Vanguard’s low fees and large variety of funds make it attractive to many investors. But is it suitable for active traders who want to buy and sell frequently? In this Vanguard review, we go through the pros and cons of the platform so you can see if Vanguard is right for you.
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Vanguard - Reviews & Ratings
• Account Minimum: $0
• Mutual Funds: $0
• Stock Trades: First 25 trades are $7, additional are $20 per trade
• Best for: Long-term, passive traders
• Highlight: Vanguard Portfolio watch to assess your portfolio
Investor Warning: You could lose money by investing in Vanguard’s fund. Although the funds seek to preserve the value of your investment, they cannot make a guarantee. Any investment in the funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The funds’ sponsor has no legal obligation to provide financial support to the funds, and you should not expect that the sponsor will provide financial support to the funds at any time.
Vanguard have a mission to and reputation for maintaining low-cost investing. The company provides a selection of low-cost offerings suitable for long-term investors.
Recently introduced features include, commission-free online transactions on about 1,800 ETFs; a variety of proprietary, low-cost ETFs and lower investment minimums for almost 40 of the lowest-costing index funds.
Vanguard isn’t suitable for active traders looking to make a lot of trades per month as their business model isn’t ideal beyond the buy-and-hold strategy.
The brokers downfall is that it fails to offer a trading platform, like other competitors, and investors looking to trade more than 25 times per year will be hit with a steep commission cost.
Vanguard Overview and Summary
- Jack Bogle helped the average American save for retirement more than any other broker in investing
- The company encourages other brokers to opt employees in at high rates and to implement increases automatically
- Vanguard are best suited to passive traders who are interested in long-term, fee-free investing.
- Vanguard Portfolio watch is a tool on Vanguard’s website that assesses your portfolio and cautions you if have strayed too far from the criteria that you set in conjunction with vanguard
- Vanguard charges a yearly fee of $20 for a brokerage account. Unless, You have a premium account with at least $10,000 in Vanguard funds and ETFs, or you signed up to receive electronic statements and paperwork.
- Vanguard’s lessons section is practical, posing real-life situations and providing solutions to help you determine the best path to take.
- Vanguard have a complex commission structure because it’s dependent on how much you have invested in ETFs and mutual funds. This is a stark distinction, and downfall of Vanguard, in comparison to other competitors.
What is Vanguard?
The Vanguard Group was founded in 1975 by the late Jack C. Bogle to disrupt the investment space by focusing on low-cost investing. It is now the second largest mutual fund company in the world, and holds over $5.1 trillion in assets under management (AUM).
Bogle wanted to create a more accessible industry and believed that the less investors pay in fees, the more money you stand to make. Today, the broker offers of a large selection of mutual funds with zero transaction fees and around 1,800 fee-free ETFs.
You can also avail of the brokers financial planning, lessons in investing, brokerage services, asset management and trust services.
Jack C. Bogle and The Vanguard Brand
John (nicknamed, Jack) C. Bogle helped the average American save for retirement more than any other broker in investing. After Bogle’s passing in January 2019, The Vanguard Group was contributing about $21.1 billion annually into retirement accounts that would otherwise be used as fee income for Wall Street.
However, this is a modest estimate based on Morningstar data, that takes into account how much investors saved on its low-cost mutual funds, money market funds and exchange traded funds, compared to competitors. It does not take into consideration, however, the lower fees that customers of other firms have to pay.
Jack’s revolution resided around investing in low-cost, passive index funds that tracked markets, instead of trying to beat them.
Jack Bogle’s Investment Philosophies to Help You Succeed
Interestingly, The Vanguard Group was created after Jack got fired for making an “unwise decision” in a previous company. Jack said
“When I was 38, I became head of Wellington Management, and I did an extremely unwise merger. I got wrapped up in the excitement of the go-go era, and the go-go era ended. As a result of that stupid decision, I got fired. The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot. And if I had not been fired then, there would not have been a Vanguard.”
Here are some of Jacks investment philosophies to help you on your way to success:
- Don’t over complicate things, keep things simple.
- Don’t get caught up in the hype
- Keep those fees to a minimum
- Stop making impulse buys
- Be realistic
An Insight Into the Vanguard Brand
Our core purpose…is to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success.
In 2018, Vanguard was named and ranked as one of the strongest brands in nearly 100 categories and remains the only financial services company in the “Top 13 Brands of the Year with the Largest Equity Increase.” The company also ranked as the top financial services brand in the investment category. What makes the Vanguard brand stand out over others financial services?
Shannon Nutter-Wiersbitzky, Principal-Head of Participant Strategy and Development at Vanguard said, “The company is managed in the sole interest of the fund shareholders.”
What this means, Shannon explains, is that Vanguard is owned by its mutual funds and as a result, the investors of those funds. So, the success or failure of the company, directly affects investors; The more the company grows and becomes successful, the more success investors have, too.
Revenue, after expenses is returned in two ways. Firstly, through reinvestments in the business, and secondly, through lower-fund expense ratios. Nutter-Wiersbitzky believes that this allows Vanguard to maintain its low costs with high quality investment success.
How Vanguard Enhance the Customer Experience
Vanguard’s first priority is to develop the best plan designs. The company encourages other brokers to opt employees in at high rates and to implement increases automatically. Inertia, they claim is a sticky force, so if customers are opted in, then they’re more likely to stay through the defaults, and the company believe that this is key to the success of the retirement process.
The broker’s web portal helps customers understand what may affect their retirement savings.
The first factor is of course, their balance. The second involves converting that balance into an income stream. To enable this, the company leverage data and analytics, and the Vanguard Capital Markets Model, to project a retirement income.
This may be all some customers need, however, others may have a gap that needs closing and Vanguard help narrow this gap by improving your situation. The company will offer one quick, actionable recommendation that might be something as simple as bumping up your contribution rate by a couple percentage points. The broker believe that any small improvements you make now will have a dramatic impact on hitting future goals.
How Does Vanguard Work?
You can sign up to Vanguard in 4 easy steps but first, here’s what you’ll need to get started:
- Social Security number
- Email address
- Your U.S. address
- Employer’s name and address, if applicable
Four Steps to Getting Your Vanguard account:
Step 1: Fill in your personal information
Step 2: Fund your account
Step 3: Review and sign
Step 4: Create an online account.
Who is Vanguard Best For?
Vanguard is best for you if you consider yourself one of the following:
- Long-term investing
- Fee-free investing
- Index fund & ETF investing
- Passive Investor
Vanguard manage trillions of dollars in assets, making them a powerful broker when it comes to funds. Vanguard is the perfect fit for customers looking to invest in the company’s funds, and their exchange-traded funds are commission free, too.
Vanguard doesn’t provide a platform suitable for active traders, so investors looking to make a lot of trades should look elsewhere, and they do not allow you to trade other securities.
Vanguard Review: The Best Features
Vanguard Portfolio Watch
Vanguard Portfolio watch is a tool on Vanguard’s website that assesses your portfolio and cautions you if you have strayed too far from the criteria you set with the help of Vanguard, including non-vanguard funds, if you have listed them.
Its goal is to make sure your assets are diverse and to protect you from losses when and where possible. These cautions don’t necessarily mean that you’re doing anything wrong.
They are more to alert you to the fact that your action is off the mark so that you don’t do anything unintentionally. Once you have included all your assets, Portfolio Watch will give you a full, detailed story of your finances and where any potential risks may lie.
Portfolio Watch will then break down your assets into a number of categories, such as the size of your company or your investing interests, too much tax-inefficient funds in taxable accounts, an abnormally high weight to international stocks, and assess if there’s a way to improve things before recommending some options to you.
Overall, it’s a good tool for giving you a broader perspective of your finances, averting any potential risks and helping you stay on track of your plan.
Where Vanguard Portfolio Watch Could Improve
Vanguard’s Portfolio Watch may not always break down your funds correctly. Instead of breaking funds down into component sub-classes it assesses most funds as being in their primary stock category. For example, if your fund is 65% mid-cap and 35% large-cap, it may define your fund as 100% mid-cap and give a false alert to too many mid-caps.
Where Vanguard Shine
Education: Vanguard’s Lessons in Investing
- I left my job, what happens to my plan?
- What are the key dates to my retirement?
- How do I turn savings into income?
Vanguards lessons section is practical in the realist of ways. It poses real life situations and provides solutions to help you determine the best path to take. You can also get access to videos and podcasts analysing the current market so you’re always informed and up to date.
Their retirement-planning tools, resources and calculators are useful for any age. Investors can create a strategy to meet your goals and look at your funds all in one place, as well as helping you to get rid of college debt or hit your retirement savings plan.
You’ll learn how to turn your savings into income, and how to handle any financial emergencies. With so many resources dedicated to long-term financial planning, Vanguard makes the number one spot in our list of the top brokers for Roth IRAs.
A Vanguard Lesson: How Much Should I Be Saving?
Vanguard suggests saving 12% to 15% of your pay each year for retirement, including any contributions by your employer.
One of the brokers most popular lessons helps you figure out how much you should be saving. The average investor, they state, saves 10% in their retirement plan, including their employers contributions. That’s two percentage points lower than the range they suggest.
Vanguard’s simple solution to help you reach your goal
- Increase your savings by just a little, everything helps, even if it’s just a percentage point.
- Boost your savings rate by a little more year on year until you’re at the suggested range
Does your plan offer an annual savings increase feature? If so, then the company suggest signing up for it. Once you do, Vanguard will increase your savings rate annually. And it’s all automatic, so you won’t need to remember a thing.
Are Vanguard’s ETFs Commission-Free?
With so many commission-free ETFs why go anywhere else?
Vanguard want to do right by their customers and give them access to the vast majority of ETFs. That’s why they offer over 1,800 ETFs, commission free, 20 of which were named “best” by Money Magazine. Vanguard also offer 75 of its own funds.
The brokers goal is to “lead the way on behalf of investors who think and feel differently about investing.”
While commission-free ETF brokers were once a stand-out offer among competitors, the recent industry shift towards zero-fee commissions for these funds has meant that it’s becoming the norm. This means that although it’s one of Vanguard’s highlights, it doesn’t make them a top broker for ETFs.
If you’re interested in their ETFs, Vanguard will provide the tools you need to help you get started, including; helping you examine mutual fund and ETFs similarities and differences, finding stock and bond ETFs from the US and around the world, and getting more discounts and free trades as your company grows.
Low-Cost Funds: A Vanguard Tradition
Vanguard are probably most known for their low-cost funds. In addition to 75 ETFs, the company offers more than 140 mutual funds. Both their ETFs and mutual funds will give investors a fair deal. Vanguard don’t charge any sales load and have one of the lowest expense ratios in the industry.
Vanguard states that its average fund, including both mutual funds and ETFs, has an expense ratio of .11 percent. A ratio well below the industry standard of .62 percent.
If you’d like to create your own portfolio, Vanguard invite you to choose from their list of funds. Their goal, they say, is “to help [customers] get the most for [their] money by combining low costs, diligent fund management, and exceptional service.
Simply choose a fund name to see after-tax and standardized returns. Then compare up to 5 funds by ticking the boxes next to the fund and selecting the “Buy” button below.
Vanguard’s Impressive Mutual Fund Selection
Vanguard offer a wonderful selection of over 15,000 mutual funds, giving you a good chance of finding what you need. More than 9,800 of these can be purchased without a sales load, and you can trade more than 3,000 without a transaction fee. This is just below the industry leads, such as TD Ameritrade and Charles Schwab, who offer more than 4,000 funds.
Does Vanguard Have an Account Minimum?
With Vanguard, the account minimum is $0. However, with a recent industry transition toward lower fees, this isn’t a stand-out feature, although it is a Vanguard highlight. That said, Vanguard doesn’t allow customers to buy fractional shares, so you’ll need to have enough to by a minimum of one share of any security.
Vanguard Review: A Comparison of Brokerages
A comparison of Robinhood, Charles Schwab, and Vanguard reveals the following:
- Overall rating: Robinhood 7.5/10, Charles Schwab 9.5/10, Vanguard 6/10
- Account min: Robinhood $0, Vanguard $0, Charles Schwab, $0
- Fees: Vanguard $0, Charles Schwab $0 , Robinhood $0
- Highlight: Vanguard Portfolio Watch, Charles best online broker for stock traders, Robinhood Pioneer of commission free stock
Where Vanguard Falls Short
As Vanguards focus is on long-term investments, they only offer a standard order interface. This isn’t a crucial downfall, but it isn’t exactly a positive for any trader. If you’re only looking to trade a couple times a year, then Vanguard’s platform will still suit you.
Vanguard have a complex commission structure, because it’s dependent on how much you have invested in ETFs and mutual funds.
When Vanguard is compared to TD Ameritrade, we see a stark distinction here, signaling a downfall of Vanguard when compared to its competitors. Investors’ costs to trade options and stocks are calculated by how much you have invested in funds, rather than how much you have in the brokerage in total. If we look at Vanguard vs Fidelity when it comes to trading complex stocks or market orders, Fidelity is frequently the better option.
The complexity of the tiers is based on the Vanguard belief that investors should work with the market, instead of trying to beat it. This involves long-term, passive investments that accumulate over time, as well as encouraging customers to buy more Vanguard funds, as opposed to individual stocks.
This gives Vanguard a disadvantage to competitors when it comes to individual securities, with higher-end commission prices for trading. As a result, Vanguard does not make our list of the best platforms for day trading.
Vanguard charges a hefty $20 annual account fee, unless you have $10,000 or more in Vanguards ETFs or mutual funds. However, you can simply sign up to receive electronic statements to avoid this fee, which may actually be a good incentive to encourage more customers to go paper-free.
Final Thoughts: Vanguard Review
The Vanguard Group company began with the belief that long-term investing, such as retirement funds, were the most beneficial, and so, Vanguard’s structure encourages this kind of investing.
Due to its focus on long-term financial planning, Vanguard isn’t one of the best online stock trading platforms you’ll find. But it still has plenty of world-class features. Vanguard offers a wonderful selection of lessons and planning tools to help investors understand and manage investment plans — with a reputation of focusing on the long-term.
Vanguard are most notable for their low-cost funds that allow customers to trade with zero-commissions. For investors looking for zero-fee ETFs or high frequency trading, there are plenty of other options to check out. We recommend a review of Fidelity Investments or a quick look at the pros and cons of TD Ameritrade.