Vanguard Review 2021: Known for Its Low-Cost Mutual Funds and ETFs

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Whether you’re saving for retirement or stashing away money for a college education, Vanguard has options that match up with your goals. Passive investing in ETFs, mutual funds, and stocks is one of the best ways for everyday people to create a healthy financial future.

Vanguard is one of the biggest names in investing and is known for its low-cost mutual funds and ETFs, which is why NextAdvisor named it one of the best online brokerages for 2021. The company is good for investors who select the more passive approach to investing. Investors who want a more hands-on approach — or those who want to select their own individual investment types — might want to look elsewhere. 

Read on to learn more about Vanguard.

Pros and Cons of Vanguard

With about $7.2 trillion in assets under management, Vanguard is in the top five investment management companies according to size. It’s well-known for its low- or no-fee products and wide array of mutual funds. A mutual fund helps diversify your investments and protects your money from volatility in the market. 

Here are some ways the company stands out.

Pros

  • Different accounts for different needs. You have your choice of IRAs, education savings, trusts, and brokerage accounts.

  • Fee-free investing. You can invest in exchange-traded funds, mutual funds, options, and some stocks without paying for commissions.

  • No minimums for some accounts. You don’t need a set dollar amount to start investing in exchange-traded funds, stocks, or bonds, except for most mutual funds, which are $3,000 to get started.

Cons

  • Basic user interface. While great for new passive investors, active investors or those who want to learn more analytics might find the platform a little too simplistic.

  • Limited customer service. If you need to chat with someone about your account, you can only do it Monday through Friday, 8 a.m. to 8 p.m. An automated service runs for 24 hours a day, but that only gives you information on your account and market updates.

Vanguard at A Glance

  • Offers both self-managed and robo-advisors, depending on what type of investor you are.
  • You can choose the right account based on your needs, including individual and joint taxable accounts, traditional and Roth IRAs, SEP and SIMPLE IRAs, 529s, UGMAs, and trusts.
  • Multiple investment types are available, including stocks, bonds, options, ETFs, mutual funds, and other services.
  • Mostly fee-free, except some mutual funds and options have transaction fees. 

Investments Available on Vanguard

If you decide to invest through Vanguard, you have your choice of thousands of:

  • Stocks
  • Bonds
  • Mutual Funds
  • ETFs
  • Options
  • CDs

You can’t invest in fractional ETFs with Vanguard. Only full shares are available. Investing in fractional shares allows investors to determine how much they want to invest in a share by buying a piece of it without buying the whole share.

Vanguard Fees

Vanguard has $0 commission fees and low expense ratios. An expense ratio is the fee an investor is charged for investing in that fund. 

FeeAmount
Commission fee $0 
Management fees0.15% to 0.30%
Annual fee$20 to $25, depending on the account, but can get waived in some instances.
Account minimum$0 and up, depending on the account
Transfer fees$0
Mutual fund fees (if applicable)0% to 1%, depending on the fund and fee
Expense ratios0.09% for ETFs
Trading fees0%
Account closing fees$0

Who Is Vanguard Best For?

Vanguard is best for new investors or those who don’t want to spend a lot of time managing investment accounts. While it’s a good idea to review your investment accounts at least once a year, you don’t have to spend a lot of time tinkering with your investments with Vanguard.

How to Open an Account with Vanguard

Head to the Vanguard investor page and click “open an account” to get started. If you already have an account somewhere else, you can select “start your transfer or rollover.” If you’d like to open a new account from scratch, select “start your new account.”

If you’re starting from scratch, you’ll follow the prompts on each page. Options to fund your account include through an electronic bank transfer or employer plan, or by transferring investments from another financial firm. If you’ve never used Vanguard before, you’ll need to create a login to continue. 

If you’re rolling over an account, you can select what type of account you’re moving over. You can choose from:

  • Checking or Savings 
  • 401(k), 403(b), or other employer plan
  • Traditional IRA
  • Roth IRA
  • Inherited IRA
  • Inherited Roth IRA
  • Individual or Joint for general investing
  • Rollover IRA
  • SEP-IRA
  • UGMA/UTMA (for a minor)
  • 529 education savings plans

Vanguard Compared to Others

Many of the leading investment platforms are competing for your business. Vanguard, TD Ameritrade and Charles Schwab all have no-transaction-fee mutual funds and commission-free ETFs. And for many products, these big-name asset managers don’t have an account minimum to get started, aside from the cost of a trade. But they do stand out in other ways:

  • Charles Schwab has a 0.50% operating expense ratio. If you invest in other mutual funds aside from Schwab’s, you could get hit with a $49.95 charge per trade.
  • Vanguard, Charles Schwab, and TD Ameritrade all charge $25 for each broker-assisted trade. But online trades won’t cost you anything. 
  • TD Ameritrade offers investment opportunities in futures and forex, while Vanguard doesn’t. If you want to diversify your portfolio with these higher-risk options, you might want to look elsewhere.
  • Vanguard doesn’t have an account closing fee, but to transfer your full account out of TD Ameritrade, it’ll cost you $75. It’s $50 at Charles Schwab.

Frequently Asked Questions

Is it worth investing in Vanguard?

Because Vanguard offers such a broad selection of investment options, most investors can find a fund that suits their long-term goals and needs. It’s always worth asking a financial advisor — either through Vanguard Personal Advisor Services (its financial advisors), or with an independent service provider — whether your choices are best aligned with your financial needs.

How trustworthy is Vanguard?

Vanguard Personal Advisor Services are held to fiduciary standards under SEC and other applicable regulations. That means if you work with a Vanguard financial advisor to pick which funds you want to invest in, the advisors must make recommendations based primarily on your best interests. 

Vanguard advisors don’t make commissions. Thanks to the company’s large size and mass of assets under management, it is able to cut down on commissions from sales and trades and make its profits through low management fees or annual account fees. This reduces the likelihood that an advisor would make a risky trade with your money in order to try and earn a profit. 

In comparison, advisors who charge commissions only — such as a stockbroker — aren’t held to the same fiduciary standard and only have to recommend trades that are “suitable” to your needs (as opposed to trades in your “best interest”).

Is Vanguard a safe company to invest with?

Vanguard has been in business since 1975 and is a household name among most passive investors. While investing in the stock market comes with inherent risks, including the loss of money, it’s always important to understand what you’re investing in. Vanguard has a good reputation and is one of the top-five big investment managers.

Is Vanguard good for beginners?

Vanguard accounts are commonly used by beginners and passive investors who prefer a “set-it-and-forget-it” strategy. But all investors will find Vanguard’s low-cost ETFs and index funds appealing as they consider their long-term investment strategy.