Vanguard is well known for its funds – mutual funds, and especially exchange-traded funds (ETFs).
Not only is it one of the largest fund companies in the world, but it’s ETFs are frequently included in the portfolios of both investment advisors and robo-advisor platforms.
But less well-known is that Vanguard is also a major brokerage firm.
Not only can you invest in their proprietary mutual funds and ETFs, but also those of other fund companies, as well as individual securities, like stocks and bonds.
And while you’re investing your money in those other assets, you’ll also have full access to Vanguard’s menu of popular funds.
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About Vanguard
Based in Malvern, Pennsylvania, Vanguard was launched in 1975. It was created by the legendary John Bogle, who was credited with creating the first index fund in the same year the company was founded.
Vanguard has more than $5.3 trillion in assets under management, is the largest provider of mutual funds in the world, and the second largest provider of ETFs.
One of the factors that make Vanguard unique, however, is that it’s owned by its investors.
This gives Vanguard full responsibility to its investors, rather than to shareholders, as is the case with publicly traded companies.
How The Vanguard Brokerage Account Works
As you might expect, the Vanguard trading platform works particularly well with funds. Many of the tools available on the trading platform are specific to funds.
For example, Vanguard offers its Mutual Fund and ETF Screener tool, that enables you to set criteria for the funds you want to invest in.
This will make it much easier for investors to sift through the literally thousands of funds that are now available.
You can choose the parameters for the funds you want to invest in, such as specific industry sectors, certain fund families, and even expense ratios.
The platform also offers portfolio analysis. It will display your current asset allocation as well as your target allocation to show you how close you are to matching your investment goals.
The Vanguard Tax Center allows you to continuously track the tax consequences of your investments.
This includes taxable dividends and capital gains distributions. You can track them on both a year-to-date and annual basis. You’ll also have access to tax planning and education, to help minimize the tax impact of your investing activities.
Vanguard also specializes in target-date funds, which are funds comprised of other funds.
They create portfolios that automatically readjust based on your current age and projected retirement age.
For example, if you’re in your 20s, your portfolio will be most heavily invested in stocks.
But as you move toward your 60s, it will automatically shift more heavily into bonds.
Vanguard classifies clients by account size, as follows:
- Voyager clients, $50,000 to $500,000
- Voyager Select clients, $500,000 to $1 million
- Flagship clients, $1 million to $5 million
- Flagship Select client, over $5 million
Personal Advisor Services
With a minimum account balance of $50,000, you will also have access to a financial advisor.
The advisor will help you with major financial decisions, like saving and investing for specific goals, or preparing for retirement.
The advisor can also act as an emotional circuit breaker during times when the financial markets are going through a bout of volatility.
Vanguard Brokerage Fees
- Annual broker service fee: $20. However, Vanguard offers numerous ways to have this fee waived.
- Stocks: Fees are based on the size of your portfolio:
- ETFs: Vanguard offers commission-free trades on 1,800 non-Vanguard ETFs, plus more than 75 Vanguard ETFs.
- Mutual funds: No commissions on over 140 Vanguard mutual funds, as well as more than 3,000 non-Vanguard mutual funds.
- Options: Similar to the pricing structure on stocks, commissions on options are based on the size of your portfolio:
Fixed income investments fee schedules depend on the type of security.
For example, US Treasury securities are available commission-free, regardless of the size of your account.
This is also true of newly issued US government agency securities, corporate bonds, and certificates of deposit.
However, fees do apply if you are purchasing existing issues of all securities except US Treasury securities:
Vanguard Personal Advisor Services Robo-Advisor
Like most major investment platforms today, Vanguard offers its very own robo-advisor, the Vanguard Personal Advisor.
This will give you an option to invest some or even all your money in a fully managed portfolio. In fact, it’s the largest robo-advisor in the industry – and by a very wide margin – with more than $115 billion in assets under management.
What’s unique about Vanguard Personal Advisor Services is that it invests in both ETFs and mutual funds.
The vast majority of robo-advisors invest strictly in ETFs. This is significant because while ETFs are passive funds based on index investing, mutual funds can be either passively invested or actively invested funds.
That means some mutual funds attempt to outperform the market, not just track it.
Naturally, the funds used in the portfolio are from Vanguard itself. But this is hardly a limitation since Vanguard funds are heavily used by nearly every other robo-advisor in existence.
Vanguard Personal Advisor requires a minimum investment of $50,000 and charges an annual management fee of 0.30% of your account value on balances up to $5 million. However, the fee structure is tiered, and the fees decrease as your balance increases.
| FEE | MANAGED ASSETS |
|---|---|
| 0.30% | On assets up to $5 million |
| 0.20% | On assets above $5 million and up to $10 million |
| 0.10% | On assets above $10 million and up to $25 million |
| 0.05% | On assets above $25 million |
Vanguard Personal Advisor Services is available for both taxable and retirement accounts.
Vanguard Brokerage Account Features and Benefits
There is no minimum investment required to open a Vanguard brokerage account. And now that Vanguard has joined the ranks of brokerages that offer commission-free trades on stocks, ETFs, and some mutual funds, you can get started with a relatively small sum of money.
However, it is important to note that some Vanguard funds may have minimum purchase requirements.
For example, you can begin investing in target retirement funds for as little as $1,000. Many index funds and mutual funds at Vanguard require a $3,000 minimum investment.
Available accounts: Individual and joint taxable accounts; traditional, Roth, rollover, SEP and SIMPLE IRAs: Solo 401(k) plans; trusts, nonprofits, custodial accounts, and 529 college savings plans.
Available investments: Individual stocks, bonds, options, mutual funds, ETF’s, annuities, and certificates of deposit. Funds offered include both Vanguard and non-Vanguard funds.
Cash account: Vanguard provides a money market mutual fund, that seeks to maintain a $1 share price. You can use it to transfer funds to and from an external bank account, as well as to accumulate cash for future investment purchases. You can choose either a taxable or tax-exempt money market mutual fund.
The Vanguard Mobile App: The app provides all the functionality of the online trading platform. You can use it to check your account balance, investment performance, transaction history, returns, and cost basis. You can also trade on the app, and choose your target asset allocations. It can also be used to make mobile check deposits using your smartphone. The mobile app is available for iOS devices at The App Store and Android devices at Google Play.
Customer service: Available by phone and live chat, Monday through Friday, 8:00 am to 8:00 pm, Eastern Time. However, contact by email is available on a 24/7 basis.
Should You Invest Through Vanguard Brokerage?
Vanguard is best known for its wide range of low-cost mutual funds and ETFs and it is an excellent choice if you’re a fund investor. They offer 1,875 ETFs and more than 3,140 mutual funds, all commission-free.
On balance, the service seems to target buy-and-hold investors who will both get the benefit of commission-free trades and access to a wealth of funds.
However, despite being one of the largest financial institutions in the world, Vanguard Brokerage isn’t necessarily appropriate for all types of investors.
While you can trade individual stocks, bonds, ETFs, and other securities at Vanguard, their system lacks some of the advanced stock-screening tools found at other brokerage firms.
Small investors and active traders may be better served by investment brokers like Ally Invest and Firstrade, which specifically cater to frequent traders.
Finally, Vanguard does offer personalized investment services through Vanguard Personal Advisor Services, which combines personal financial advice from a human advisor, with automated recommendations based on the investor’s risk tolerance and investment objectives.
If you’d like more information, or you’d like to open a brokerage account, visit the Vanguard Brokerage website.
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