Along with the standard brokerage services, Vanguard also offers variable and fixed annuities, educational account services, financial planning, asset management and trust services.
In the same spirit of shedding further insight on the different investment options available to consumers, today, I wanted to share with you my experiences with Vanguard's Investment Services. Personally, I have been a Vanguard account holder since 1999. Overall, I have found Vanguard offers a wide selection of mutual funds and ETFs at a low cost, but their website to be somewhat outdated and clunky.
|Options Trades||$1/ contract|
|Investment Types||Stocks, OTC/Penny Stocks, ETFs, Mutual Funds, Bonds, Options, Forex, Cryptocurrencies, Futures|
|Accounts Types|| |
|Access||Web Based, iPhone App, Apple Watch, Android App, BlackBerry App|
|Broker Assisted Trade||25|
|No Fee ETFs||67|
|Customer Service||Phone: M-F 8A-10P ET|
Currently, Vanguard offers the following account options. Beside each type of account, I've included a brief summary of my experiences, where applicable.
- 401(k) rollovers to a Vanguard IRA – This type of account enables you to transfer your 401(k) retirement account at your previous employer and convert it to a traditional IRA with Vanguard. I completed this process in with my wife's 403(b) with a former, and the process was executed without any failures or delays. And, better yet, there were no additional penalties/fees incurred by the process from Vanguard.
- Annuities – Vanguard offers both fixed income and variable annuities. While I don't personally have one of these, I understand Vanguard has some of the lowest rates in the industry for annuities. This is mostly because they don't have full-time sales people selling their product and pass the discount onto you.
- Roth IRAs and Traditional IRAs – Vanguard gives investors the option of opening either a Traditional (pre-tax contributions) or Roth (post-tax contributions) IRA. I have been using a Roth IRA from Vanguard for 3 years now, and I have found it a very effective investment vehicle with their low-cost mutual funds.
- Individual (taxable) Accounts – Lastly, Vanguard allows you to save money in taxable accounts in either stocks, bonds, CDs, or mutual funds.
|Options Trades||$0.65/contract||$0/trade + $0.65/contract ($0.50/contract for 30+ trades/quarter)||$1/ contract|
Further Reading: Our Wealthfront vs. Vanguard vs. E*TRADE Comparison
The Vanguard Group offers a very comprehensive array of investment options, regardless of the type of account you choose to open. This review focuses only on Vanguard's “bread-and-butter” – mutual funds and ETFs.
Vanguard Mutual Funds
- 121 total mutual funds – including money market, international, balanced, bond, REIT, and stock mutual funds.
- Vanguard offers both actively (stock picking) and passively (tracking an index) managed mutual funds.
- Offers lower fee “Admiral Shares” mutual fund options. These shares generally require a balance in the mutual fund of at least $10,000. However, the expense ratio for these Admiral Shares is generally 30-50% lower than that of the normal mutual fund shares.
- In addition to mutual funds, Vanguard has also become a major player in the ETF markets, currently offering 52 different ETFs in the majority of the same areas that they offer mutual funds.
- Generally, ETFs have expense ratios ~0.1% lower than the same asset class of mutual fund. While this is not a huge difference, it can add up over the years with larger account balances.
In most cases, especially if you have complete control over your investment account, you would want to choose the Vanguard ETFs over their mutual funds. Not only are most cheaper but typically are more tax efficient.
Vanguard Personal Advisor Services
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Fees and Commissions
It was the culmination of a long pricing war among online brokers. In no small part, this was spurred on by the emergence of totally free brokers like Robinhood.
It took until January 2020, but Vanguard finally joined the cadre of commission-free brokers. That means investors don't have to pay for stock and ETF transactions when completed online (there's still a charge for trades made via phone). Options trades are also commission-free, but note that there is a per-contract charge of $1. This is higher than what many other brokers charge (50 to 65 cents).
Minimum Balance and Initial Deposit
Generally, the minimum investment amount for Vanguard mutual funds is $3,000 which is somewhat steep for the first time investor. However, for Vanguard ETFs, the minimum is only 1 share and might be best suited for beginning investors. Vanguard also offers admiral shares which have even lower in annual fees. To qualify:
- Invest $10,000 or more in most Vanguard index funds that offer Admiral Shares.
- Invest $50,000 or more in Vanguard actively managed funds that offer Admiral Shares.
Vanguard recently lowered the dollar requirements and is great news for investors.
Mutual Fund and ETF Screener
Vanguard's screener is a very effective tool to find the right fund that meets your investing criteria. You can filter based upon: asset class, minimum deposit, risk level, share class, and tax efficiency.
Once you find the right Vanguard fund for you, you can invest directly. You can also compare the various funds to find out which performed better. It's a useful tool since Vanguard has over 100 ETFs and mutual funds.
Overall, the ease of use of the online Vanguard system, and corresponding customer service has always been very effective and straightforward. Whenever I am unable to figure out something online, it is always easy to get a real, live person on the phone who is knowledgeable and can assist.
Vanguard Portfolio Watch
The portfolio analysis tool is provided for free by Vanguard. You can gain insight in to your asset allocation as well as the overall costs of taxes, and manage risks associated with your portfolio. Their summary section it will give automated recommendations to modify your portfolio.
It does not support external accounts into asset allocation consideration. This is another example of the Vanguard-only-centric view their service has.
Vanguard Pros & Cons
Great Selection of Funds—Vanguard offers a broad selection of mutual funds and ETFs.
Handy Tools—Vanguard's screeners are a great addition.
Good Customer Service—Getting hold of help is seldom a challenge.
Commission-Free Trades—Pay no commissions on most stock, option and ETF trades.
Not the Best Broker for Stocks—Vanguard is a better fit for investors looking to trade mutual funds and ETFs.
High Minimum for Mutual Funds—The minimum investment amount for Vanguard mutual funds is $1,000.
High Options Contract Price—The per-contract price for options is $1, higher than what many other brokers charge.
Vanguard is great if you use their funds and ETFs. When you venture outside of this realm, their service is ok at best. If you ever decide to buy individual stocks, you are best to find another stock broker for that purpose. Vanguard's research tools are almost nonexistent. Unless you have a significant amount invested in them, it may not make sense to use their service for the lower trading fees.
I recommend using Vanguard for your retirement account if possible (there are many poor alternatives, unfortunately), or if you prefer to use only Vanguard funds for your investing. Firms like Fidelity, and TD Ameritrade offer much more comprehensive services, if you are looking for a one-stop brokerage firm.
Readers: How would you rate your experience with Vanguard?