Vanguard is an unquestioned industry leader in no-load mutual funds and low-cost ETFs. However, throughout 2019, the company was in danger of losing its reputation as the low-cost leader in the brokerage industry as its competitors, one by one, dropped their trading commissions to zero. Vanguard stubbornly resisted this trend until the first days of 2020, when it suddenly announced that it too was dropping its commissions on stock and ETF trades to zero. In one fell swoop, Vanguard was back at the top of the pack, adding zero-commission trading to its vast roster of customer-friendly policies and offerings. Clients continue to support the firm, as evidenced by the trillions in customer assets invested with Vanguard. Here’s a look at the various features and benefits offered by Vanguard Investments, from costs to trading accessibility, along with comparisons with other industry leaders.
To get some quick insight into Vanguard, take a look at this quick take:
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- About Vanguard Investments
- Pros and Cons of Vanguard Investments
- Vanguard Investments at a Glance
- Individual Services Reviews
- What Vanguard Investments Is Best For
- Where Vanguard Investments Falls Short
- Current Promotions
- Comparison: Vanguard Investments vs. Other Brokers
- Should You Invest With Vanguard Investments?
About Vanguard Investments
Vanguard was founded in 1975 by John C. Bogle, who served as its first CEO. The company revolutionized the mutual fund industry by operating as a client-owned firm rather than one owned by outside investors. Vanguard remains that way today and boasts more than 30 million clients and more than $5 trillion in assets. Its no-load mutual fund lineup and ETF product line are market leaders in the low-cost segment, with the average Vanguard mutual fund expense ratio running 83% below the industry average, according to the company.
Pros and Cons of Vanguard Investments
The pros and cons of Vanguard vary depending on the financial product or service, but it can be a beneficial place for those looking for low-cost ETFs, mutual funds and fee-free trading. The firm also has no minimum balance requirements for stock accounts. Signing up for a new account online is also easy and convenient.
Even though Vanguard Investments was a pioneer in low-cost investing, as an overall investment house, it still offers both pros and cons to investors.
- No commissions to trade stocks or ETFs
- Large selection of no-fee mutual funds and ETFs
- Creator of popular, well-known and low-cost funds
- No minimums to invest in stocks (just enough to buy one share)
- No broker-assisted trade fees
- High minimums for mutual fund purchases
- Not a good interface for active traders who want to buy stocks online
Vanguard Investments at a Glance
Here’s a quick look at the features and benefits of Vanguard Investments:
|Vanguard Investments at a Glance|
|Account Minimum||No minimum account balance; $1,000+ for various mutual fund options|
|Option Commission||$0 + $1 per contract for standard accounts|
|Zero-Transaction-Fee Mutual Funds||Yes, more than 3,000 when you trade online, including more than 140 Vanguard funds|
|Investment Selection||Bonds and fixed income, ETFs, mutual funds, options and stocks|
|Customer Service||Phone lines Monday-Friday, 8 a.m.-9 p.m. EST|
|Mobile App||Yes, for iPhone, iPad, Kindle and Android|
|News and Research||Extensive resources to learn about investing and stay up to date on the markets|
|Miscellaneous Fees||Phone trades of stocks and ETFs are generally $25 for standard accounts, $50 for no-transaction-fee funds; $20 annual account fee for accounts below $10,000 that don’t meet other requirements|
Individual Services Reviews
Vanguard is primarily known as a mutual fund and ETF provider, and that’s where its strengths have always been. However, the investing landscape has changed dramatically since Vanguard broke new ground as a low-cost leader way back in 1975. Nowadays, the brokerage industry is fighting over the zero-commission segment of the stock and ETF market, and Vanguard tossed its hat into the ring in 2020. Combined with its long-standing position as the industry’s low-cost leader, Vanguard’s move to $0-commission trading has been a great boon for investors.
However, investors are interested in more than just low costs when it comes to choosing a broker. Trading platforms, mobile accessibility, educational tools and broad product lines also are important to many customers. Here’s a look at how Vanguard performs in terms of comprehensive brokerage services to make comparisons with other brokers easier.
Compared with many of its competitors, Vanguard’s website doesn’t seem built for ease of accessibility or for active investors. For example, you won’t find streaming quotes on the site nor will you find a way to personalize your interface. The whole feel of the website is that it’s built for long-term mutual fund investors rather than stock traders. Given the investment philosophy of the company, that’s likely intentional.
Account and Investment Minimums
Vanguard has no account minimums for general brokerage accounts, but it does impose the following minimums to invest in specific mutual funds:
For Investor Shares (which are no longer offered on most Vanguard funds):
- $1,000 for Vanguard Target Retirement Funds and the Vanguard STAR Fund
- $3,000 for most other Vanguard funds
For Admiral Shares:
- $3,000 for most index funds
- $50,000 for most actively managed funds
- $100,000 for certain sector-specific index funds
If your account is under $10,000, you might be assessed a $20 annual fee unless you opt in for electronic statements.
Commissions and Fund Expenses
Vanguard has always been a low-price leader when it comes to its mutual funds, with its expense ratios averaging 83% less than the industry average. Overall, costs fell tremendously in early 2020 when Vanguard announced that it would also charge $0 commission on stocks, ETFs, mutual funds, new-issue CDs and options. One of the few caveats to this $0 fee is the $1 additional charge per options contract.
Vanguard routes orders to various market centers in an effort to achieve “best execution” prices and practices for customers. The company chooses where to route customer orders based on execution speed, overall effective price, price improvement and liquidity enhancement.
In an era when client interface is of paramount importance to many brokerage firms, Vanguard’s site still feels distinctly old school. It’s hard to navigate the site to find exactly what you want, and key information is not prominently displayed on the homepage.
Mobile and Emerging Tech
Vanguard offers mobile apps for iPhone, iPad, Android and Kindle devices. You can use the mobile apps to check your account; buy, sell or exchange securities; analyze your portfolio; or do research. You can also deposit checks remotely to your account using the app.
Range of Offerings and Investment Selection
Vanguard offers the following investment types through its brokerage accounts:
- Mutual Funds
You cannot trade leveraged stocks or ETFs at Vanguard. Mutual funds can be bought or sold for free, as can a large number of ETFs. Many of the most popular Vanguard mutual funds are found in 401(k) plans, so it’s possible that investors are already familiar with many of the firm’s most popular and successful offerings.
A fairly new Vanguard feature is the ability for clients to work with financial advisors on an annual fee basis rather than paying commissions. Dubbed Vanguard Personal Advisor Services, the process involves partnering with a Vanguard financial advisor who will manage the account via low-cost funds and tax-smart strategies for the cost of 0.30% per year, on amounts up to $5 million. Fees can drop as low as 0.05% on assets above $25 million. There’s a $50,000 minimum to participate in this program.
Vanguard encourages investors to sign up for recurring automatic investments online. Vanguard automatic investing can help you get closer to your investment goals by ensuring you contribute to your account on a recurring basis.
News and Research
Vanguard offers educational tools on a number of long-term investment topics, such as preparing for retirement, saving for college and operating a tax-efficient portfolio. However, it’s notably lacking in individual stock research or short-term trading information, keeping in line with its long-term, mutual fund-oriented investment philosophy. Vanguard does offer a mutual fund and ETF screener to help investors choose their own specific securities.
Portfolio Analysis and Reports
Vanguard offers personal rate-of-return calculations for individual portfolios along with market quotes. However, quotes are delayed at least 15 minutes. Advisors working with Vanguard have access to a client portfolio analysis tool that can analyze hypothetical performance, risk statistics, sector breakdowns, asset allocation, region weighting and more. The tool can also be used to compare portfolios side by side. If you’re taking advantage of the Vanguard Personal Advisor platform, you can ask for this type of analysis to be run on your portfolio.
Vanguard offers phone service Monday through Friday from 8 a.m.-9 p.m. EST. There is no online chat available.
Education and Security
Vanguard provides basic research and information about long-term investing, which is the company’s mantra. Those looking for individual stock analysis and advanced trading suggestions will be disappointed.
From a security standpoint, Vanguard is among the best. In addition to industry-standard encryption, Vanguard earned an “extended validation” Security Socket Layer (SSL) certificate from internet security firm Comodo to help prevent phishing attacks. The firm also employs various logon protection protocols, from username and password authentication to the use of security questions. Bank accounts are masked, emails are sent out to verify account change requests and various portions of the site time out to protect vital information.
The ongoing “race to zero” among online brokerages finally reached Vanguard in the opening days of 2020, when the firm announced that it would adopt a $0 commission structure for equity and ETF trades. Options trades are also $0, plus $1 per contract. New-issue CDs and most mutual funds also trade for $0 commission. Costs for Vanguard’s mutual funds have always been among the lowest in the industry, and this is still true, with the average Vanguard mutual fund’s expense ratio running 83% below the industry average.
For the most part, Vanguard doesn’t charge annual account fees either. As long as you select e-delivery of statements, confirmations and other important account disclosures, your annual account fee is $0. You can also avoid an account fee if you keep a Vanguard fund or ETF balance of at least $10,000 or if you’re a Voyager, Voyager Select, Flagship or Flagship Select client. Otherwise, your annual account fee is $20.
What First-Time Investors Need To Know: Investing for Beginners
What Vanguard Investments Is Best For
Vanguard Investments is best for the following features:
- Commissions and fund expenses
- Mobile and emerging tech
Where Vanguard Investments Falls Short
These are the disadvantages of using Vanguard Investments:
- Trading experience
Vanguard doesn’t currently have any new sign-up promotions.
Comparison: Vanguard Investments vs. Other Brokers
Vanguard has always been a star in the mutual fund and ETF department, offering a host of low-cost and low- or no-fee options. It’s now also just as competitive as its most cost-conscious peers when it comes to low stock commissions. The firm still comes up short when it comes to breadth of services or current promotions, however.
|Broker||Stock Commission||Account Minimum||Promotion|
|TD Ameritrade||$0||$0||60 days of commission-free trading, plus up to $600 in cash with new account deposit|
|Merrill Edge||$0||$0||Up to $600 in cash with new account deposit|
|Charles Schwab||$0||$0||500 commission-free online equity and options trades for two years with $100,000 deposit|
|Firstrade||$0||$0||Up to $200 in transfer-fee rebates|
|Robinhood||$0||$0||1 share of free stock when your brokerage application is approved|
|E-Trade||$0||$500||Up to $2,500 in cash with qualifying deposit|
Should You Invest With Vanguard Investments?
Vanguard has proven its value to investors for decades, ever since it first introduced its low-cost mutual funds in the 1970s. However, Vanguard is now right at the cutting edge of industry trends with its recent move to $0 commissions. Anyone can benefit from lower costs when it comes to investing, and with no minimum balance to open stock accounts, it’s easy to begin trading with Vanguard.
Even if you don’t have an account directly with Vanguard, you may very well already own Vanguard mutual funds, as they’re popular both in 401(k) plans and with other brokers, including some that rank highly on the GOBankingRates Best Brokers list. Considering the ease of access to Vanguard’s low-cost, high-performance mutual funds and ETFs and the recent elimination of trading commissions, Vanguard has proven that it remains a solid option for most investors.
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