UPDATED: Apr 25, 2016
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Vanguard’s brokerage cost system is based upon the amount of dollars invested. For example, a trader with less than $50,000 pays $7 per stock trade on non-Vanguard ETF’s for the first 25 trades, at which point each subsequent trade jumps to $20. If you invest between $50,000 & $100,000 your trade commissions stay constant at $7 (considered Voyager status) and drop to $2 with investments between $500,000 and a million dollars (Voyager Select status).
If you invest more than a million, you will be considered Flagship status and therefore receive the first 25 trades at no commission and subsequently are charged only $2 a trade thereafter.
The trade commissions for the Voyager and Flagship investor seem low when compared against the market, however those individuals investing less than $50,000 experience about “normal” fees on the first 25 trades and then experience extremely high $20/trade costs. In a nutshell, trading with Vanguard is beneficial if you have a high account balance, but costly with lower balances.
My point is not to bash Vanguard as their assets and returns are amongst the best in the industry, I am simply pointing out that for someone looking to trade on a relatively frequent basis, Vanguard can be very expensive if the account balance is modest.
Where Vanguard earns it’s keep is with the ongoing costs of managing their mutual funds and ETFs. They are constantly some of the lowest in the industry, so long-term investors benefit greatly over time.
Aside from the different “tiers” of service and investment opportunities Vanguard offers users depending on their asset-pool size, Vanguards trading tools and brokerage practices lag behind its competitors.
In an age where anyone can access live market analytics and news at their fingertips, the need for an aggressive, user-friendly trading interface should be priority number one… Unless your goal is not to foster brokerage activity, but rather subtly direct investors to long-term mutual fund holdings. Vanguard seems to operate under the latter.
I want to be clear, I am not downplaying Vanguard’s model of investing, as it is undoubtedly considered a fine institution. Since this part of the review is about their brokerage service, it is important to note it is lagging far behind other full service and discount brokerage firms.
Trades and account management with Vanguard can be done online, by phone or email with a licensed brokerage associate, or on a mobile device.
The theme here is that Vanguard is geared for long-term investors and not really the active trader, unlike E*Trade and other full-service brokers.
This is Vanguard’s bread and butter.
With Vanguard’s approach to long-term investment and compounded wealth accumulation via their house-owned mutual funds, it is no surprise that these types of investments make for good retirement opportunities.
- Vanguard IRA
- 401(k) rollovers
- Target Retirement Funds
- Annuities for Savings
Vanguard is notorious for having some of the lowest management fees when it comes to their own index funds, with many getting down into the single-digit basis point range once a reasonable sum has been reached.
As mentioned previously, Vanguard’s funds historically rank among the best over long periods of time for one main reason: they cost less than other funds.
For the most part, an S&P 500 index fund will be almost identical no matter what company is providing it, so the only factor that will determine performance compared to its peers is cost. Vanguard nearly always wins.
Banking services offered by Vanguard are essentially non-existent.
While they do not have a complete banking solution like some other firms, they do allow for some check writing against certain accounts ($250 minimum per check).
According to Vanguard.com they are available for assistance via phone, U.S. mail and secured email.
877-662-7447 – Vanguard investor & client information
800-523-1188 – Vanguard participant services
800-992-8327 – Vanguard brokerage services
Vanguard has been around since the early 70’s and their success is undeniable as their mutual funds alone are valued in the multiple of trillions of dollars. However, their online brokerage services are lagging behind what Vanguard may describe as their “in-direct” competitors such as E*Trade, TD Ameritrade and Scottrade.
The difference I see between Vanguard and the other big players in the online brokerage game is they do not distinguish itself as the cutting edged, technological, day trading experience the other brokerage houses do.
At the end of the day if you are looking for some nice retirement options or access to industry-leading mutual funds, Vanguard is a great choice. However, if you are looking to throw a few dollars into a brokerage account and get active on the open market, stay away from Vanguard as their initial account requirements and high commission structure could quickly rid you of your dollars.
*Waived if balance is over $10,000 (each fund)