Vanguard Account Review: Brokerage Fees, IRA Investing, Pros and Cons, Mutual Fund Offerings
Vanguard Review - Pricing
- Stocks/ETFs: $7 first 25 trades, $20 subsequent trades for account with less than $50,000
- $7 for account with $50,000–$500,000 invested in Vanguard products (Voyager Services)
- $2 for account with $500,000–$1,000,000 invested in Vanguard products (Voyager Select Services)
- Free for first 25 trades, $2 for subsequent trades for account with $1,000,000-$10,000,000 (Flagship Services)
- Free for first 500 trades, $2 for subsequent trades for account with $10,000,000+ (Flagship Select Services)
- Options: $20 + $1 per contract (Voyager: $7 + $1 per contract; Voyager Select and Flagship: $2 + $1 per contract)
- Mutual funds: Vanguard mutual funds - free. All others - Standard: $35; Voyager and Voyager Select: $20; Flagship: $8
- Certificates of deposit (CDs): Purchase: $5 per $1,000, Minimum: $50. Sale: $35 per transaction
- U.S. Treasury: Commission-free
- Mortgage-backed securities: $50 per transaction
Vanguard Important Fees and Surcharges
- Extended hours surcharge: $0
- Large order surcharge: $0
- Penny stocks surcharge: $0
- Option exercises and assignments: $30 + $0.015 per-share
- IRA set-up fee: $0
- Annual IRA fee: $25 for SIMPLE IRA, $15 for 403(b)(7), $20 for Individual 401(k)/Roth 401(k) plans, $20 for 529 plan
Vanguard Account Advantages
- Low expense Vanguard mutual funds
- Vanguard ETFs are free to buy and sell
- Very good range of mutual funds offered
- Dividend reinvestment program
Vanguard Account Disadvantages
- Commissions are high for many clients
- Outdated trading technology
- $20 annual maintenance fee if no electronic statements (waived if account balance is over $50K)
- $20 annual fee for each mutual fund with a balance of less than $10,000 if no electronic statements (waived if account balance is over $50K)
Vanguard Account Types
- Uniform Gifts/Transfers to Minors Act (UGMA/UTMA
- The Vanguard 529 College Savings Plan
- Roth IRA
- Traditional IRA
Investors looking to open a brokerage account should check out Vanguard. Most commonly known for its own mutual funds and ETF's, the firm also provides trading in stocks and options. Let's take a more detailed look at the broker and see how it compares to some of its rivals.
Mutual and Exchange-traded Funds
Vanguard manages 127 mutual funds that can be bought and sold on its website. These funds are famous for having very low expense ratios. They range from 0.05% to 0.93%.
Most are below 0.30%, very low by any standard. Several investment goals are covered by these funds, including retirement, money market, Pacific stock, small-cap growth,
and an S&P 500 strategy, to name a few. There are also 55 Vanguard ETF's. Like the mutual funds, the firm's ETF offerings also have very low expense ratios, ranging
from 0.05% to 0.34%.
Vanguard ETF's and mutual funds are free to trade in a Vanguard account. The great majority of them have no loads. There are 5 Vanguard mutual funds that have purchase fees and/or redemption fees. These range from 0.25% to 1.00%. All 5 of them have corresponding ETF's that don't have the fees.
Vanguard's Fees and Commissions
A brokerage account with Vanguard carries an annual fee of $20. Moreover, the broker charges another $20 for every Vanguard mutual fund with a balance under $10,000. These fees are waived for accounts that have balances above $50,000. Accounts with balances under this level can avoid the fees by electing to receive account communications in electronic format. The broker maintains no account minimum requirement, and there is no opening deposit minimum.
Vanguard's commission schedule for stock and option trades is based on the size of the account in which the trade is placed. An account with a balance under $50,000 is classified as a standard account. Here, the first 25 trades in a year are $7. All trades thereafter are $20. Option trades in a standard account cost $20 plus $1 per contract.
An account with a balance above $50,000 but below $500,000 is a Voyager account. Stock and non-Vanguard ETF trades cost $7 year-round. Options cost $7 plus $1 for each contract.
Voyager Select accounts have a balance under $1,000,000. Equity trades are only $2 in this account. Options cost an extra $1 per contract.
Accounts with balances less than $10,000,000 are classified as Flagship accounts. The first 25 stock trades per year are free. After the first 25 in a year, the same trade costs only $2. Options are $1 per contract plus a $2 base charge.
The final category is Flagship Select, which is defined as $10,000,000 and above. Flagship Select accounts receive 500 equity trades per year for free. After the first 500, trades are only $2. Option trades in a Flagship Select account are the same as Voyager Select and Flagship.
Vanguard Trading Tools Review
The Vanguard website is fairly basic. It does provide good information on a variety of investment topics, such as retirement planning and saving for education. One section contains articles, podcasts, and videos on a variety of investment and economic subjects.
Trades on the website take place within the browser because Vanguard does not have a trading platform. The trade pages are simple but easy to understand and use. Helpful information about how to place a trade appears on an order page along with Vanguard's phone number for customers who have any questions.
Traders who don't want to use Vanguard's 20th-century website can use the broker's 21st-century mobile app. Vanguard offers a platform for Android, iPhone, iPad, and Kindle Fire. Account information is displayed after logging in. Also available is trading capability for stocks, ETF's, and Vanguard mutual funds. Confirmations and account statements can be downloaded in pdf format, a nice feature.
Phone representatives can be reached at 877-662-7447 during the week from 8 am till 10 pm (EST). The broker has an international phone number for investors who travel outside the United States. Furthermore, an internal messaging system is available after logging into the website so that customers can reach the firm by e-mail.
Comparison to Other Brokers
The Vanguard website is more difficult to navigate than TD Ameritrade's and Fidelity's websites.
Scottrade has a very good browser-based trade ticket, which the Vanguard site lacks. The
Optionshouse mobile app has better market news than Vanguard's app. For example, the Schwab app
offers live streaming of CNBC at no cost. Investors also can't trade non-Vanguard mutual funds on the broker's app. On the
Fidelity app, in comparison, all mutual funds can be traded.
Vanguard's commission schedule for large accounts and infrequent traders is decent compared to other brokers. For example, TD Ameritrade charges $6.95 for all accounts, and all
Schwab customers pay $4.95.
Vanguard Review Summary
Vanguard has excellent mutual funds and ETF's that will appeal to many investors. Although it has a complicated commission schedule, clients with large accounts can do well here. Traders who need advanced trading tools will do better with another broker.
Reviewed by Savings-Secrets.com on