.
The Vanguard Group, John Bogle’s investment company, is now one of the largest investment companies in the world. They have over $6 Trillion in assets under management (as of January 2020). Two-thirds of that is in funds or ETFs that track an index.
How had Vanguard become so popular over the last 45 years? They keep your investing costs low, so you stick with them. If you're interested in opening a brokerage account at Vanguard, here's what you need to know in our Vanguard review.
- Full service broker that specializes in low cost index funds
- Market leader in low cost investing
- Offers low cost personal advisory services through affiliated advisor
Vanguard Brokerage Services
$0 for Stocks, Options, and ETFs
Taxable, IRA, Trust, and More
Full Service, but…
Vanguard Brokerage Services is a full-service self-directed discount brokerage firm, but the company specializes in no-load, low-cost mutual funds and ETFs. You can trade stocks, options and more, but the Vanguard website doesn’t make it easy. Active traders will want to put a hard pass on Vanguard Brokerage Services.
I’ve personally had an account at Vanguard for several years, but I hate the Vanguard website. Every time I log into the website I’m tempted to move my money to Fidelity or TD Ameritrade. However, I stick around because Vanguard makes it cheap and easy to invest, and I don’t need to do tax loss harvesting in my retirement accounts.
Opening An Account At Vanguard
Vanguard excels in helping people open new accounts. In particular, rolling over a retirement or after tax brokerage account is a pain-free process.
The whole account opening/rollover process involves a series of questions written in plain English. Once Vanguard figures out what you need to do, they give you the appropriate forms, and complete the account rollover for you.
If you’re opening an account with funds from your bank account, you can log in to Vanguard’s personal investor page, and choose the type of account you want to open.
From there, you’ll connect to your bank account, and transfer funds. The whole process takes about 10-15 minutes. After that, it takes 2-3 business days for your funds to settle.
Vanguard makes it easy to open any type of investing account you can imagine. This feature came in handy when I decided to open a SEP-IRA at the last minute one year. I managed to open the account the day before taxes were due.
Buying And Selling Costs At Vanguard
Vanguard has over 100 mutual funds and over 50 ETFs. You can buy and sell Vanguard funds at no cost. On average the expense ratios on Vanguard funds are among the lowest. These days, Vanguard (through Vanguard Brokerage Services), Charles Schwab, Fidelity, and the iShares from BlackRock fight for the lowest expense ratios on common indexes.
No matter what, you can feel confident that you’ll pay very low fees on your mutual funds or ETFs. Even Vanguard’s actively managed funds have low fees relative to their counterparts.
Vanguard recently announced they are moving to commission-free investing like most of the other major brokers.
They currently charge $0 for stock and options. Nearly all ETFs and over 3,000 mutual funds also have $0 commissions.
Vanguard does not have any account minimum requirements. However, to start investing in mutual funds, you’ll usually need at least $3,000.
In some cases, Vanguard lowered the barrier of entry down to $1000. If you’re just getting started, you don’t need to despair about these minimums. Vanguard allows account holders to buy just one share of a Vanguard ETF. As a result, you can start investing in a well-diversified portfolio for just a few hundred dollars.
Unlike other full-service brokerages, Vanguard has clunky research and analysis tools. You can see a few portfolio insights from Vanguard’s portfolio watch feature. However, you can’t track your portfolio against an ideal asset allocation.
Vanguard’s best research is in PDF files that are tough to search. In keeping with the company’s commitment to passive investing, most of the research falls into the category of “timeless.” That means that the information you find won’t necessarily influence your portfolio today or any time soon.
Vanguard Personal Advisor Services
If you're looking for a little more "hand-holding" and want to speak to a financial expert that can help you manage your portfolio, set goals, and help you invest, you might consider Vanguard Personal Advisor Services.
With Vanguard Personal Advisor Services, you'll connect with a financial advisor to understand your goals, and they'll help you put a plan in place.
Once you have your plan, Vanguard Personal Advisor Services will review your portfolio quarterly and rebalance as needed. You can also connect with your advisor by phone, email, or video chat if you have questions.
The annual cost is 0.30% of assets under management. That's a very low price relative to what other companies charge for similar services.
As Vanguard continues to grow, we’re hard pressed to say it’s best days are behind it. Vanguard’s low cost promise means that investor dollars will continue to pour in for the foreseeable future. However, savvy investors can get the tools they want and the expense ratios they want too.
Vanguard offers great features for cost-conscious investors who want to use Vanguard’s inexpensive funds. However, you can find these same features at other low-cost brokerages like Fidelity, Charles Scwab, or TD Ameritrade.
If you already have an account at Vanguard, I wouldn’t bother changing it. On the other hand, if you’re looking for a new account, consider some of the other options that I’ve mentioned.
What do you think of Vanguard? Are you currently using a discount brokerage firm?
This content was reviewed by Vanguard but the opinion is the authors alone.
All investing is subject to risk, including the possible loss of the money you invest. Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited‐purpose trust company.
For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
Vanguard Marketing Corporation, Distributor of the Vanguard Funds.
- Commission & Fees - 100
- Customer Service - 90
- Ease Of Use - 70
- Investment Options - 100
- Tools & Resources - 80
- Account Types - 100
Vanguard is a leader in low cost investing, and they have a lot of options available to help investors achieve that. The only thing lacking is that their website and app aren’t the easiest to use.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.