Vanguard is well known for its funds – mutual funds, and especially exchange-traded funds (ETFs).
Not only is it one of the largest fund companies in the world, but it’s ETFs are frequently included in the portfolios of both investment advisors and robo-advisor platforms.
But less well-known is that Vanguard is also a major brokerage firm.
Not only can you invest in their proprietary mutual funds and ETFs, but also those of other fund companies, as well as individual securities, like stocks and bonds.
And while you’re investing your money in those other assets, you’ll also have full access to Vanguard’s menu of popular funds.
Based in Malvern, Pennsylvania, Vanguard was launched in 1975. It was created by the legendary John Bogel, who was credited with creating the first index fund in the same year the company was founded.
Vanguard has more than $5.3 trillion in assets under management, is the largest provider of mutual funds in the world, and the second largest provider of ETFs.
One of the factors that make Vanguard unique, however, is that it’s owned by its investors.
This gives Vanguard full responsibility to its investors, rather than to shareholders, as is the case with publicly traded companies.
How The Vanguard Brokerage Account Works
As you might expect, the Vanguard trading platform works particularly well with funds. Many of the tools available on the trading platform are specific to funds.
For example, Vanguard offers its Mutual Fund and ETF Screener tool, that enables you to set criteria for the funds you want to invest in.
This will make it much easier for investors to sift through the literally thousands of funds that are now available.
You can choose the parameters for the funds you want to invest in, such as specific industry sectors, certain fund families, and even expense ratios.
The platform also offers portfolio analysis. It will display your current asset allocation as well as your target allocation to show you how close you are to matching your investment goals.
The Vanguard Tax Center allows you to continuously track the tax consequences of your investments.
This includes taxable dividends and capital gains distributions. You can track them on both a year-to-date and annual basis. You’ll also have access to tax planning and education, to help minimize the tax impact of your investing activities.
Vanguard also specializes in target-date funds, which are funds comprised of other funds.
They create portfolios that automatically readjust based on your current age and projected retirement age.
For example, if you’re in your 20s, your portfolio will be most heavily invested in stocks.
But as you move toward your 60s, it will automatically shift more heavily into bonds.
Vanguard classifies clients by account size, as follows:
- Voyager clients, $50,000 to $500,000
- Voyager Select clients, $500,000 to $1 million
- Flagship clients, $1 million to $5 million
- Flagship Select client, over $5 million
Each portfolio level comes with a progressively lower fee structure, and increased access to live financial advisors.
Personal Advisor Services
With a minimum account balance of $50,000, you will also have access to a personal advisor.
The advisor will help you with major financial decisions, like saving and investing for specific goals, or preparing for retirement.
The advisor can also act as an emotional circuit breaker during times when the financial markets are going through a bout of volatility.
Vanguard Brokerage Fees
- Annual broker service fee: $20. However, Vanguard offers numerous ways to have this fee waived.
- Stocks: Fees are based on the size of your portfolio:
- ETFs: Vanguard offers commission-free trades on 1,800 non-Vanguard ETFs, plus more than 75 Vanguard ETFs.
- Mutual funds: No commissions on over 140 Vanguard mutual funds, as well as more than 3,000 non-Vanguard mutual funds.
- Options: Similar to the pricing structure on stocks, commissions on options are based on the size of your portfolio:
Fixed income investments fee schedules depend on the type of security.
For example, US Treasury securities are available commission-free, regardless of the size of your account.
This is also true of newly issued US government agency securities, corporate bonds, and certificates of deposit.
However, fees do apply if you are purchasing existing issues of all securities except US Treasury securities:
The Vanguard Personal Advisor Robo-Advisor
Like most major investment platforms today, Vanguard offers its very own robo-advisor, the Vanguard Personal Advisor.
This will give you an option to invest some or even all your money in a fully managed portfolio. In fact, it’s the largest robo-advisor in the industry – and by a very wide margin – with more than $115 billion in assets under management.
What’s unique about Personal Advisor is that it invests in both ETFs and mutual funds.
The vast majority of robo-advisors invest strictly in ETFs. This is significant because while ETFs are passive funds, based on index investing, mutual funds are actively invested funds.
That means they attempt to outperform the market, not just match it.
Naturally, the funds used in the portfolio are from Vanguard itself. But this is hardly a limitation since Vanguard funds are heavily used by nearly every other robo-advisor in existence.
Personal Advisor requires a minimum investment of $50,000 and charges an annual management fee of 0.30% of your account value.
However, the fee structure is tiered, such that an account greater than $25 million will be subject to a fee of just 0.005%. It’s available for both taxable and retirement accounts.
Vanguard Brokerage Account Features and Benefits
Minimum initial investment: $3,000, which is the typical minimum to invest in mutual funds.
However, you can begin investing in target retirement funds for as little as $1,000.
Cash account: Vanguard provides a money market mutual fund, that seeks to maintain a $1 share price. You can use it to transfer funds to and from an external bank account, as well as to accumulate cash for future investment purchases. You can choose either a taxable or tax-exempt money market mutual fund.
The Vanguard Mobile App: The app provides all the functionality of the online trading platform. You can use it to check your account balance, investment performance, transaction history, returns, and cost basis. You can also trade on the app, and choose your target asset allocations. It can also be used to make mobile check deposits using your smartphone. The mobile app is available for iOS devices at The App Store and Android devices at Google Play.
Customer service: Available by phone and live chat, Monday through Friday, 8:00 am to 8:00 pm, Eastern Time. However, contact by email is available on a 24/7 basis.
Should You Invest Through Vanguard Brokerage?
Despite being one of the largest financial institutions in the world, Vanguard Brokerage isn’t necessarily appropriate for all types of investors.
The service primarily benefits investors with very large portfolios.
For example, the fee to trade stocks and options is just $2 on a portfolio of $500,000 to $1 million.
If your portfolio is larger than $1 million, the first 25 trades are free (with 100 free trades on a portfolio of $5 million or more). But for accounts below $500,000, the commission is $7 per trade.
If you’re a small investor or a very active trader, you’ll get a better fee structure with other investment brokers.
Vanguard is also an excellent choice if you’re a fund investor. They offer 1,875 ETFs and more than 3,140 mutual funds, all commission-free.
On balance, the service seems to target large, buy-and-hold investors, who will both get the benefit of low or commission-free trades, as well as a wealth of funds.