The Vanguard Group is the grand daddy of low-cost indexed based mutual fund investing. Started in 1975 by Jack Bogle, he understood over 80% of actively managed funds did not beat the market’s indices. His mantra, is you aren’t best to beat the market, you should become the market, and focus on low cost fees.
Vanguard has grown to become the world’s largest no load mutual fund company. While Vanguard is mostly known for its low-cost index funds, they also offer a variety of low-cost, actively managed mutual funds and exchange-traded funds (ETFs).
Vanguard also provides brokerage services, 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. There is a wide selection of mutual funds and ETFs at a low cost, but their website to be somewhat outdated and clunky.
Account Options Offered At Vanguard
Currently, Vanguard offers the following account options. Beside each type of account, I’ve included a brief summary of my experiences, where applicable.
Investment Types Offered
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
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.
Trading Fees and Commissions
Vanguard charges no commission for trading their mutual funds and ETFs. Purchasing stocks and non Vanguard ETFs through Vanguard can be expensive. This isn’t surprising since their focus is on low cost mutual funds.
Stock and ETF Fee Schedule
|Amount||Stocks and ETFs|
|Less than $50,000||$7 for the first 25 trades
$20 for subsequent trades
|$50,000–$500,000||All trades: $7|
|$500,000–$ 1 million||All trades: $2|
|$1 million plus||Free for first 25 trades
$2 for subsequent trades
Unless you have a somewhat large account with them, Vanguard isn’t a great place to trade stocks. You are best to use other discount brokerages. Vanguard’s service is lacking features when comparing to other discount stock brokers. Based upon experience though, if you are wanting to use Vanguard you are only interested in purchasing Vanguard only mutual funds and ETFs.
Minimum Balances 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:
Vanguard recently lowered the dollar requirements and is great news for investors.
Mutual Fund and ETF Screener
Vanguards 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 straight-forward. 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 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 with them, it may not make sense to use their service for the lower trading fees.
It is assumed you go for Vanguard only for their low cost indexed mutual funds and ETFs. Though they are no longer have exclusivity in this area. Most mutual fund houses offer similar, and in some cases lower annual fees when compared to Vanguard. Many of the brokers offer commission free ETFs, further lowering your transaction costs to match Vanguard.
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