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Vanguard is best suited for beginner and seasoned investors alike who are seeking access to an array of low-cost vast mutual fund and ETF offerings, all packaged into a simple-to-use brokerage platform. Read on as we dive into the pros and cons in this Vanguard review. We'll look at some of the important facts, figures, and features, and help you decide if it's the best online broker for you.
Vanguard
Vanguard remains a top option for passive investors with excellent zero-commission options for stocks and ETFs, including index fund ETFs.
$0 online; $25 broker-assisted fee for some phone trades of stocks and ETFs from other companies (Less than $1 million)
$0
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This stock broker is a good fit for: Investors seeking a low-cost stock broker to invest in stocks, ETFs, and mutual funds, among other common investments. Traders may want to look elsewhere, since this isn't Vanguard's bread and butter.
"The thing I like the most about Vanguard is their willingness to provide help and guidance. It's easy to get a knowledgeable person on the phone at Vanguard, and they walk me through every question I have. Also, I'm very sensitive to fees and pay zero whenever possible. Vanguard has given me all the fee-free options I've needed."
- The Ascent writer Kimberly Rotter, AFC®
Vanguard was one of the last holdouts in the zero-commission revolution, but the company has scrapped its stock and ETF trading commissions for online trades. You'll only pay a commission on broker-assisted trades ($25), which is still quite standard in the industry.
This is perhaps the biggest reason to use Vanguard as your broker. Vanguard's proprietary mutual funds and ETFs have some of the lowest expense ratios. In addition to being able to buy and sell Vanguard's excellent family of mutual funds with no transaction fee, Vanguard offers more than 3,000 other mutual funds on a no-transaction-fee (NTF) basis.
Vanguard has no minimum deposit requirement to open a brokerage account. That said, the platform doesn't allow you to trade fractional shares of stock, so you'll need at least enough to cover one share of whatever stock you want. However, Vanguard does let you buy fractional shares of Vanguard ETFs, so you could buy a share of a $100 ETF for as little as $1.
If you plan on buying mutual funds, keep in mind that most have their own minimum initial investment requirements, which are typically in the thousands of dollars.
This is both a good and bad feature. Unlike many online brokers, Vanguard allows investors to buy stocks directly on foreign stock exchanges. However, doing so comes with a steep $50 commission.
Vanguard provides third-party stock research reports from Standard & Poor's, Thomson Reuters, and First Call. This can help beginners find good investment candidates and can also be a great tool to help learn the basics of stock analysis.
Vanguard offers individual and joint brokerage accounts, traditional and Roth IRAs, SEP-IRAs, SIMPLE IRAs, solo 401(k)s, and 529 college savings plans.
Vanguard offers the ability to buy FDIC-insured CDs in its brokerage accounts. Not only do these have no fees or commissions, but they have some of the best APYs of any CDs on our radar. Plus, they are available in terms ranging from one month to more than 10 years.
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Most online brokers still charge a per-contract fee for options trading. Although Vanguard used to cost a lot more than $1 per contract charge, these days, most of its peers charge much lower fees. However, it's worth noting that the options commission is waived for a certain number of trades for accounts with over $1 million invested in Vanguard ETFs and mutual funds. For example, an account with $1 million in Vanguard funds would get 25 free options trades before commissions start.
Some online brokers allow investors to buy fractional shares of stock. In other words, if you have $500 and your favorite stock is $1,000 per share, you could buy half a share. Vanguard doesn't allow this. However, Vanguard will allow fractional share purchases of Vanguard ETFs.
Vanguard's trading platform isn't as feature-packed for traders as other trading platforms out there. It's mainly designed for long-term investors who need to place an occasional order to buy or sell a stock. Traders looking for a complex platform would probably be better served elsewhere.
Virtually all of the major online brokers offer commission-free online stock trades, and Vanguard is no different. Its per-contract options commission is a bit on the high end, but its mutual fund commission is quite competitive. And as noted earlier, both the options and mutual funds commissions can be waived for accounts with more than $1 million invested in Vanguard funds.
Stocks and ETFs | Options | Mutual Funds |
---|---|---|
$0, (plus $25 to trade less than $1 million of ETFs from other companies by phone) | $1 per contract | $0 - $20, (plus $25 to trade less than $1 million of mutual funds from other companies by phone) |
As mentioned earlier, mutual funds are perhaps the best reason investors might choose Vanguard over any of its rivals.
For starters, Vanguard's mutual funds are highly regarded as some of the lowest cost index fund products for long-term investors. Vanguard mutual funds have some of the lowest expense ratios in the industry, and low-cost index investing was one of the motivations for founding the company in the first place. If you choose Vanguard as your broker, you'll be able to buy any of Vanguard's mutual funds without paying a commission.
In addition, Vanguard offers thousands of other (non-Vanguard) mutual funds on a commission-free, or no-transaction-fee (NTF) basis. And if a particular mutual fund you're interested in is not on Vanguard's NTF list, its standard mutual fund commission of $20 is on the lower end of those charged by its peers. For accounts with over $1 million in Vanguard funds, the standard commission is $0 for a certain number of mutual fund trades, and just $8 thereafter.
In addition to the commissions we've already discussed, Vanguard charges some other fees you might run into:
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Vanguard's trading platform isn't as robust as other stock trading platforms from trading-first brokers. If you regularly move in and out of stocks or like to make complex options trades, Vanguard is probably not the best choice for you.
On the other hand, Vanguard has plenty of functionality and features such as research reports that will be more than sufficient for long-term investors. And, Vanguard's mobile app is highly rated on the Apple App Store and allows you to trade and check your portfolio on the go.
Margin Balance | Effective Rate |
---|---|
Up to $19,999 | 13.75% |
$20,000 - $49,999 | 13.25% |
$50,000 - $99,999 | 12.75% |
$100,000 - $249,999 | 12.25% |
$250,000 - $499,999 | 11.75% |
$500,000 and above | Contact Vanguard for rates |
While we aren't huge fans of margin investing, there are some cases when using margin can be useful. With that, here's a look at Vanguard's margin rates. To put those numbers in context, the words I'd use would be "about average." This is a similar margin structure to most other online brokers. If you frequently use margin, there are lower-cost options, but for most people who use margin occasionally or not at all, these rates should suffice.
Access to third-party stock research can be a valuable tool for investors, especially beginners. It can help you find good investment opportunities, determine how volatile you can expect your investments to be, and learn the basics of stock analysis. Vanguard provides third-party stock research reports from Standard & Poor's, Thomson Reuters, and First Call, which should be more than sufficient for most long-term investors.
Wondering how Vanguard stacks up to the competition? Check out our reviews:
At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.
See our full methodology here: Ratings Methodology
There is no specific account minimum to open a brokerage account with Vanguard. However, since Vanguard doesn't allow fractional share investing except with its own ETFs, you'll need at least enough money to purchase one share of a stock or a fractional share of an ETF, or the minimum investment amount for a mutual fund you want to invest in.
There are a few things Vanguard doesn't offer for investors. Fractional share investing of stocks is a big example -- if a stock is trading for $500 per share, you'd need $500 to invest in it. Many competitors would allow you to directly buy a piece of a share. Plus, as a platform focused on long-term, buy-and-hold investing strategies, Vanguard's trading platform isn't as feature-packed as many other traditional brokerages.
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Fidelity disclosure
Fractional share quantities can be entered out to 3 decimal places (.001) as long as the value of the order is at least $1.00. Dollar-based trades can be entered out to 2 decimal places (e.g. $250.00)
Vanguard disclosures
Visit vanguard.com to obtain a prospectus or, if available, a summary prospectus, for Vanguard and non-Vanguard funds offered through Vanguard Brokerage Services. The prospectus contains investment objectives, risks, charges, expenses, and other information; read and consider carefully before investing.
Options are a leveraged investment and are not suitable for every investor. Options involve risk, including the possibility that you could lose more money than you invest. Before buying or selling options, you must receive a copy of Characteristics and Risks of Standardized Options issued by OCC. A copy of this booklet is available at theocc.com. It may also be obtained from your broker, any exchange on which options are traded, or by contacting OCC at 125 S. Franklin Street, Suite 1200, Chicago, IL 60606 (888-678-4667 or 888-OPTIONS). The booklet contains information on options issued by OCC. It is intended for educational purposes. No statement in the booklet should be construed as a recommendation to buy or sell a security or to provide investment advice. For further assistance, please call The Options Industry Council (OIC) helpline at 888-OPTIONS or visit optionseducation.org for more information. The OIC can provide you with balanced options education and tools to assist you with your options questions and trading.
Commission-free trading of Vanguard ETFs applies to trades placed both online and by phone. All ETFs are subject to management fees and expenses; refer to each ETF's prospectus for more information. Account service fees may also apply. All ETF sales are subject to a securities transaction fee. See the HYPERLINK "https://investor.vanguard.com/investing/transaction-fees-commissions/etfs" Vanguard Brokerage Services commission and fee schedules for full details.
Vanguard funds not held in a brokerage account are held by The Vanguard Group, Inc., and are not protected by SIPC. Brokerage assets are held by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC.
Vanguard Marketing Corporation, Distributor of the Vanguard Funds
Robinhood disclosure
All investments involve risk and loss of principal is possible.
Securities are offered through Robinhood Financial LLC, member FINRA/SIPC. Cryptocurrency services are offered through an account with Robinhood Crypto, LLC (NMLS ID 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Cryptocurrency held through Robinhood Crypto is not FDIC insured or SIPC protected. For more information see the Robinhood Crypto Risk Disclosure.
Trades of stocks, ETFs and options are commission-free at Robinhood Financial LLC. Other fees may apply. Please see Robinhood Financial’s Fee Schedule to learn more.
Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement.
Robinhood Gold is an account offering premium services available for a $5 monthly fee. Not all investors will be eligible to trade on Margin. Margin investing involves the risk of greater investment losses. Additional interest charges may apply depending on the amount of margin used. Bigger Instant Deposits are only available if your Instant Deposits status is in good standing.