Vanguard® Review 2019

James Royal is a reporter covering investing and wealth management. Before joining Bankrate, he worked as a writer for NerdWallet and a stock analyst for The Motley Fool. He holds a doctorate in literature from the University of Florida.

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Vanguard Logo

Best For

  • Commission-free ETFs
  • Passive investing
  • Long-term investing

Vanguard is a behemoth in the funds space, with trillions of dollars in assets managed by its funds, but it also runs a brokerage that encourages buy-and-hold investing. Vanguard makes a great choice for clients who invest primarily in the company’s funds, and all the company’s exchange-traded funds (ETFs) are commission-free too.

While Vanguard also allows you to trade other securities, it doesn’t offer the type of platform that would work particularly well for active traders, and is best-suited for long-term investors who aren’t making a large number of trades each month.

Vanguard at a glance

Star Rating

3
  • Affordability: 3 of 5
  • Usability: 3 of 5
  • Tools & Research: 3 of 5
  • Mobile: 3 of 5
  • Scalability: 3 of 5
  • Minimum Balance:
    $0
  • Cost per stock trade:
    $7*
  • Cost per options trade:
    $7+$1 per contract for accounts < $50k, Sliding scale thereafter
  • Promotion:
    None
  • Commission-free mutual funds or ETFs:
    1500+ commission-free ETFs
  • No-transaction-fee mutual funds:
    3000+ NTF mutual funds
  • Securities tradable:
    Stocks, ETF, options, bonds, mutual funds
  • Customer service:
    Phone M-F 8am-10pm ET, email support
  • Account fees:
    $20 account fee for accounts less than $10,000. Can waive fee if signed up for e-delivery of documents
  • Mobile app:
    Vanguard offers the “Vanguard“ mobile app on the Apple App Store and Google Play Store

*per trade for first 25 trades per year, $20 thereafter for accounts < $50k; Sliding scale thereafter; $0 fees for Vanguard ETFs

 

Feature you’ll love

Vanguard Portfolio Watch: Vanguard Portfolio Watch is a tool that automatically examines your portfolio to see how it compares to criteria that you and Vanguard have set. The goal is to make sure your assets are diversified and minimize risks where possible. You can include not only your Vanguard assets, but all holdings, so that you can get a comprehensive picture of your financial life and where you might have unidentified risk.

Once you’ve loaded your holdings into the tool, Portfolio Watch will give you a breakdown of what kinds of funds you own by a number of factors, for example, company size or investing style (value vs. growth). Then if there’s a place where you need more exposure – say you own too many funds invested in small companies – it can recommend the funds you need to purchase to even out your portfolio. It’s a neat tool to get a broad perspective on what you own and what you might like to own.

Where Vanguard rocks

Education: Vanguard was founded on the vision and positive ethos of Jack Bogle to help individual investors build wealth, and that’s most obvious in the broker’s education and planning tools. The broker offers articles, videos and podcasts that inform clients on the state of the market and help investors make smart financial decisions with a long-term mindset.

The broker’s site includes tons of retirement-planning tools, calculators and resources for investors of all ages. Investors can set up plans for various goals, compare funds side-by-side, screen for funds, as well as project college and retirement costs so that you can meet them.  

Commission-free ETFs: Vanguard offers a huge number of commission-free ETFs – more than 1,800. That compares favorably against two of the next-largest players, Fidelity and Charles Schwab, which have closer to 500 of such funds. Vanguard’s offering also includes its own funds, which total more than 75.

A nice perk that could be overlooked is that Vanguard does not charge you to place an order of its own funds by phone, unlike many other brokers. However, it does charge you $25 to order ETFs from other fund companies via phone.

Low-cost funds: Vanguard has long been synonymous with low-cost funds, and that tradition continues. In addition to its own ETFs, Vanguard’s mutual funds number more than 140.

Whether you choose one of its mutual funds or ETFs, you can be sure you’re getting a good deal. Besides not charging any sales load, Vanguard’s funds have among the lowest expense ratios in the industry, fees that could otherwise really eat into your returns over time.

Vanguard says that its average fund, including both mutual funds and ETFs, has an expense ratio of a razor-thin 0.11 percent. That compares to 0.62 percent across the industry.

No-transaction-fee mutual funds: Vanguard offers a truly astounding number of mutual funds on its platform: more than 15,000. So chances are that you can find what you’re looking for in a fund. Of these, more than 9,800 can be purchased with a sales load, while more than 3,200 can be traded without a transaction fee. That compares nicely to some of the top in the industry, such as Charles Schwab and TD Ameritrade, both of which have more than 4,000 such funds.

No account minimum: Vanguard has no account minimum, so you can open an account without immediately funding it. You’ll still need enough to buy at least one full share of any security you buy, because Vanguard doesn’t allow you to buy fractional shares.

 

Quick comparison of Brokerage options:
Brokerage Overall Rating Avg. Cost Per Trade Usability Rating
Vanguard logo
$7* 3 of 5
Merrill Edge® Review 2019 logo Read Our Review
$6.95 3 of 5
TD Ameritrade® Review 2019 logo Read Our Review
$6.95 5 of 5
Charles Schwab® Review 2019 logo Read Our Review
$4.95 5 of 5

Where Vanguard could improve

Trading commissions: Vanguard’s commission structure is somewhat complex, because it has so many tiers depending on how much you have invested in Vanguard’s ETFs and mutual funds. That’s a crucial point to note: it’s not just how much you have in the brokerage, but rather how much you have invested in its funds that determines your costs to trade stocks and options.

  • If you have less than $50,000 in Vanguard funds, stock trades cost $7 for the first 25 trades in a year, but rise to $20 after that.
  • From $50,000 to $500,000, stock trades cost $7 with no upward revision based on trading volume.
  • From $500,000 to $1 million, stocks are $2 per trade.
  • From $1 million on up, you begin to get free trades.

The options commissions are similarly tiered, as trades start with a base commission of $7 and $1 per contract. Much like with stock trading, customers with more than $1 million begin earning free options trades.

The complexity of this tiered structure can be confusing, unfortunately, especially as trades for lower-balance customers actually go up with higher volume. Part of the point of such pricing is to encourage investors to take a longer-term view of the market and not trade so frequently, as well as buy more Vanguard funds rather than individual stocks.

Vanguard is a great broker for funds, but much less so for individual securities, with trading commissions that hit the high end of the industry’s pricing.

Account fees: Vanguard charges a $20 account fee annually for accounts with less than $10,000 in Vanguard assets, either ETFs or mutual funds. That’s a pesky charge when virtually every other brokerage has eliminated account or inactivity fees. However, the good news is that customers can easily eliminate this fee by agreeing to receive all communications electronically.

Trading platform: Vanguard is not a broker for active traders, so the broker does not offer anything more than a basic order interface. For the right kind of investor, the lack of a trading platform is not detrimental in the least, but it certainly doesn’t help the company in the eyes of active investors. If you’re looking to trade just a few times per year or buy mostly funds, Vanguard will still work for you.

New account bonus: Unlike many other brokers, Vanguard does not offer customers a bonus for opening a new account. This shouldn’t be a dealbreaker if Vanguard meets your other needs, however.

Bottom line

Vanguard is a broker that fits a specific kind of investor just right, though it won’t appeal to some types:

  • The copious amount of educational and planning resources help many investors set up an easy-to-manage investment plan.
  • Vanguard offers a huge selection of low-cost funds – which customers can trade without a commission.
  • However, trading commissions and the trading platform will probably not appeal to active investors.

Investors seeking alternative brokers offering many commission-free ETFs should also check out TD Ameritrade and Fidelity Investments, both of which offer hundreds of them. Active investors who need a fully-featured, customizable trading platform should check out Interactive Brokers and Fidelity.

 

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