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.
$0 stock and ETF trades
This stock broker is a good fit for: Investors looking 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.
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.
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 rations. In addition to being able to buy and sell Vanguard's excellent family of mutual funds with no transaction fee, Vanguard offers thousands of other mutual funds on a no-transaction-fee (NTF) basis. Plus, its mutual fund commission of $20 for all other funds is on the lower end of the spectrum relative to peers. That's reduced to $8 or less for investors with at least $500,000 invested in Vanguard's mutual funds and ETFs.
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 or ETF you want. And if you plan on buying mutual funds, keep in mind that most have their own minimum initial investment requirements.
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.
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Most online brokers still charge a per-contract fee for options trading. Although it used to cost a lot more than Vanguard's $1 per contract charge, these days, most of its peers charge much lower fees.
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 0.5 shares. Vanguard doesn't allow this.
Vanguard's trading platform isn't feature-packed for traders, which is understandable. 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.
If you want a mobile-only experience to invest in stocks and options: Robinhood leads the mobile pack with its mobile investing app. Importantly, it also offers commission free trading for stocks, ETFs, and options, whereas Vanguard charges a fee for each options contract. The downside is that Robinhood has much more limited investment options (no mutual funds, for example) and account types.
If you want a better trading platform: TD Ameritrade has a deep lineup of user-friendly trading platforms on desktop, mobile, and online. The stock broker wins the "trading platform" crown consistently. Importantly, TD Ameritrade also offers access to an array of common investment vehicles and account types, much like Vanguard.
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.
|Stocks and ETFs||Options||Mutual Funds|
|$0||$1 per contract||$0 - $20|
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 about 3,400 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.
In addition to the commissions we've already discussed, Vanguard charges some other fees you might run into:
Vanguard's trading platform isn't designed for frequent traders. 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||Interest Rate|
|Up to $19,000||8.50%|
|$20,000 - $49,999||8.00%|
|$50,000 - $99,999||7.50%|
|$100,000 - $249,999||7.00%|
|$250,000 - $499,999||6.50%|
|$500,000 - $999,999||5.25%|
|$1 million or more||4.75%|
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 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.
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