Vanguard Review 2020

Vanguard is one of the largest and most trusted investment institutions in the world. The company offers a wide range of investment products and services, including many of its own low-cost, industry-leading mutual funds and ETFs.vanguard review

With a Vanguard account, you can invest in traditional stocks, bonds, certificates of deposit (CDs), money market accounts, and more. Vanguard also offers personal financial advising services and retirement account options, including traditional IRAs and Roth IRAs.

If you’d like to learn everything there is to know about Vanguard, then you’ve come to the right place. This post is going to dive into the various services they offer and look at the benefits of being a customer and the fees that they charge.

Without further ado, let’s get started.

What is Vanguard?

Vanguard is headquartered in Valley Forge, Pa. and employs over 17,600 people in four offices in the U.S. and 15 international offices.

Perhaps the most impressive figure about Vanguard is that it has over $5.6 trillion in assets under management and 30 million individual investors.

Vanguard is also the world’s largest mutual fund provider, and they are the second largest provider of ETFs.

The Backstory

vanguard investment logoFounded in 1975 by John Bogle—who I’m forever grateful to for sending me a handwritten note about my book before he passed away—Vanguard began as the world’s first index mutual fund.

Bogle started Vanguard with the goal of making money only for its own clients as opposed to outside investors. This “client-owned” structure enables Vanguard to keep their fees low even to this day.

Rather than running a for-profit model that might include paying commissions to its employees for selling funds or offering huge bonuses to executives, any profits that Vanguard makes are redirected back into its funds in order to keep fees low for shareholders.

Vanguard Services and Features

Next, let’s take a look at the different services that Vanguard offers.

Vanguard Brokerage Account

The first step to investing with Vanguard is opening a brokerage account, and that can be done by either opening a new account or by moving an existing account or assets to Vanguard.

Within this brokerage account, you’ll be able to invest in a wide range of financial products and services, which I’ll cover next.

vanguard brokerage account

 

Vanguard Mutual Funds

Brokerage account holders can invest in 130 different Vanguard mutual funds.

Vanguard’s fund specialists have identified a shorter list of 21 Vanguard Select Funds, which were chosen due to being well-diversified among U.S. and International holdings.

These funds also have a long-standing history, making them trusted investment vehicles for your hard-earned money.

Vanguard Exchange Traded Funds (ETFs)

Vanguard account holders can invest in a range of Vanguard owned and operated ETFs. See the complete list of the 59 ETFs that you’ll have access to as a Vanguard customer.

Vanguard has also identified a shortlist of Vanguard Select ETFs that stand out due to their combination of diversification, liquidity, and low costs.

Vanguard CDs and Bonds

If you’re looking for fixed-income investments, Vanguard offers a wide range of CD and bond options.

These products are available to purchase through your standard Vanguard brokerage account.

The minimum investment for a Vanguard CD is $10,000 (which is higher than many of its competitors).

Vanguard Money Market Funds

Vanguard offers several money market funds if you’re looking for no-risk, high-liquidity cash investment options.

The benefit of investing in Vanguard’s money markets (i.e., instead of CDs) is that you have access to your funds at any time without incurring an early-withdrawal penalty.

Vanguard offers three taxable money market funds and five tax-exempt money market funds. The minimum deposit to open a money market account is $3,000 (versus $10,000 for CDs).

Vanguard IRAs

Vanguard can help you prepare for retirement with traditional IRAs and Roth IRAs.

According to their website, investing your retirement funds with Vanguard comes with the following benefits:

  • In the past decade, Vanguard’s no-load mutual funds performed better than their peers 85% of the time.
  • Vanguard’s fund expenses are 83% lower than average.
  • You get lots of investment options with a Vanguard IRA. For example, you can opt to invest in one fund, like the Vanguard Target Retirement 2055 Fund (VFFVX), which is designed for people who plan to retire between 2053 and 2057.

Vanguard Personal Advising

Vanguard’s Personal Advising service connects you with a financial advisor who can help you plan and pursue your financial goals. If you have under $500,000 in investments, you’ll be able to speak with someone on a team of advisors. If you have over $500,000 in investments, you’ll be paired with a dedicated advisor.

My favorite part about Vanguard’s personal advising service is that their employees don’t receive bonuses or commissions for selling Vanguard’s services to you. This falls in line with one of the company’s guiding principles of putting customers’ interests ahead of company profits.

If you’d like a more detailed review of Vanguard’s Personal Advising service, check out this article that I recently wrote.

Vanguard Robo-Advisor

At the time of this writing, Vanguard’s robo-advising service is not publicly available. I’ve heard rumors that it’s available on an invitation-only basis, but those are just rumors.

If and when Vanguard’s robo-advising service does go live, I expect it to make a big splash. This is because it’s rumored that they will charge an asset management fee that hovers around 0.15%, which is lower than other robo-advisors. (By comparison, Betterment charges between 0.25% and 0.40% and Wealthfront charges 0.25%).

As soon as more information about Vanguard’s robo-advising service becomes publicly available, I will update this post. Stay tuned!

Vanguard Pricing and Fees

Vanguard’s reputation is pillared on charging low fees to customers. Many people ask me how Vanguard makes money, given the low fees they charge.

A primary factor is the sheer volume of assets under management that they have—over $5 trillion. Doing some rough math, let’s say Vanguard earns only 0.15% to 0.30% on $5 trillion. This yields around $75 to 150 billion. (As I write this number, I am simply amazed.)

What’s more, Vanguard can keep expenses down by minimizing the number of brick-and-mortar branches they have. “We don’t have branches on every corner,” a super helpful phone agent recently explained to me.

Fees on Trades

Vanguard doesn’t charge commissions on Vanguard ETFs and most Vanguard mutual funds (ETF or Mutual Fund, what’s the difference?). More than 3,000 non-Vanguard mutual funds are also commission-free, while a small transaction fee applies to upwards of 6,000 other non-Vanguard funds.

There’s a $7 fee to trade stocks online and a $25 fee to trade stocks over the phone. When it comes to options, you’ll pay a $7 fee for options trades and a $1 contract fee, whether online or over the phone. With both stocks and options fees, if you have over $500,000 invested with Vanguard, you’ll pay lower fees.

Check out the fees section of their website for a full list of the fees Vanguard charges.

vanguard pricing and fees

 

Vanguard Promotions and Bonuses

Vanguard doesn’t typically offer any sign-up promotions or bonuses. There are certain benefits available to different levels of investors, however.

Signing Up and Getting Started

To sign up for a Vanguard account, go to their website and click on the OPEN AN ACCOUNT button near the top right-hand corner.

You’ll be walked through a simple sign-up process where you’ll enter personal information and link your external bank accounts so you can deposit funds.

Once you are signed up, you can download their user-friendly mobile app.

vanguard mobile app

 

Vanguard Security

Vanguard offers leading-edge security features—like voice recognition and two-factor authentication for account access. The company also has hundreds of technology professionals whose primary goal is to keep your accounts safe.

In fact, they even “ethically hack” their own systems and employ threat scientists to test for system vulnerabilities.

Customer Service and Support

Customer support is available over the phone from 8 a.m. to 10 p.m. Eastern Time at 1-800-662-2739.

Pros and Cons of Vanguard

Pros

  • Vanguard offers some of the best mutual funds and ETFs on the market
  • You’ll pay lower asset management fees than most competitors charge (for long-term investments)
  • Helpful customer support agents and advisors
  • Investor-first philosophy offers assurance that Vanguard has your best interests in mind

Cons

  • High fees for trading stocks and options (many competitors offer free stocks and options trades)
  • No robo-advisor service—at least yet
  • High minimum deposits required to open CDs
  • Website and mobile apps feel a little outdated compared to newer offerings

Vanguard FAQs

Is Vanguard any good?

Yes. Vanguard is a very good investment service and brokerage institution. The company charges very low fees and offers a wide range of investment offerings.

Is Vanguard or Fidelity better?

This is a matter of personal preference. Vanguard offers a wider range of funds and ETFs and might be a better choice for long-term investors. On the other hand, Fidelity has over 190 financial planning offices, so you may opt to go with Fidelity if you prefer to have an in-person experience with your investment firm.

Fidelity might also be better for short-term traders because they don’t charge fees for U.S.-based stock and options trades.

Is investing with Vanguard a good idea?

Yes. Investing with Vanguard is a good idea, and I definitely recommend doing so. In full disclosure, I have been a happy Vanguard customer for many years now—long before I started Millennial Money.

In fact, Bogleheads Guide to Investing—which was inspired by Vanguard founder John Bogle—was formative for me when I started on my journey to financial independence.

What are the best performing Vanguard funds?

Everyone has different investing preferences and goals, so it’s important to do your homework before selecting any fund that you invest in. Vanguard funds are traditionally considered to be “buy and hold” funds.

That said, here are some of the top-performing Vanguard funds that you may want to look into:

  • Vanguard Dividend Growth Fund (VDIGX)
  • Vanguard Balanced Index (VBINX)
  • Vanguard Total Stock Market Index (VTSMX)
  • Vanguard Total Bond Market Index (VBMFX)
  • Vanguard Total International Stock Market Index (VGTSX)

Billionaire investor Warren Buffet likes these five funds:

  • Vanguard 500 Index Fund Admiral Shares (VFIAX)
  • Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)
  • Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)
  • Vanguard Short-Term Government Bond ETF (VGSH)
  • Vanguard Consumer Staples ETF (VDC)

Alternatives to Vanguard

Some of the larger brokerage firms that offer similar services to Vanguard:

What’s more, Blackrock’s iShares division is the largest provider of ETFs in the world (the only provider larger than Vanguard).

Is Vanguard a Good Investment Option?

It’s hard to find a better company than Vanguard for long-term retirement savings. On the other hand, if you’re more of an active trader or a day-trader, you’ll probably want to work with a company like TD Ameritrade or Fidelity that doesn’t charge transaction fees on most stocks and options trades.

If you’ve made it this far, you can probably tell that I’m a fan of Vanguard. But at the end of the day, whether you are investing your money with Vanguard or with one of its competitors, it won’t make that much of a difference.

What will have the most significant impact on your ability to achieve financial freedom is having a smart approach to how you’re saving, investing, and spending your money. Thanks for reading, and here’s to being wise about your financial decisions!

Grant Sabatier

Creator of Millennial Money and Author of Financial Freedom (Penguin Random House). Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. Grant has been featured in The New York Times, Wall Street Journal, BBC, NPR, Money Magazine and many others. He uses Personal Capital to manage his money in 10 minutes a month.

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