Vanguard Investing Review: More Than a Mutual Fund Company?

GOBankingRates Score

4.8
Quick Take: The Vanguard Group is an investment management company that's well known for its quality ETFs and mutual funds. It operates as a self-service, commission-free brokerage service and also manages retirement accounts like 401(k)s and IRAs. The company's investment plans have become synonymous with low fund expense ratios, allowing investors to hold onto more of their gains. Its ETFs also have a history of outpacing the returns generated by their competitors.
  • Investing Options
    5.0
  • Fund Expense Ratios
    5.0
  • Return on Investment
    4.5
  • Tax Benefits
    4.5
How did we calculate this?

Pros

  • Industry-leading expense ratios
  • More than 100 different portfolios to choose from
  • Three-quarters of Vanguard funds beat competitor returns
  • Quoted market prices are higher than 98% of shares held by Vanguard
  • Most Vanguard funds don't produce taxable gains, reducing the investor's tax burden
  • Free stock trading

Cons

  • Margin rates are as high as 8.75%.

    Vanguard Overview

    Founded in 1975, The Vanguard Group has become a premier investment management company in the U.S. and one of the largest in the world. The majority of its services involve investment-grade funds like ETFs and mutual funds. Investors pay minimal expense ratios on Vanguard funds and receive outsized returns compared to competing companies.

    Vanguard also offers an online brokerage service where investors and traders can trade stocks, bonds and ETFs commission-free. Investors aren’t held to account minimums when investing with Vanguard, which offers a vast array of educational materials, making it a perfect option for a new investor. 

    Key Features

    The company manages trillions of dollars in funding by offering a long list of compelling key features. Here’s a look at some of the most important services it provides.

    Investing Options

    Vanguard offers more than 100 ETFs and mutual funds to customers. This focus on investment-grade funds is a hallmark of this company. Customers have other investment options, too, which include:

    • Stock trading. Offering commission-free, online brokerage services, Vanguard allows investors to trade stocks and ETFs through its platform. 
    • Retirement accounts. The company also offers a range of retirement accounts like 401(k)s and IRAs. Customers can take advantage of Vanguard’s retirement planning services to ensure they’re on the right track for financial freedom during their golden years.

    Fund Expense Ratios

    Vanguard is well known on Wall Street for providing some of the lowest expense ratios on investment-grade funds. The average ETF expense ratio is 0.24%, but Vanguard’s average ETF expense ratio is just 0.06%. There are also no trading fees or commissions charged, meaning that investors can hold on to more of their returns. 

    Fund ROI

    Vanguard has also become well known for producing above-average returns. More than 75% of the company’s funds beat their competitors’ returns during the 10 years leading up to December 31, 2021. For example, one of Vanguard’s most popular funds, the Vanguard Total Stock Market Index Fund, has outperformed average returns in its category for six out of the last seven years. 

    Tax Benefits

    Vanguard takes active steps to reduce the tax burden placed on its investors. That’s why 85% of all the company’s ETFs have had no taxable gains distributions over the five years leading up to December 31, 2021. 

    No taxable gains combined with minimal expense ratios mean Vanguard investors retain more earnings. 

    Good To Know

    Not all ETFs, even Vanguard ETFs, are equal. It’s important to do your research and gain an understanding of returns and fees before investing in any fund. 

    Other Features

    The features above are some of Vanguard’s most exciting, but they’re not the only ones. Some other impressive offerings include:

    Investor Education

    No matter what an investor’s doing, they need to educate themselves before making that first investment. Vanguard knows this and, like most competing online brokerages, it offers informational resources and educational tools that help its customers learn about the market and gain a better understanding of it ahead of trading.

    The company’s investor education series, for example, covers various topics including:

    • Investment planning and risk management
    • Asset classes, allocation and diversification methods
    • Investment expenses and cost management
    • The differences between investing in bank CDs, ETFs, mutual funds, bonds and stocks
    • Investment-related fees
    • Tax implications of investments

    Vanguard’s experts curate and design the lessons on the platform, giving both beginners and experienced investors valuable, practical information.

    Retirement Nest Egg Calculator

    Most people know that investing for their retirement is important. However, many find themselves in a conundrum when they’re trying to determine how much money they’ll need when they retire and how much they should be putting back regularly to ensure a comfortable retirement. Vanguard has the solution to this problem in the form of a retirement nest egg calculator.

    Using this calculator, Vanguard customers simply set the conditions they believe apply to them — like the amount of time they have to invest — their beginning nest egg amount, how much they think they’ll have to spend each year and the asset allocation they plan to follow when they invest.     

    Once investors input these details into the platform’s calculator, Vanguard will show them how their money is likely to grow over time and how long their retirement nest egg will last when they’re in their golden years.

    Asset Allocation Determination Tool

    An investment strategy that aims to strike a balance between reward and risk, asset allocation divvies portfolio resources based on a person’s goals, risk tolerance and investment horizon. A 50/50 portfolio, for example, has an investment mix that consists of 50% stocks and 50% bonds. The asset allocation an investor chooses will determine the risk and reward potential of their portfolios, with higher allocations to stocks pointing to higher risk but higher potential rewards and higher allocation to bonds pointing to lower risks and lower potential rewards.

    It can be difficult for a new investor to determine the right balance of risk and reward through asset allocation. Vanguard offers the asset allocation determination tool to lend a helping hand.

    Once an investor launches the tool, it asks them a series of questions surrounding their goals and risk tolerance. The platform uses the answers to calculate the investor’s perfect balance of stocks and ETFs, bonds and cash based on their level of risk tolerance and investment objectives. 

    Get Started Tool

    Many people don’t know where to start with investing, which creates a barrier to stock market entry. The Vanguard Investing Get Started Tool features a questionnaire that outlines the best way for newcomers to enter the market.

    How to Apply

    Anyone can apply for a Vanguard account. Here’s what needs to be done.

    To Apply

    1. Go to the Vanguard website.
    2. Click the “Open an Account” button. 
    3. Choose to open a new account or move an existing investment account. 
    4. Complete all fields as accurately as possible. 
    5. Verify your email address. 

    Comparable Investing Services

    No investment service is a perfect option for all investors. Those who aren’t interested in signing up for services with Vanguard may want to look at comparable investment management companies. Here are a couple of top options to consider.

    State Street Advisors

    State Street Advisors is an asset management company that offers more than 100 different ETFs and manages more than $1 billion in total assets. Its SPDR ETFs are commonly considered quality investment-grade funds. These funds track the underlying benchmarks of the broader indexes while providing investors with exposure to the types of assets they should have in their portfolios. 

    The average expense ratio that State Street Advisors charges is around 0.27%.

    TD Ameritrade

    Investors who want a brokerage account, but don’t want to work with Vanguard, should consider TD Ameritrade. The company is a premier online brokerage, offering commission-free trading, relatively low margin rates and access to a wide range of assets.

    Designed by traders and for traders, the company’s thinkorswim trading platform offers all of the technical indicators and trading tools that investors might need to make profitable trades in the market.  

    The Vanguard Group Offers Broad-Ranging Features That Suit Any Investor

    The Vanguard Group’s wide-ranging services are a great fit for many types of investors. Those who take a passive approach to investing money will likely benefit from the company’s ETFs while the more active types will probably find great value in the company’s trading platform.

    Vanguard’s services are especially suited for those looking to build a nest egg and grow their money over time. 

    Final Take

    The Vanguard Group has earned its position as a top brokerage and fund manager in the United States. The company has a reputation for offering compelling services, low fees and taking a real interest in the success of the investors it serves. 

    Vanguard FAQ

    Investors often have questions about the services available to them. Answers to some of the most common questions about Vanguard investing are below.
    • Is Vanguard good for beginners?
      • Yes, it is because of the in-depth educational resources that Vanguard provides. Moreover, beginners can benefit from accessing the market through ETFs while they learn how to manage their own investment portfolios.
    • How much does someone need to invest in Vanguard?
      • Investors aren't held to any minimum account balances when using Vanguard's brokerage services. Those interested in the company's ETFs will have to purchase a minimum of one share. Market conditions determine the price per share. The price per ETF share will depend on the fund the investor chooses, but most will be below $100 per share.
    • How trustworthy is Vanguard?
      • Vanguard has nearly five decades of experience providing quality services to investors. The company is one of the most well-respected money management firms on Wall Street.
    • Who is better, Fidelity or Vanguard?
      • Fidelity and Vanguard are similar in that they both offer investment-grade funds and other financial services. It's impossible to determine which would be better for each unique situation as each fund and financial service is different.
      • It's best to compare the specific service options you're interested in and determine which company's features and costs line up with your expectations for that specific service.

    Rates and fees are subject to change.

    Editorial Note: This content is not provided by Vanguard. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by Vanguard.

    Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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