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.
Quick Summary
- 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
The above rating is based on our opinion of Vanguard as rated in various categories, including commissions and fees, customer service, product offerings, and more. Please see the Vanguard review section below for a full breakdown.
Vanguard Details | |
|---|---|
Provider Name | Vanguard Brokerage Services |
Min Investment | $0 |
Commissions | $0 for Stocks, Options, and ETFs |
Account Type | Taxable, IRA, Trust, and More |
Promotions | None |
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.
Investment Minimums
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.
Research Tools
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 Digital Advisor®
Vanguard Digital Advisor is an advisory product from Vanguard Advisers Inc., an affiliate of Vanguard's brokerage company, Vanguard Marketing Corporation and is Vanguard's response to the robo-advisor trend. And it does this by helping you focus on retirement planning, investment management, and debt payoff strategies, not just your portfolio.
The Digital Advisor platform has a variety of tools that can help you understand how to best pay down debt, free up money faster, and set goals for retirement.
Once you have your retirement goal set, the robo-advisor will automatically invest your investment funds into a combination of Vanguard ETFs® that's aligned to your risk tolerance. Digital Advisor then manages those investments and adjusts them automatically to keep them aligned with your goal as it evolves over time.
The minimum investment to enroll in Digital Advisor is $3,000. The annual net advisory fee is approximately 0.15% AUM (or roughly $1.50 for every $1,000 you invest), although it could vary depending on your specific holdings. This is lower than what you’ll see from other robo-advisors like Betterment or Wealthfront. Digital Advisor costs approximately 0.15% per year. Betterment and Wealthfront costs 0.25% per year based on details available on their respective websites as of November 6, 2020.
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.
Final Thoughts
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?
Advertiser Disclosure
This content was reviewed by Vanguard but the opinion is the authors alone.
Vanguard Personal Advisor Services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.
Vanguard Digital Advisor's services are provided by Vanguard Advisers, Inc. ("VAI"), a federally registered investment advisor. VAI is a subsidiary of VGI and an affiliate of VMC. Neither VAI nor its affiliates guarantee profits or protection from losses.
Vanguard Digital Advisor is an all-digital service that targets an annual net advisory fee of 0.15% across your enrolled accounts, although your actual fee will vary depending on the specific holdings in each enrolled account. To reach this target, Vanguard Digital Advisor starts with a 0.20% annual gross advisory fee to manage Vanguard Brokerage Accounts. However, we'll credit you for the revenues that The Vanguard Group, Inc. ("VGI"), or its affiliates receive from the securities in your managed portfolio by Digital Advisor (i.e., at least that portion of the expense ratios of the Vanguard funds held in your portfolio that VGI or its affiliates receive). Your net advisory fee can also vary by enrolled account type. The combined annual cost of Vanguard Digital Advisor's annual net advisory fee plus the expense ratios charged by the Vanguard funds in your managed portfolio will be 0.20% for Vanguard Brokerage Accounts. For more information, please review Form CRS and the Vanguard Digital Advisor brochure.
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.
Vanguard Review
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Summary
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.
Pros
- Commission-free trading of stock, options, and ETFs
- A leader in low-cost mutual funds and ETFs
- Access to every account type and many services available
Cons
- Outdated platform and user-interface is hard to navigate
- Lacking some tools that investors may want access to
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 on the About Page, or on his personal site RobertFarrington.com.
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.
