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To many investors, Vanguard is more than just an asset management company, a mutual fund company, or an online stock broker to invest with – Vanguard is a way of life.
Vanguard Brokerage Services – is a simple, customer-friendly extension of Vanguard’s guiding principles of low-cost investing for the long-term.
Its founder, John Bogle, literally invented the index stock fund, which has come to be the single largest source of parked wealth on the planet today.
Vanguard brokerage account holders can not only trade stocks with no commission, but they can also transact all of Vanguard’s flagship mutual funds for no fees or commissions.
Read on to see if Vanguard is the right place for you to open a brokerage account in 2020.
|Commissions:||$0 on all Stock, ETF, and Index Funds|
|Management Fee(s):||Varies Per Robo-Advisor ( 0.15% - 0.30%)|
|Account Types||Individual and Joint Taxable Accounts, Traditional and Roth IRA, Custodial IRAs, Rollover IRAs, SEP IRAs, UGMA/UTMA Custodial Accounts, Robo-Advisors|
|Automatic Rebalancing:||Only for Robo-Advisor Clients|
|Customer Support:||Email, Office Hours, Phone|
|Mobile App:||iOS & Android|
|Tradeable Securities:||Stocks, ETFs, Index Funds, Mutual Funds, Penny Stocks, & Bonds|
|SRI:||Yes, they offer numerous several in-house funds for investors.|
Vanguard is the parent company of Vanguard Brokerage Services. Since its founding, it has become one of the largest financial institutions in the United States.
After pioneering the index fund over 40 years ago, Vanguard has established a pristine reputation and today is the largest manager of index funds and mutual funds in the country.
You can open a wide array of accounts, including IRAs, taxable Individual and Joint accounts, 401k/SEP/SIMPLE plans, 529 Education Savings Plans, UGMA/UTMA custodial accounts, and margin trading accounts. It is a one-stop-shop.
This robust offering alone makes Vanguard one of the best online brokers for long-term investors.
Most accounts do not have an account minimum, and their low-fee structure is hard to beat when compared to other brokers.
Vanguard isn’t a publicly-traded company, but rather, functions as a cooperative where fund holders are part owners of the company.
This broker can be used for 100% Do-it-Yourself (DIY) investors. However, the fun doesn’t stop there.
They also offer two different robo-advisor services: Vanguard Digital Advisor and Vanguard Personal Advisor Services. These robo-advisors are available for ultra-low management fees of about 0.15% and 0.30% per year, respectively.
- Elite reputation, long-term investor focus, and a commitment to low costs. Incentives at Vanguard are completely aligned with their customers.
- Vanguard’s website and mobile app are clean and sleek – there’s nothing flashy or pushy going on, and that’s how investors like it.
- Most online brokers make money for themselves by selling client’s order flow to market makers. This can sometimes sacrifice getting the best possible price on your trade. Vanguard foregoes this chance to make a little extra profit and doesn’t sell customer order flow data to anyone.
- A strong library of educational resources – mainly in the form of articles, but there are also videos and blogs on Vanguard’s website.
- Educational resources are focused on the transparency in Vanguard’s trading process, how to think prudently when investing, and how to think long-term as an investor.
- The limitations in its trading platform (on features and tools) and the lack of active trader benefits are the main knocks.
- It’s either a feature or a bug that Vanguard operates a no-frills brokerage, depending on what type of investor you are and what kind of time horizons you have.
- Lower margin interest rates can be found at other brokers for active and high volume stock traders.
- Some of the lowest expense ratio mutual funds in the Vanguard family do have minimum buys of $3000. However, most of their retirement target funds are just $1000 minimum to purchase.
- Only U.S. citizens can open accounts at Vanguard Brokerage Services.
Vanguard Account Details
Account Minimum Balance:
$0 minimum balance for all Individual and Joint brokerage accounts and all Individual Retirement Accounts (Traditional, Roth, SEP, SIMPLE, Rollover).
$0 commissions on all stock trades and exchange-traded funds (ETFs) made online or on the mobile app; a $30 service fee for any broker-assisted trades.
Options contracts trade for $0 commission and a $1.00 per contract fee.
Vanguard family mutual funds trade for $0 commission; non-Vanguard mutual fund trades will cost up to $50 per transaction.
Two robo-advisors have the following management fee structure (excluding the underlying operating expense ratios of the ETFs & funds held in a portfolio):
- Vanguard Digital Advisor – 0.15% per year mgt fee
- Vanguard Personal Advisor Services – 0.30% per year mgt fee
- Individual and Joint taxable brokerage accounts
- Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs Custodial IRAs, and Rollover IRAs
- UGMA/UTMA custodial accounts, 529 plans
Not offered unless enrolled in a robo-advisor.
Vanguard index funds have annual operating expense ratios (OERs) averaging just 0.06%. Additionally, Vanguard mutual funds have OERs ranging from 0.04% per year up to 0.60% per year for stock-based and international mutual funds.
Support for customers is available by phone from 8 a.m. – 8 p.m. Eastern Standard Time, Monday through Friday. In-platform automated chat is available for routine tasks on both the website and the mobile app.
Yes, human advisors available for broker-assisted trades and for professional services like setting up a retirement plan or for full-on asset management.
Vanguard has a traditional mobile app; however, they recently launched a new version they are calling Beacon.
This new app is a modern and improved version of its legacy app. It packs a serious punch. Vanguard is currently allowing legacy customers to use the older version of the app if they wish.
The Vanguard website has resources available to help with overall tax strategy, with articles and guides written by experienced fiduciary managers and updated with current tax information each season.
Vanguard’s trading platform doesn’t offer automatic rebalancing. It has minimal tools for maximizing tax strategy, other than displaying unrealized gains and losses in your positions.
All U.S.-exchange listed stocks, index funds, and ETFs are available to trade. Nearly 4,000 non-Vanguard mutual funds are available for no transaction fees if traded online.
Options and Over-The-Counter stocks (penny stocks) can all be traded at Vanguard.
Fixed income investments can also be traded, including Treasuries, Municipal & Corporate bonds, secondary market issues, and CDs. Foreign investments can be made in certain stocks and bonds in certain European markets as well as Australia, Canada, and South Africa.
Fractional shares of stock cannot be purchased at Vanguard, only units of one full-share or greater.
Socially Responsible Investing:
Vanguard has several in-house funds that are passively managed and focused on socially conscious companies. Indexes are maintained by a committee, and then the funds passively buy or sell stocks to follow that index’s membership.
All assets (securities + cash) held at Vanguard brokerage are Securities Investor Protection Corporation (SIPC) insured up to $500,000 in the event of a broker-dealer failure.
This $500,000 in protection applies to each account capacity (such as Individual, Joint, or Trust account). The limit for SIPC claims on uninvested balances is $250,000 cash.
Vanguard currently is offering 90 days free from any management fees for enrolling in their robo-advisor, Vanguard Digital Services.
This robo-advisor creates custom portfolios around retirement and long-term financial goals, and Vanguard will do this across multiple accounts (such as a taxable + a retirement account) so long as each account has over $3000 in it.
Margin trading is available on taxable Vanguard accounts. However, those who enroll in margin trading must fill out a separate application form that includes disclosures relating to the risks involved with trading securities on margin.
The interest rate paid on margin (which is a loan from Vanguard to you) fluctuates based on market conditions such as the rate on near-term Treasury Bills, and on account balance (higher balances are charged lower interest rates).
Margin interest starts at 8.50% for balances under $19,000, and margin rates can go as low as 4.75% for accounts over $1 million.
Vanguard is one of the largest asset managers in the world. As we all know, they pioneered the index fund and continue to dominate this market.
They have tens of thousands of institutional clients and professional money managers who utilize Vanguards’ brokerage and custodial services.
For smaller, retail customers, Vanguard has two advisory services available – robo-advisor Vanguard Digital Services, and Personal Advisory Services for clients with over $50,000 invested at Vanguard.
Vanguard Investor Review
Vanguard’s brokerage services offer a full suite of products, research and educational tools, taxable and non-taxable accounts, financial planning, and even banking.
It is an online broker for both beginners and experienced investors who don’t want to actively trade and instead favor a passive investing style.
The company is unique among its peers in that Vanguard is not a publicly-traded company. Its owners are its clients – the people who own their mutual funds, index funds, and ETFs. Vanguard fund holders are called Client-Owners.
While Vanguard wasn’t the first to lead out with cutting stock commissions to zero, they did take the plunge in early 2020.
All Vanguard funds can all be traded for zero commissions and have almost no fees if purchased through a Vanguard brokerage account. This is a big selling point as their funds are attractive across the financial industry.
The mobile app is good for viewing balances, orders, and making basic trades, but it’s not heavy on advanced features. It’s a minimalist interface, in line with Vanguard’s web platform and their general no-frills vibe.
Some customers love it, some will grow weary of the lack of extended features and seek out another broker. But nobody can take issue with Vanguard’s fiduciary-first approach to all its clients, part of the lasting legacy of John Bogle.
Vanguard is Best For:
- Long-Term Investors
- Retirement Investors
- Young Adults & Working Professionals
- Low Fees
- Index Funds
Opening a Vanguard brokerage account is best for investors, not traders. It is designed for people who embody a long-term mindset and do not need to trade securities every hour or minute.
Long-term investors will love Vanguard. And folks who like the idea of having a say in how your brokerage does things – by being a client-owner of Vanguard – will also gravitate to this online broker.
The fees on their advisor programs are among the lowest in the industry. It is important to note that the more assets you hold there, the better the discounts you’ll get.
What is Vanguard?
Vanguard Brokerage Services is a division of Vanguard Group, which owns and manages over 4000 funds.
Vanguard is a highly rated, customer-friendly online brokerage offering a wide range of taxable and non-taxable (retirement) accounts, and $0 commissions to make stock trades, most ETFs and mutual funds, as well as options trades.
How Does Vanguard Work?
Vanguard allows you to open an account with no minimum deposit and begin investing in stocks, bonds, and funds.
Investors are not limited to Vanguard family funds and ETFs. You can also go outside for other funds, stocks, bonds, options, and CDs.
Now that Vanguard has cut most all their commissions to zero, the company makes a profit in a few ways:
- Scale – Since their fees and expense ratios are so low, they count on having an enormous base of assets to earn those small fees on an annual basis.
- Interest on Cash Balances – Vanguard earns interest income on un-invested cash balances held at their brokerage. It pays only part of that interest income back to customers via cash yields. Although Vanguards’ money market account pays a very high yield compared to peers.
- Interest on Margin – Customers who take out loans to buy stocks or other investments pay interest on those loans.
- Payment for Order Flow – Vanguard doesn’t do what most brokers do and earn fees from market makers that work for securities exchanges (like the New York Stock Exchange and the Chicago Board Options Exchange) by selling order flow. Vanguard does loan stocks held for borrow to other brokers, earning some fees for this service.
What We Like:
Here is how Vanguard stands out amongst a crowded field. Low operating expenses on all index funds and ETFs. Zero commission on stocks, Vanguard funds and ETF trades.
Minimalist trading platform but meeting highest standards of safety and reliability. Vanguard pays a higher yield on default cash (money market) account than most peers.
How Vanguard Invest Your Money
Vanguard Brokerage Services is a self-directed trading platform, where you make the decisions on what to buy and sell.
They use a default money market account called Vanguard Federal Money Market fund as the destination for all cash assets, either un-invested cash or cash proceeds on sales of securities.
Vanguard Federal Money Market fund pays 0.77% yield as of December 2020.
Does Vanguard Offer Wealth Management?
Yes, clients with over $50,000 held in Vanguard accounts (this can be spread across multiple accounts, such as an IRA and a taxable account adding up to $50,000) can sign up with Vanguard Personal Advisor Services, which charges 0.30% per year in management fees.
While Vanguard funds are generally the main tools used to construct a portfolio for a client, Vanguard’s advisors will look at your whole financial picture including accounts held elsewhere and come up with a cohesive plan for you.
Vanguard’s lower-tier robo-advisor, Digital Advisor Service, will construct portfolios using just a family of four broad market Vanguard ETFs.
Vanguard Fees and Pricing
Vanguard charges zero commissions on all stock trades, exchange-traded funds (ETFs), and Vanguard family mutual funds that are made online or via mobile app. A $25 service fee is assessed for any broker-assisted trades made over the phone.
Options contracts trade for $0 commission and a $1.00 per contract fee. Vanguard family mutual funds trade for $0 commission; other mutual fund trades will cost up to $49.95 per purchase, scaling lower for buys over $50,000.
There are zero account opening fees or annual maintenance fees for taxable, retirement, trading services, or high-yield cash accounts.
A $20 annual service fee for accounts with balances under $50,000 is waived so long as you sign up for digital statements and trade receipts.
Is Vanguard Brokerage SIPC Insured?
Yes, all assets (securities + cash) held at Vanguard Brokerage Services are Securities Investor Protection Corporation (SIPC) insured up to $500,000 in the event of a broker-dealer failure.
This $500,000 in protection applies to each account capacity (such as Individual, Joint, or Trust account). The limit for SIPC claims on uninvested balances is $250,000 cash. Vanguard funds not held in Vanguard Brokerage Services accounts are not SIPC insured.
In addition to standard SIPC insurance, no accounts and FINRA membership for oversight, Vanguard Marketing Corporation has secured an additional syndicate insurance coverage from Lloyd’s of London for brokerage clients.
This syndicate insurance has the same customer eligibility requirements as SIPC and an aggregate limit of $250 million for all claims of securities and cash (with a per-client coverage limit of $49.5 million for securities and $1.9 million for cash).
Research and Tools for Investors
While Vanguard supplies a wealth of information on their own family of index funds, mutual funds, and ETFs, there isn’t much information for individual stock research.
Active traders and people really looking to dive into small-cap and large cap stocks will need to seek their tools elsewhere.
Vanguard doesn’t encourage active trading on its platform, and this shows in the lack of deep-dive research tools, and lack of real-time pricing on the mobile app (delayed quotes only).
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Vanguard’s extensive asset management experience shows through here, as there is lots of high quality, prudent investing research available for free on the company’s website, much more than the average online brokerage.
Topics include asset allocation and retirement planning, global economic analysis, and what types of accounts to open to optimize tax savings over time.
And the company’s ethos is front and center – Vanguard always has clients thinking long-term when making investment decisions.
Bottom Line: Vanguard Review
Vanguard favors long-term investors. They pioneered the index fund and offer the lowest fees in the industry. Choosing this broker is a mature decision. The retirement planning, advisors, reputation, and low fees make this a safe bet.