Vanguard® review 2021

James F. Royal, Ph.D., is a senior reporter on investing and wealth management at Bankrate. He was formerly a stock analyst for The Motley Fool and a writer for NerdWallet. He is the author of The Zen of Thrift Conversions, a book about how to invest in hidden bank stocks. He believes in the power of education to help individuals make smart financial decisions that can markedly improve their lives. Royal is regularly quoted on investing topics in national news media, such as CNBC and Forbes. He holds a doctorate in literature from the University of Florida, where he was an award-winning instructor.

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Vanguard Logo

Best For

  • Fee-free fund investing
  • Passive investing
  • Long-term investing

Vanguard’s name precedes it as perhaps the top name in the fund industry, managing trillions of dollars on behalf of investors across the world. But it also runs a brokerage that’s an ideal choice for individuals practicing buy-and-hold investing in funds. Vanguard offers literally thousands of funds without a commission or transaction fee, meaning you can put your whole money to work straight into the fund, ultimately increasing your return. While Vanguard is a solid pick for fund investors, it doesn’t provide the trading platform that would fit well for active traders. Still, Vanguard works well for long-term investors with modest trading requirements. 

Vanguard at a glance

Star Rating

3.5
  • Cost: 4 of 5
  • Accounts and trading: 3 of 5
  • Research and Education: 3 of 5
  • Mobile: 3 of 5
  • Customer Experience: 3 of 5
  • Minimum Balance:
    $0
  • Cost per stock trade:
    $0
  • Cost per options trade:
    $1 per contract for accounts, free trades for those with Vanguard funds > $1 million
  • Promotion:
    None
  • Commission-free mutual funds or ETFs:
    All
  • No-transaction-fee mutual funds:
    3,200+ NTF mutual funds
  • Securities tradable:
    Stocks, ETFs, options, bonds, mutual funds
  • Customer service:
    Phone M-F 8 a.m.-10 p.m. ET, email support
  • Account fees:
    $20 account fee for accounts with less than $10,000 in Vanguard funds. 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

Top 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.

Pros: Where Vanguard stands out

Education

Vanguard was created on the vision and positive ethos of founder 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.

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 130.

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 mutual fund has an expense ratio of a razor-thin 0.10 percent. That means you’ll pay just $10 annually on average for every $10,000 you have invested in its funds. That compares to 0.63 percent across the rest of the industry, based on 2019 data from Morningstar and Vanguard. That’s a huge advantage for Vanguard, and increases your average annual return by more than one-half of a percent annually. 

The average ETF expense ratio was even cheaper on Vanguard’s ETFs, at just 0.06 percent, compared to 0.25 percent for the industry as a whole in 2019. 

Of course, you won’t have to be a Vanguard customer to buy its funds, but its no-fee commission structure makes it easier and cheaper to do so. 

Commission-free stocks and ETFs

Vanguard has joined the ranks of the major online brokerages that have lowered commissions on stocks and ETFs to $0. But its decision was hardly in the vanguard at all, as the company was among the last major online brokers to make the move to commission-free. But the shift definitely behooves a fund company that’s long been known for its investor-friendly pricing. The new pricing structure largely does away with the previous too-complex, multi-tiered pricing system, where commissions were determined on how much you had invested in Vanguard funds.  

A nice perk that could be overlooked is that Vanguard does not charge you to place an order of its own funds (either mutual funds or ETFs) by phone, unlike many other brokers. However, it does charge you $20 to $25 to order ETFs from other fund companies via phone, depending on how much you have invested in Vanguard funds. Stock orders by phone will run you $20 to $25, as well, though customers with more than $1 million in Vanguard funds will receive this service for free.

No-transaction-fee mutual funds

Vanguard offers a truly astounding number of mutual funds on its platform: more than 14,000. So chances are that you can find what you’re looking for in a fund. Of these, more than 9,750 can be purchased without a sales load, while more than 3,400 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 no-transaction-fee funds.

Quick comparison of Brokerage options:
Brokerage Overall Rating Avg. Cost Per Trade Accounts and Trading
Vanguard logo
$0 3 of 5
Fidelity® review 2021 logo Read Our Review
$0 5 of 5
Merrill Edge® review 2021 logo Read Our Review
$0 4 of 5
WellsTrade® review 2021 logo Read Our Review
$0 3 of 5

Cons: Where Vanguard could improve

Options trading commissions

Vanguard’s commission structure for options is somewhat complex, because it has several tiers depending on how much you have invested in Vanguard’s ETFs and mutual funds. While the broker removed this tiered system for stocks and ETFs, it’s maintained some of it for options commissions. 

It’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 cost to trade options.

  • If you have less than $1 million in Vanguard funds, options trades cost $1 per contract.
  • From $1 million to $5 million, the first 25 options trades in a year are free and subsequent trades cost $1 per contract. 
  • From $5 million and up, the first 100 options trades are free, and $1 per contract thereafter.

The options commissions sit at the high end of the industry, where the standard price is $0.65 per contract. You can find options even cheaper at TradeStation (as cheap as $0.50 a contract) or completely free at Robinhood.

High minimums for mutual funds

Mutual funds typically require an initial investment of several thousand dollars, and Vanguard is no different. The minimum investment for target date funds is $1,000, and it moves to $3,000 for most index funds and actively managed mutual funds. That’s quite a threshold for new investors looking to get started, especially for a fund company that touts its investor-friendly cred.

After you make that initial purchase, you won’t face a minimum ongoing purchase amount. 

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 or you’ll receive this waiver if you maintain more than $50,000 in Vanguard assets.

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 deal-breaker if Vanguard meets your other needs, however.

Fractional shares

If you’re buying a mutual fund on Vanguard, you’ll be able to buy fractional shares. Otherwise, you’re out of luck on purchasing partial shares on stocks and ETFs. However, if you have dividend reinvestment set up, Vanguard will allow you to reinvest into fractional shares of mutual funds, ETFs or stocks. 

Bottom line

Vanguard will work just fine for individual investors who want to buy and hold their investments, especially if those investments are Vanguard funds. 

  • The wealth of education and planning resources help long-term investors create a financial plan that is easy to stick to and works for them. 
  • Vanguard’s low-cost funds cover many areas of the investing world, giving you a ton of options, and you can trade them without a commission or transaction fee. 
  • Active investors probably won’t have their needs met, with little in the way of fundamental research or trading tools being offered. 

Investors looking for no-commission ETFs or mutual funds can turn to almost any other broker offering them, including TD Ameritrade and E-Trade. Active investors might have a look at TD Ameritrade or Interactive Brokers, both of which are geared for more actively managed portfolios, have customizable trading platforms and offer access to a wide range of securities.   

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