Vanguard is best suited for beginner and seasoned investors alike who are seeking access to an array of low-cost vast mutual fund and ETF offerings, all packaged into a simple-to-use brokerage platform. Read on as we dive into the pros and cons in this Vanguard review. We'll look at some of the important facts, figures, and features, and help you decide if it's the best online broker for you.
Ratings Methodology
Vanguard
Our Rating:
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
Bottom Line
Vanguard remains a top option for passive investors with excellent zero-commission options for stocks and ETFs, including index fund ETFs.
Fees:
$0 online; $0 by phone; $25 broker-assisted fee for ETF trades from other companies (Less than $1 million)
Account Minimum:
$0
Alternatives to Consider
We recommend comparing brokerage options to ensure the account you're selecting is the best fit for you. To make your search easier, here's a short list of our best trading platforms of 2023.
| Account | Fees | Account Minimum | |
|---|---|---|---|
Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | $0 for stocks, ETFs, and options | $0 | Open Account for Robinhood |
Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | $0 for stocks, $0 for options contracts | $0 | Open Account for SoFi Active Investing |
Rating image, 5.0 out of 5 stars. 5.0/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | $0 commission for online U.S. stock and ETF trades | $0 | Open Account for Fidelity |
Full Vanguard review
This stock broker is a good fit for: Investors seeking a low-cost stock broker to invest in stocks, ETFs, and mutual funds, among other common investments. Traders may want to look elsewhere, since this isn't Vanguard's bread and butter.
Pros
- Zero-commission trading
- Low cost ETFs and mutual fund investing
- No account minimums
- Account types offered
Cons
- Options commissions
- Doesn't offer fractional share investing
- Active trading platform isn't as robust as competitors
Top perks
Zero-commission trading
Vanguard was one of the last holdouts in the zero-commission revolution, but the company has scrapped its stock and ETF trading commissions for online trades. You'll only pay a commission on broker-assisted trades ($25), which is still quite standard in the industry.
Low cost ETFs and mutual funds
This is perhaps the biggest reason to use Vanguard as your broker. Vanguard's proprietary mutual funds and ETFs have some of the lowest expense ratios. In addition to being able to buy and sell Vanguard's excellent family of mutual funds with no transaction fee, Vanguard offers more than $3,000 other mutual funds on a no-transaction-fee (NTF) basis.
No account minimums
Vanguard has no minimum deposit requirement to open a brokerage account. That said, the platform doesn't allow you to trade fractional shares of stock, so you'll need at least enough to cover one share of whatever stock or ETF you want. And if you plan on buying mutual funds, keep in mind that most have their own minimum initial investment requirements, which are typically in the thousands of dollars.
International market access
This is both a good and bad feature. Unlike many online brokers, Vanguard allows investors to buy stocks directly on foreign stock exchanges. However, doing so comes with a steep $50 commission.
Research access
Vanguard provides third-party stock research reports from Standard & Poor's, Thomson Reuters, and First Call. This can help beginners find good investment candidates and can also be a great tool to help learn the basics of stock analysis.
Lots of account types
Vanguard offers individual and joint brokerage accounts, traditional and Roth IRAs, SEP-IRAs, SIMPLE IRAs, solo 401(k)s, and 529 college savings plans.
Great CD rates
Vanguard offers the ability to buy FDIC-insured CDs in its brokerage accounts. Not only do these have no fees or commissions, but they have some of the best APYs of any CDs on our radar. Plus, they are available in terms ranging from one month to more than 10 years.
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What could be improved
Options commissions
Most online brokers still charge a per-contract fee for options trading. Although it used to cost a lot more than Vanguard's $1 per contract charge, these days, most of its peers charge much lower fees. However, it's worth noting that the options commission is waived for a certain number of trades for accounts with over $1 million invested in Vanguard ETFs and mutual funds. For example, an account with $1 million in Vanguard funds would get 25 free options trades before commissions start.
Some online brokers allow investors to buy fractional shares of stock. In other words, if you have $500 and your favorite stock is $1,000 per share, you could buy 0.5 shares. Vanguard doesn't allow this.
Active trading platform
Vanguard's trading platform isn't as feature-packed for traders as other trading platforms out there. It's mainly designed for long-term investors who need to place an occasional order to buy or sell a stock. Traders looking for a complex platform would probably be better served elsewhere.
Commissions
Virtually all of the major online brokers offer commission-free online stock trades, and Vanguard is no different. Its per-contract options commission is a bit on the high end, but its mutual fund commission is quite competitive. And as noted earlier, both the options and mutual funds commissions can be waived for accounts with more than $1 million invested in Vanguard funds.
| Stocks and ETFs | Options | Mutual Funds |
|---|---|---|
| $0 | $1 per contract | $0 - $20 |
Data source: Vanguard.
Buying mutual funds
As mentioned earlier, mutual funds are perhaps the best reason investors might choose Vanguard over any of its rivals.
For starters, Vanguard's mutual funds are highly regarded as some of the lowest cost index fund products for long-term investors. Vanguard mutual funds have some of the lowest expense ratios in the industry, and low-cost index investing was one of the motivations for founding the company in the first place. If you choose Vanguard as your broker, you'll be able to buy any of Vanguard's mutual funds without paying a commission.
In addition, Vanguard offers thousands of other (non-Vanguard) mutual funds on a commission-free, or no-transaction-fee (NTF) basis. And if a particular mutual fund you're interested in is not on Vanguard's NTF list, its standard mutual fund commission of $20 is on the lower end of those charged by its peers. For accounts with over $1 million in Vanguard funds, the standard commission is $0 for a certain number of mutual fund trades, and just $8 thereafter.
Fees
In addition to the commissions we've already discussed, Vanguard charges some other fees you might run into:
- Account service fee: Vanguard charges a $20 annual account service fee. However, the service fee is waived for some of Vanguard's clients with large account balances, or those who hold at least $10,000 in Vanguard ETFs and mutual funds in their account, or who choose to have their statements and documents electronically delivered. In other words, it isn't terribly difficult to get out of paying this fee.
- Foreign securities fee: If you purchase a stock on a foreign exchange (not an American depositary receipt, or ADR), it comes with a $50 processing fee.
- Wire fee: Vanguard charges a $10 fee for an outgoing wire, which is actually rather low. Wire fees in the $30 range aren't uncommon. And, this is waived for investors with at least $1 million in Vanguard funds.
TIP
Compare the best IRA accounts
If you're interested in comparing IRA accounts, you're not alone! You can get the list of the best IRAs we've found (and compare them side-by-side) on these pages:
- Best IRA Accounts
- Best Roth IRA Accounts
Trading platform
Vanguard's trading platform isn't as robust as other stock trading platforms from trading-first brokers. If you regularly move in and out of stocks or like to make complex options trades, Vanguard is probably not the best choice for you.
On the other hand, Vanguard has plenty of functionality and features such as research reports that will be more than sufficient for long-term investors. And, Vanguard's mobile app is highly rated on the Apple App Store and allows you to trade and check your portfolio on the go.
Vanguard margin rates
| Margin Balance | Effective Rate |
|---|---|
| Up to $19,999 | 13.75% |
| $20,000 - $49,999 | 13.25% |
| $50,000 - $99,999 | 12.75% |
| $100,000 - $249,999 | 12.25% |
| $250,000 - $499,999 | 11.75% |
| $500,000 - $999,999 | 10.50% |
| $1 million or more | Contact Vanguard for rates. |
Data source: Vanguard. Rates as of Aug. 19, 2023.
While we aren't huge fans of margin investing, there are some cases when using margin can be useful. With that, here's a look at Vanguard's margin rates. To put those numbers in context, the words I'd use would be "about average." This is a similar margin structure to most other online brokers. If you frequently use margin, there are lower-cost options, but for most people who use margin occasionally or not at all, these rates should suffice.
Research offerings
Access to third-party stock research can be a valuable tool for investors, especially beginners. It can help you find good investment opportunities, determine how volatile you can expect your investments to be, and learn the basics of stock analysis. Vanguard provides third-party stock research reports from Standard & Poor's, Thomson Reuters, and First Call, which should be more than sufficient for most long-term investors.
Vanguard is right for you if:
- You are a long-term investor -- especially a retirement investor -- who wants to place an occasional buy or sell order and isn't a frequent trader.
- You only want to use options on occasion, if at all.
- You are a mutual fund investor or an ETF investor, and you specifically want to be able to buy Vanguard mutual funds with no commissions.
FAQs
There is no specific account minimum to open a brokerage account with Vanguard. However, since Vanguard doesn't allow fractional share investing, you'll need at least enough money to purchase one share of a stock or ETF, or the minimum investment amount for a mutual fund you want to invest in.
There are a few things Vanguard doesn't offer for investors. Fractional share investing is a big example -- if a stock is trading for $500 per share, you'd need $500 to invest in it. Many competitors would allow you to directly buy a piece of a share. Plus, as a platform focused on long-term, buy-and-hold investing strategies, Vanguard's trading platform isn't as feature-packed as many other traditional brokerages.
Our Brokerages Experts
By:Matt Frankel, CFP®
Writer, Analyst
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
Fact CheckedAshley Maready
Writer and Editor
Ashley Maready is a former history museum professional who made the leap to digital content writing and editing in 2021. She has a BA in History and Philosophy from Hood College and an MA in Applied History from Shippensburg University. Ashley loves creating content for the public and learning new things so she can teach others, whether it's information about salt mining, canal mules, or personal finance.
As a seasoned financial expert with extensive experience in investment strategies and brokerage platforms, I can confidently provide an in-depth analysis of the information presented in the article about Vanguard. My knowledge extends across various financial instruments, including stocks, ETFs, mutual funds, options, and trading platforms.
Now, let's delve into the key concepts and information covered in the article:
Vanguard Overview:
The article discusses Vanguard as an online broker suitable for both beginner and seasoned investors. It emphasizes Vanguard's appeal to passive investors, offering a range of low-cost mutual funds and ETFs.
Ratings Methodology:
The article employs a 5-star rating scale to assess Vanguard's performance, with 4.5 out of 5 stars. The ratings are categorized as follows:
- 5 stars: Best
- 4 stars: Excellent
- 3 stars: Good
- 2 stars: Fair
- 1 star: Poor
Vanguard's Bottom Line:
The conclusion highlights Vanguard as a top option for passive investors, particularly those interested in zero-commission options for stocks and ETFs, including index fund ETFs.
Fees and Account Minimums:
- Fees: $0 online, $0 by phone, $25 broker-assisted fee for ETF trades from other companies (for accounts with less than $1 million).
- Account Minimum: $0
Alternatives to Consider:
The article suggests comparing brokerage options and provides a shortlist of other trading platforms, such as Robinhood, SoFi Active Investing, and Fidelity.
Vanguard's Pros:
- Zero-commission trading: Vanguard eliminated stock and ETF trading commissions for online trades.
- Low-cost ETFs and mutual funds: Vanguard offers low-expense-ratio proprietary mutual funds and ETFs.
- No account minimums: Vanguard does not require a minimum deposit to open a brokerage account.
- International market access: Investors can buy stocks directly on foreign stock exchanges through Vanguard.
Vanguard's Cons:
- Options commissions: Vanguard charges a fee of $1 per contract for options trading.
- No fractional share investing: Vanguard does not allow the trading of fractional shares.
- Active trading platform limitations: The trading platform is designed more for long-term investors than active traders.
Top Perks:
- Research access: Vanguard provides third-party stock research reports from reputable sources.
- Lots of account types: Offers various account types, including individual and joint brokerage accounts, IRAs, and college savings plans.
- Great CD rates: Vanguard allows the purchase of FDIC-insured CDs in brokerage accounts with competitive APYs.
What Could Be Improved:
- Options commissions: Vanguard's options commission is comparatively higher than some competitors.
- No fractional share investing: Unlike some competitors, Vanguard does not allow the trading of fractional shares.
- Active trading platform: Geared more towards long-term investors; may not be ideal for active traders.
Trading Platform and Margin Rates:
- The article highlights that Vanguard's trading platform may not be as feature-packed for active traders but is sufficient for long-term investors.
- Provides information on Vanguard's margin rates based on different margin balance levels.
Research Offerings:
Vanguard offers third-party stock research reports from Standard & Poor's, Thomson Reuters, and First Call to assist investors in making informed decisions.
FAQs:
- Clarifies that Vanguard has no specific account minimum but mentions the need for enough funds to purchase whole shares due to the absence of fractional share investing.
- Highlights limitations, such as the lack of fractional share investing and a platform geared towards long-term strategies.
Brokerages Experts:
Profiles of the experts, Matt Frankel and Ashley Maready, provide credibility to the information presented in the article.
In conclusion, the article provides a comprehensive review of Vanguard, considering various aspects like fees, account types, pros, cons, and alternatives. This analysis caters to a diverse audience, from long-term investors to those interested in specific financial instruments.
