April 29, 2018

Vanguard Brokerage Review: Is It Good?

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Vanguard Brokerage may be a full-service broker, but typically long-term investors preferring ETFs and mutual funds see the greatest return on their investment with them.

5-point scale (the higher, the better)

Pros and Cons

  • Large selection of mutual funds and commission-free ETFs
  • Broker assistance is available at no additional cost
  • Easy to use
  • Commission structure penalizes frequent traders
  • Customer service wait times
  • Commission costs on non-Vanguard investment options

Bottom Line

Good choice for ETF and mutual fund investors interested in Vanguard-sponsored investments

Investors know Vanguard as a low-cost broker, thanks to its low expense ratios on mutual funds and ETFs. That doesn't mean they aren't a full-service broker, though. They do offer stocks, bonds, options, and forex trading. With tiered commissions and benefits for large investors, it may be a brokerage worth considering, depending on your goals and investment strategy.

Keep reading to learn more about Vanguard Brokerage.

In this review, you'll learn:

Who Is Vanguard Good For?

Vanguard Broker is unique because they don't appeal to every investor. If you are saving for retirement, you are a part of their target audience. If you have shorter-term goals or you prefer to actively trade stocks and bonds, you may want to look elsewhere.

Vanguard's commissions can be steep unless you are a high net worth investor. The lower your net worth is, the higher your commissions. For example, investors with more than $1 million to invest can trade free of commissions, and those with $500,000 up to $1 million may trade for $2 per trade. Investors with $50,000 up to $500,000 to invest will pay commission rates around $7 per trade. The commissions continue to increase too, if you make more than 25 trades in one month. Comparing this commission to other discount online brokers, you'll likely find that $7 commission is rather steep for frequent trades.

What's the Cost?

Unlike many online brokers that don't charge a monthly fee, Vanguard charges a $20 service fee per month. Luckily, they offer a few easy ways to get the fee waived:

  • Sign up for Vanguard's e-delivery service. You'll receive all communication, including statements, fund reports, and prospectuses electronically, and you'll save the $20 monthly fee.

  • Have an account balance on your Vanguard assets (mutual funds and ETFs) higher than $10,000.

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What Type of Accounts Do They Offer?

Vanguard offers a variety of accounts, each of which helps you meet different investment goals:

  • IRA: Vanguard offers both Roth and traditional IRAs. They tend to offer more investment options than your standard employer's 401(k). With the option to invest in Vanguard's mutual funds and ETFs, you can save even more money by avoiding hefty commission costs, helping you to maximize your retirement dollars.

  • 529 Savings Plan: Save for college with low-cost investments. The Vanguard 529 plan offers tax savings, allowing you to save more of your dollar for qualified education costs. The plan can be used for college as well as qualified K-12 tuition costs.

  • Individual and joint accounts: Anyone investing for something other than retirement or college can open an individual or joint investment account with Vanguard. You can open an account online and start investing for the cost of 1 ETF share. For Vanguard mutual funds, they usually require a $3,000 investment.

  • Annuities: Vanguard offers both fixed-rate and variable-rate annuities. These investments are often best for investors who already maxed out their 401(k) contributions. They offer tax savings, a method to save for the long-term, and are often low cost.

  • Small business retirement plans: Vanguard offers small 401(k) plans, SEP IRAs, and SIMPLE IRAs for businesses with less than 100 employees. They offer the same low cost investments and diverse funds as individual accounts.

What We Like About Vanguard Brokerage

  • They have low fees on mutual funds and ETFs. According to Vanguard, investors save as much as 81% when they invest in Vanguard mutual funds and ETFs. If you don't trade more than 25 times per month, you could save significantly on commission fees.

  • You don't have to meet an account minimum to open an account. Even though you don't need any funds to open an account, you'll need money to invest. Vanguard requires that you have at least enough money to buy 1 share of an ETF. This can be as low as $50, but could be as much as several hundred dollars. If you open any other type of account, though, you may need to meet a $1,000 - $3,000 account minimum.

  • You won't pay fees when you buy or sell Vanguard ETFs in most cases. As long as you don't buy/sell the same Vanguard ETF more than 25 times in one year, you won't pay any commission.

  • You can use broker assistance to trade Vanguard ETF funds for no fee. If you prefer broker assistance, you won't pay any extra fees if you trade Vanguard's ETFs.

  • They have more than 100 Vanguard funds to choose from. Whether you prefer index funds, ETFs or managed funds, Vanguard offers a large selection, increasing your chances of finding commission free investment opportunities.

  • They are a client-owned brokerage. This helps Vanguard keep their costs down, giving you the opportunity for larger returns on your investments. All shareholders are "owners," meaning you line your own pockets when your investments do well.

  • The platform is simple without being overwhelming. The Vanguard website/trading platform is as straightforward as they come. You don't have to worry about getting overwhelmed or even confused when making trades.

  • You can use an advisor for trade execution for a low fee. Usually hiring an advisor to help you with your trading costs what feels like an arm and a leg. Vanguard charges just an annual 0.3% of your assets under management for this service. In order to be eligible, though, you must have at least $50,000 invested with Vanguard.

Reasons You May Want to Look Elsewhere

  • Their online trading platform is mediocre. You won't find a great deal of reports or charting. You also wouldn't want to use the platform if you were a day trader making frequent trades. It's best targeted towards mutual fund and ETF investors with less frequent trades. It lacks any type of customization or automation, which day traders often need.

  • The commissions for non-Vanguard assets are pretty steep. You can usually find lower commission fees at other discount brokers for non-Vanguard mutual funds and ETFs.

  • It can get too costly for day traders. If you make frequent trades, like a day trader, you could end up spending a pretty penny on commission fees with Vanguard. You are likely better off with a discount broker that offers flat fees or lower commissions for frequent trades.

How They Compare

E*TRADE: Both Vanguard and E*TRADE offer fee-free ETFS and mutual funds. Which broker wins you over depends on your investment needs and fund preferences. E*TRADE has a more robust trading platform and more research options than Vanguard for the DIY investor.

Fidelity: If you are looking for a diverse portfolio, Fidelity offers many more investment choices than Vanguard. Both brokers offer robust retirement account options, though. Fidelity does tend to shine for frequent traders, as their commission structure doesn't increase with more frequent trades.

TD Ameritrade: Both TD Ameritrade and Vanguard offer Vanguard ETFs, but Vanguard offers a no-commission fee on all Vanguard ETFs, whereas TD Ameritrade only offers a small selection of commission-free ETFs. TD Ameritrade offers a more robust trading platform and mobile app, making it easier to execute frequent trades, though.

Bottom Line

If you invest mostly in ETFs and mutual funds, Vanguard may be a viable option. Their long list of commission-free investment choices may help you get a higher return on your investment. If you are in the market for more complex investments or are a frequent trader, though, other online brokers offer better options for you.


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