Vanguard Review – A Slow and Steady Investing Platform
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For cost-conscious investors, Vanguard is an excellent platform with enough features to meet your needs.
8.5/10
Cost
9/10
Features
9/10
Ease of use
8/10
Services
8.5/10
The stock market is a key part of any wealth-building strategy, and it’s important to have the right investment platform to reach your financial goals. While hip apps make it easier than ever to make free trades and practically gamify investing when it comes to making the sorts of moves a financial advisor would suggest, you’ll need to have access to investment products like index funds, mutual funds, and exchange-traded funds (ETFs) as well as individual stocks.
When investing your money in the stock market or bonds, you need a brokerage account to handle these transactions. There are dozens of brokers to choose from, but one of the leading options you’ll see brought up repeatedly is Vanguard. Vanguard offers a trading platform that allows you to trade stocks and other investment products and set up a traditional IRA for retirement planning.
Vanguard has become popular, in part, thanks to the fact that it is the de facto low-cost investment platform among online brokers. That said, there’s much more to Vanguard than just low fees. For active traders and new investors, Vanguard has a lot of investment options and features to take advantage of. Keep reading for an overview of the brokerage and some pros and cons of using the platform for your investment portfolio or IRA retirement funds.
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What is Vanguard?
Vanguard is one of the largest investment firms in the world and offers over 3,200 no-transaction-fee mutual funds to invest in through its platform. Many investors primarily use Vanguard for their retirement accounts; however, it is possible to trade on the platform as well actively. Vanguard prioritizes the well-being of its investors over all else. Its website offers many helpful resources to help those new to investing and retirement accounts learn the ropes.
Vanguard is perhaps most well-known thanks to its founder, Jack Bogle. Jack Bogle’s core investment advice was that everyday investors would never be able to beat Wall Street, so they were better off investing in low-cost funds that would perform consistently over time. This led Bogle and Vanguard to pioneer the index fund, a way of tracking mutual funds based on the performance of a group of diverse arrays of funds in one index.
While index funds are generally a passive investment strategy for long-term investors looking to mitigate risk, that isn’t to say that you can’t use the platform for other trades, too. Vanguard allows investors to trade stocks, bonds, ETFs, and mutual funds and even handles options trades. As a low-cost option, all ETFs on Vanguard’s platform are commission-free, and you can invest in non-Vanguard funds on the platform, too.
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How does Vanguard work?
Setting up an investment account on Vanguard isn’t a particularly long process; however, it’s involved, and you must have some personal information readily available before you begin.
You’ll want to start by navigating to Vanguard’s website and clicking the Personal Investors link on the right side of the screen.
From there, you’ll click on “Open An Account." This will take you to a screen asking if you want to open a new account or roll over assets from a different brokerage.
Unless you have a retirement account from a previous job that you’d like to combine with your new Vanguard account through a rollover, you’ll want to click on the “Start your new account.” It’s worth noting that you have various investment accounts to choose from, including general investment accounts, retirement accounts, such as an IRA, and even a 529 plan to save for educational costs.
Vanguard then asks how you plan to fund your new account. In most situations, the answer will be via electronic bank transfer; however, if you’re funding it with a rollover or a transfer from a different financial firm, you can denote that at this stage of the account application process.
Vanguard then double-checks whether or not you’re truly a new user or if you have an existing login. If you’re a new user, you must complete more information to sign up.
Thankfully, Vanguard helpfully includes some things you’ll need before you open an account on their platform. You’ll need two details beyond your personal information: your bank account and routing number and information about your current employer. It’s worth noting that although the online application process only takes about 10 minutes, you won’t be able to officially start investing until your account has been funded, which can take anywhere from 3 to 7 days.
As you move through the registration process, Vanguard helpfully includes some frequently asked questions via a sidebar on their website. This allows you to understand better how your choices will impact your overall investment goals and the ability to achieve those goals using Vanguard as your brokerage account.
You’ll then need to input information about yourself. This includes your legal first and last name, an email address where you can be reached, your birth date, citizenship status, gender, and social security number. The application process on Vanguard’s website is secure, so you don’t need to worry about using sensitive information or linking up your bank account with the platform.
How much does Vanguard cost?
From offering funds with low expense ratios to being transparent about pricing when there are fees, Vanguard is a lower-cost option than many brokerages. Some costs are still associated with using Vanguard as your brokerage.
For starters, Vanguard charges an annual $25 account service fee if you choose to receive paper statements and prospectuses. However, that fee is waived if you use online statements via email instead. All Vanguard ETFs are commission-free to trade, and rates on other securities are competitive and can be found on Vanguard’s website. Additionally, you’ll pay $1 per option contract if you're trading options.
Vanguard features
Low-cost
If you’re cost-conscious as an investor, Vanguard is a leader in low-cost expense ratios, commissions, and other investment fees, especially if you’re trying to maximize your nest egg over the long term. Being able to trust that your brokerage won’t be leaching money with costly fee structures in your retirement can be a great reason to pick Vanguard over competitors.
No account minimums
You can open an account with Vanguard for as little as $0. That said, most funds require a minimum investment of at least $1,000. Otherwise, you’ll just be adding money to your money market fund, where it will wait to be put to use investing in a specific mutual fund, ETF, or other security.
A variety of securities available
While Vanguard’s ETFs are likely what you’ll want to spend most of your time and energy on, that’s not to say they’re the only thing you can invest in on the platform. Vanguard offers a variety of stocks, bonds, mutual funds, and ETFs—all delivered with the same focus on low costs and fees.
Good retirement calculators
Many Vanguard investors use the brokerage for retirement. As such, the calculators and estimation tools offered by Vanguard can help you get a clear picture of where you’re headed and what you need to retire comfortably. From determining how much money you’ll need in retirement to seeing how minor tweaks to your investment strategy impact your overall goals, Vanguard has plenty of resources to give you peace of mind.
Who is Vanguard best for?
Long-term investors
Vanguard is a great option if you hold your investment portfolio for a while. Some people may not be all-in on Bogle’s passive investment strategy; however, for those who want a slow-and-steady approach to investment management, it’s hard to imagine a better platform to use. Bogle believed an investor needs only three index funds for the long term, each a Vanguard fund: one for US stocks, one for international stocks, and one for bonds.
The cost-conscious investor
Low-fee investing is at the heart of Vanguard's business. As a result, cost-conscious investors who want to maximize their returns without forking over too much of their earnings to the brokerage they’re using will find a lot to like in Vanguard’s commission-free ETFs.
Who shouldn’t use Vanguard?
Active investors
If you want to take a hands-on approach to investing and actively manage a wide portfolio of stocks, you can do it with a Vanguard account. That being said, Vanguard does fall short regarding tools to track different stocks in real time and chart your gains and losses the way other brokerages allow. Buy-and-hold investors will get much more use from Vanguard than active day traders.
Low net-worth investors
Because of the investment minimums Vanguard requires, if you’re just starting and don’t have much money to put into your portfolio, Vanguard can be a bit cost-prohibitive. While it’s true that you can still open an account and contribute a few hundred dollars a month to it before reaching the $1,000 minimum required for something like a Vanguard Target Date Retirement Fund, it can be discouraging to have to wait that long if you’ve finally decided to get the ball rolling and open an IRA.
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Pros and cons
Pros
- Lots of low-cost funds. The area where Vanguard truly excels is in offering a variety of low-cost funds. With low expense ratios and fees, you get to keep more of your investment returns with a Vanguard brokerage account.
- Relatively robust. Asset allocation in Vanguard allows for a good mixture of stocks, bonds, and other securities, with ETFs and mutual funds being the most common building blocks of a solid portfolio on Vanguard.
- Easy to set up an account. Setting up an account with Vanguard is pretty straightforward and generally takes less than 10 minutes, assuming that you already have information about your bank account and employer on hand.
Cons
- User interface can be confusing. While the signup process on Vanguard is pretty user-friendly, the dashboard for investing can be a bit daunting and is much more basic. You’ll want to spend some time with the help resources to understand where to go to set up your portfolio since there’s a higher learning curve than with other brokerages.
- Minimums can be discouraging. While Vanguard’s Target Date Retirement Funds have lower minimums, getting to the $1,000, $3,000, or $5,000 necessary to start purchasing funds for your portfolio can take some of the wind out of your sails (which is unfortunate as Vanguard’s logo is a ship!)
- Not a ton of analytical tools. Many brokerages offer detailed analytical tools to track stock performance for active traders. Vanguard’s tools are basic, even as they provide great calculators for estimating your retirement needs.
Vanguard vs. Fidelity vs. E*Trade
Vanguard isn’t the only brokerage on the market. Here’s how it stacks up to a few competitors, including Fidelity, e*Trade, and TD Ameritrade.
Header | Fees | Commission-Free ETFs | Cryptocurrency | Fractional shares | Robo-advisor |
Vanguard | $0 for most stocks/ETFs, $1 for options | Yes | No | Yes | Yes |
Fidelity | $0 for most stocks/ETFs, $0.65 for options | Yes | Yes | Yes | Yes |
E*Trade | $0 for most stocks/ETFs, $0.50-$0.65 for options | Yes | Yes | No | Yes |
Fidelity
Fidelity Investments is a formidable competitor to Vanguard, particularly in mutual funds and brokerage services. Fidelity is renowned for its extensive range of investment options, including a wide array of mutual funds, stocks, bonds, and ETFs, making it a versatile choice for novice and seasoned investors. Unlike Vanguard, which is famous for its low-cost index funds and a focus on passive investment strategies, Fidelity offers a mix of active and passive investment solutions. This includes zero-expense ratio index funds, directly competing with Vanguard’s low-cost ethos.
E*TRADE
E*TRADE and Vanguard cater to distinct segments of the investment market with different philosophies and offerings. While Vanguard is renowned for its low-cost index funds and a focus on long-term, passive investment strategies, appealing to cost-conscious investors interested in building a diversified portfolio over time, E*TRADE, especially after its acquisition by Morgan Stanley, targets a broader audience including active traders. It offers a wide range of investment options and excels with its advanced trading platforms and tools, comprehensive research, and educational resources, making it suitable for both active and passive investors. Although Vanguard's emphasis on low expense ratios for its funds is a hallmark of its approach to minimizing investor costs, E*Trade competes by providing robust tools for market analysis and a variety of investment choices, including a strong platform for options trading, catering to those seeking more dynamic trading opportunities and in-depth financial analysis.
FAQs
Does Vanguard have a mobile app?
Yes! Vanguard's app Vanguard Beacon is available for download via Apple or Google Play Store.
What types of ETF trades can I place using Vanguard?
Vanguard allows for a few different kinds of ETF trades using its platform, including limit orders, stop orders, market orders, and stop-limit orders.
Do I have to pay taxes on my earnings?
Yes. If you withdraw any earnings on your investments made in Vanguard, you will have to pay capital gains tax on them. Vanguard will send you the appropriate tax forms at tax season, but it’s always a good idea to consult with your tax professional for any questions about how different decisions will impact your taxes.
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Is Vanguard legit?
Founded by Jack Bogle, Vanguard is a well-respected brokerage offering a lot of value without asking for a lot from investors in terms of fees. Vanguard is an excellent platform for cost-conscious investors with enough features to meet your needs. Its low fees and target-date funds make it an easy platform for retirement accounts and other long-term investment strategies. While it’s a brokerage that skews towards passive investment strategies, you can handle active portfolio management on the platform, too.
Setting up an account with Vanguard is straightforward (even if the portfolio dashboard is a bit confusing), and there are plenty of helpful resources on Vanguard’s website to help you manage your portfolio. With robo-advisors introduced in 2020 and a mobile app for convenience, the future is bright for Vanguard, illustrating that they stay current on what their investors seek from a brokerage.
Which brokerage you choose to open an account with is up to you, but it’s worth noting that Vanguard also makes rollovers from previous brokers or employers exceptionally straightforward. With great support and resources, Vanguard’s commitment to its investors outshines some of its shortcomings, assuming those shortcomings aren’t features you intend to use frequently.
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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