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Vanguard Brokerage was founded by John C. Bogle in 1983 to enable investors to supplement their mutual fund portfolios with stocks and bonds. It was not intended for regular traders or short-term investors, and it never will be, but it does provide a low-cost brokerage experience to investors who agree with Vanguard’s philosophy on investing.
For new investors, the firm’s strategy is to provide careful, educated, and calculated advice and digital experience rewards, rather than incentives that reward speculation and trading for the sake of trading.
Vanguard is the market leader in controlled accounts, but when it comes to active trading, this is less of a consideration.
Let’s take a close look at where Vanguard ranks among online brokers, so you can determine whether or not its features and philosophy are a good match for your investment needs. Aside from this Vanguard broker analysis. We will also provide an in depth overview of the Vanguard Personal Advisor Services robo-advisor and the Vanguard Digital Advisor, which are both entry-level Vanguard products.
Onto our Vanguard review!
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What Types of Investors Should Use Vanguard?
Vanguard is geared toward buy-and-hold investors who don’t need real-time data, complex charts, or metrics to make their investment decisions. Since exchange-traded fund (ETF) ownership continues to rise, the firm is concentrating on enhancing the ETF investing experience.
Vanguard launched Select ETFs in 2019, a curated list of 13 ETFs designed to give investors the building blocks they need to develop a well-diversified portfolio.
Vanguard can be a good match for you if all you want to do is build a diversified, ETF-based portfolio that you’ll rebalance on a regular basis.
However, if you’re a serious investor or trader who wants the tools to analyze stocks carefully – whether to pick winners you want to hold on to or to make short-term trades for maximum gains – your time will be better spent elsewhere.
RELATED: Cash App Review.
Regardless of the type of account you want to open, the Vanguard Group provides a wide range of investment choices. However, Vanguard’s “bread and butter” – mutual funds and exchange-traded funds – are the top reason investors choose to use this platform.
Vanguard Mutual Funds
Money market, domestic, balanced, bond, REIT, and stock mutual funds are among the 121 total mutual funds available on Vanguard. The company offers mutual funds that are managed both actively (by selecting stocks) and passively (by following an index).
The “Admiral Shares” mutual fund has a lower fee structure. A mutual fund balance of at least $10,000 is typically needed for these shares. These Admiral Shares, on the other hand, have a cost ratio that is typically 30-50 percent lower than that of traditional mutual fund shares.
Vanguard has been a major player in the ETF industry. The company currently offers 52 different ETFs, many of which are focused on the same types of investments as their family of mutual funds.
ETF expense ratios are typically 0.1 percent lower than mutual fund expense ratios of the same asset class. While this isn’t a significant difference, with greater account balances, it can add up over time.
Vanguard ETFs are preferred over Vanguard mutual funds in most cases, especially if you have complete control over your investment account. Most of Vanguard’s ETFs are not only less expensive, but also more tax effective.
Mutual Fund and ETF Screener
Vanguard’s screener is a powerful method for locating the best fund for your needs. Asset class, minimum deposit, risk level, share class, and tax efficiency are just some of the options for filtering.
You can invest directly once you’ve found the best Vanguard fund for you. You may also compare the performance of the different funds and see which one outperformed the others. Vanguard has more than 100 ETFs and mutual funds, making it a valuable tool.
Keep reading for more of our Vanguard review below.
Vanguard Portfolio Watch
Vanguard Portfolio Watch is a tool that analyzes your portfolio automatically to see if it stacks up against the parameters you and Vanguard set. The aim is to diversify your assets as much as possible while reducing risk.
You should use all of your holdings, not just Vanguard properties, to get a complete picture of your financial life and identify any areas where you might be exposed to risk.
Portfolio Watch can break down what types of funds you own based on a variety of variables, such as company size or investment style, once you’ve loaded your holdings into the tool (value vs. growth).
Then, if there’s an area where you need more exposure, such as if you have too many funds invested in small businesses, it will suggest which funds you can buy to balance your portfolio. It’s a useful tool for getting a broad sense of what you possess and want to own.
Key Vanguard Features
Our Vanguard review will look at the key features of the platform.
In comparison to other online brokers, getting started with Vanguard takes a while. While you can start the process of creating an account online, you may have to wait several days to log in. Adding features like options trading or margin trading necessitates signing related papers electronically and waiting up to a week.
After you’ve opened the account, the personalization choices are limited to showing the account you want to see. While work is being done this year to upgrade the workflow, the current site has an antiquated feel to it. Stocks, ETFs, and certain fixed-income securities can all be traded online; all other asset groups include placing an order with a broker.
The Vanguard mobile app is easy to use and purchasing and selling are quick. Apart from the most rudimentary results, however, there are few features for doing investment research. Vanguard’s software does not have watchlists, which other brokers have made available across all channels.
Vanguard’s website is, to put it bluntly, out of date in terms of trading. A redesign is in the works to make the screens look more modern, but when compared to other brokers, it will only carry it up to around 2013 standards.
Since the brokerage is all about buying and keeping, it’s understandable that there isn’t a universal trade ticket, but getting from watching, say, a news item to placing a trade can take four or five mouse clicks. This makes the concept of putting several trades through multiple sessions painful, underscoring Vanguard’s lack of suitability for traders.
In the absence of a trade ticket, Vanguard’s data is 20 minutes overdue. A real-time quote is available inside the trade ticket. However, since the quote stalls at the real-time price when you first load it, you must refresh the screen to change the quote.
There is no way to configure trading defaults such as order form or order size, so you’ll have to set them each time you enter an order. Finally, Vanguard’s platform does not allow you to stage orders or place multiple orders at once.
Overall, the trading experience is suitable for the target buy-and-hold investor who is gradually building a portfolio, but it falls short of expectations for other types of investors who are looking for a flexible and customizable platform.
Mobile Trade Experience
Quotes for stocks and ETFs on the app, like those on Vanguard’s website, display a delayed price before you enter an order. The mobile view does not show any other details, such as the day’s change or length.
On Vanguard’s mobile app, there is no charting. In terms of functionality, the native apps are fairly restricted, and they often guide you to the mobile website for a variety of functions, such as the ETF screener. The user interface is obsolete once again.
Fees and Commissions
Several online stock traders, including industry heavyweights Charles Schwab, Fidelity, and E*TRADE, revealed in the fall of 2019 that they will no longer charge commissions on certain U.S.-based trades.
It was the end of a long pricing war between online brokers. The advent of completely free brokers such as Robinhood played a significant role in this.
After a long wait, Vanguard entered the ranks of commission-free brokers in January 2020. This means that when trading stocks and ETFs online, investors don’t have to pay a commission (trades made over the phone do incur a fee, however).
Trades in options are also commission-free, although there is a $1 per contract fee. This latter cost is more expensive than the fees charged by many other brokers (50 to 65 cents).
Initial Deposit as well as Minimum Balance
Vanguard mutual funds have a $3,000 minimum contribution amount, which is a little high for a first-time investor. Vanguard ETFs, on the other hand, have a low entry point of only one share, making them ideal for new investors. Admiral shares, which have even lower annual payments, are also available through Vanguard.
Range of Offerings
Clients of Vanguard have access to a wide range of assets. However, outside of stocks, ETFs, and some fixed-income items, you’ll have to call in your orders rather than entering them electronically.
Customers of Vanguard can put their money into the following investments:
- Stocks and ETFs long; limited short sales
- OTCBB (Penny stocks)
- Mutual funds (Vanguard does not carry load funds. All Vanguard funds are commission-free as are over 3,500 non-Vanguard funds)
- Bonds (Corporate, Municipal, Treasury, CDs)
- Simple (single leg) options
- Multi-leg options via a live broker
- Vanguard Personal Advisory Services and Vanguard Digital Advisor, the firm’s robo-advisories, are not integrated into the brokerage.
- International (Canada, Europe, Australia, New Zealand, and South Africa all via a live broker)
Vanguard’s self-imposed constraints are once again front and center when it comes to order forms. Market, limit, and stop-limit orders are the only order types you can place. Conditional orders and trailing stops are not available. After a transaction has been concluded, dividend reinvestment decisions may be made.
Vanguard’s underlying order routing technology isn’t flashy, just like the trading platform itself. It only has one goal, to lower prices, and it succeeds on that front.
Vanguard records a $0.85 cents per share price gain on stock orders, which is a huge increase. Clients are unable to choose the routing location for their orders, and cannot automate or back-test a trading strategy, either.
There’s also no trade simulator like those found on other popular investment platforms, which makes sense given how Vanguard encourages long-term investment over-trading.
More of our Vanguard review below.
Vanguard was one of the last brokers to enter the zero-commission brokerage campaign, which as mentioned earlier began in January of last year. The platform’s slow move to zero commission trades may have been due to the fact that the majority of its trades had already been completed without commissions.
For online equity, ETF, and OTCBB trades, Vanguard is already commission-free. Options trades also don’t have a per-leg commission; the commissions per contract are $1, which is considerably higher than those charged by other online brokers. A 50-option-contract order costs $50. the cost of a covered call trade involving 500 shares and five contracts is $5.
Outside of the No Transaction Fee scheme, mutual fund commissions are $50 ($40 for clients with $500,000–$1 million in assets). Clients with balances of $1 million or more do not have to pay a fee.
For accounts under $5000, fixed interest is $2 per $1,000 face value. For accounts with a face value of $500,000–$1,000,000.00, there is a $1 charge per $1,000 of face value. Accounts with a balance of $1,000,001 or more are free.
As of January 2020, margin interest rates vary from 9% for $10,000 to 7.5 percent for balances over $100,000. For accounts under $10,000 in Vanguard funds, there is a $20 recurring account management charge.
Inactivity, account closure or transition, exercise/assignment, receiving wires, mailing checks, or paper statements and trade confirmations are all free of charge.
For outgoing wires, there is a $10 charge. Finally, depending on the asset class, the live broker fee is $20–$50 per deal. Live brokers are available to clients who have more than $1,000,000 in their accounts.
How Does This Broker Benefit From and For You?
Brokers must make money in some way, particularly with most fees for equity and options trades vanishing. Customers can see the fees and commissions mentioned above, but there are other ways they make money that you can’t see—and some of them can help your bottom line.
Vanguard, like most brokers, makes money off the disparity between what you’re paying on your idle cash versus what they will gain on customer cash balances. Vanguard distributes a large portion of the interest it receives to its customers, sweeping unspent funds into a money market fund.
Many brokers make money by taking money from market makers in exchange for steering their customers’ equity and options orders to those trading venues. This is called payment for order flow. When it comes to equity trades, Vanguard does not consider payment for order flow. For options traders, the firm admits $0.18 per contract, which is extremely poor.
Additionally, when the stock in your account is loaned to another trader or hedge fund, normally for the purpose of selling the stock short, these programs generate income for brokers. Vanguard does not share any of the profits it makes from stock loans with its clients.
Vanguard’s border router has improved its price to $0.85 per 100 shares traded on average. The platform improves the price of options by $0.0182 per offer.
Vanguard does not provide portfolio margining, which reduces the amount of margin required depending on the total risk. Portfolio margining is typically used by customers who trade derivatives to mitigate the risk associated with their equity positions, and Vanguard does not recommend options trading.
6. Account Amenities
- Portfolio margining isn’t available at Vanguard.
- A stock loan program is not offered by Vanguard.
- Uninvested cash earned by Vanguard clients earns about 0.1 percent less than the Federal Funds average.
- A money market fund is immediately deposited.
- Dividend-paying stocks may be added to a DRIP scheme for Vanguard clients.
7. Research Amenities
Vanguard only has a few screening options. Options do not have screeners, and futures, ETFs, and mutual funds have very basic screeners. A sortable list of fixed income products is given.
Trading Ideas Generator/Tools and Calculators
Vanguard has a number of retirement-planning resources available. An asset allocation questionnaire will help you build a well-diversified portfolio that matches your risk profile. You can also compare 529 (education) plans and figure out how much of an IRA you need to distribute. Finding Vanguard-managed funds is the extent of the functionality that might be called trading instruments or trading idea generators.
News and Research
MT Newswires and the Associated Press provide stock-specific information. The study that is available is all confidential.
Vanguard’s charting capabilities are minimal, and there are few options for customization. There is no technical research.
Vanguard just allows you to look at realized and unrealized gains and losses while reviewing your portfolio. While you can import your transactions into TurboTax-compatible tax preparation software, there is little in the way of tax analysis.
Vanguard has hinted that some portfolio research enhancements are in the works, which would provide clients with a much clearer view of their portfolio returns, but we have yet to see what these changes will entail.
Vanguard’s investing education content focuses on assisting clients in establishing financial objectives and determining how to achieve them. The majority of the educational content is delivered in the form of papers; in 2019, about 250 new articles were written.
While Vanguard runs its own YouTube channel, there is minimal video-based guidance available. Those videos aren’t available to watch on the website, unfortunately.
On Vanguard’s News and Perspective page, you can find blogs, podcasts, research papers, and articles about its investment products, retirement planning, and the economy. No live events are available at Vanguard.
Monday through Friday, from 8 a.m. to 8 p.m., phone support (customer service and brokers) is available.
There is no online chat, but you can send a brief secure message via the website, which will be replied to in the order received.
The amount of time you spend on hold with Vanguard is determined by the level of service your account qualifies for; in other words, the larger the account, the less time you spend on hold. Vanguard also has a Twitter account and responds to questions within a couple of hours.
Biometric (face or fingerprint) identification allows mobile app users to log in.
Vanguard has excess SIPC insurance with Lloyd’s of London and London Insurers, with a $250 million net cap to pay sums not repaid in a SIPC liquidation. A single customer’s cap is $49.5 million, with a cash limit of $1.75 million.
According to the Identity Theft Research Center, there have been no major data breaches at any Vanguard location as of November 2019.
Vanguard Pros and Cons
Let’s take a look at the pros and cons of Vanguard with our Vanguard review below.
- The platform provides decent information to make choices on retirement and other long-term investment choices.
- Uninvested cash generates a reasonably high return in high-yielding, low-cost money market funds.
- Customer questions are addressed in updates to the website and mobile applications.
- The majority of the pricing information on the website and in the mobile app is 15 minutes out of date. Real-time data isn’t available in a streaming format.
- The website and mobile applications do not share your watchlists.
- There are just a few news feeds and analysis options.
- Vanguard only accepts applications from US citizens or permanent residents.
Vanguard Review Parting Thoughts: A Useful, if Somewhat Limited, Investment Platform
Vanguard is the market leader in controlled accounts for a good reason. If you’re looking for a no-nonsense traditional investment account, then the platform could be a great choice for you; it is a great place to put your retirement account as well. The platform does fall short for investors who need real-time information and powerful research tools, however. So, take a look at the Vanguard platform, and see if its features are a good choice for you.
Check Out Vanguard
Take a peek at the Vanguard website to see if the platform is a good fit for you.
Thanks for reading our Vanguard review.
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