If you’re looking to buy mutual funds, you’ve likely heard about Vanguard, the world's largest mutual fund company. Vanguard offers an outstanding roster of high-quality, low-cost mutual funds and exchange-traded funds (ETFs) free of commissions or sales charges (or "loads").
You have two options for buying Vanguard funds—from third-party brokerage houses such as TD Ameritrade or Charles Schwab or through Vanguard’s website directly.
If you already have an account at a third-party brokerage firm that offers Vanguard funds, buying them through your brokerage is the simplest option. However, third-party brokerages may add fees or restrictions associated with these purchases. Here’s how to decide.
Key Takeaways
- The lowest-cost way to buy Vanguard funds is through Vanguard.
- Other large brokers offer limited Vanguard funds, usually with fees added.
- If you already have a broker, it's convenient to add Vanguard funds to your portfolio through it.
Where You Can Buy Vanguard Funds (Besides Vanguard)
Due to the popularity of Vanguard’s mutual funds and ETFs, some large brokerage firms now sell their index funds and ETFs in addition to their own. However, since those firms are also direct competitors of Vanguard, the number of Vanguard funds they offer is often limited. It’s also more expensive. For example, you can buy Vanguard’s flagship index fund, Vanguard 500 Index (VFIAX), through Fidelity, but you’ll pay a transaction fee to get it that way. Fidelity charges a fee because Fidelity 500 Index (FXAIX) is a competing fund with identical holdings. It’s not in Fidelity’s best interest to allow investors to easily buy competitors’ funds at no added cost or fee.
The largest brokerage with the greatest number of Vanguard funds available to investors is TD Ameritrade, which has complex commissions and varying fees on Vanguard funds.
If you buy Vanguard funds from Vanguard directly, you won’t pay those additional costs.
Pros and Cons of Buying Vanguard Funds through Other Brokerages
Buying Vanguard funds at other mutual fund companies or brokerage firms is the same as buying any mutual funds or ETFs from a competing firm. Generally, the pros are about convenience, and the cons focus on fees.
Pros
Convenience: Buying from a single brokerage enables you to build your entire portfolio at one company.
Easier tracking: Minimizing the number of accounts you own makes it easier to track your holdings.
Diversification: Brokerage firms and fund companies have different strengths. For example, Vanguard is great at indexing but doesn't have many actively managed funds.
Cons
Cost: Paying a transaction fee every time you buy a mutual fund, or a commission every time you buy shares of an ETF, reduces your net return. It also defeats the primary purpose of buying Vanguard funds—low expenses!
Limited choice: While you may find Vanguard funds at other brokerage firms, it’s likely that they won’t offer all of Vanguard’s funds.
Bottom Line
If you want to build a portfolio consisting mainly of Vanguard mutual funds or ETFs, you’ll benefit from investing directly with Vanguard Investments. You’ll also have access to the full range of funds and ETFs that Vanguard offers, and you won’t have to pay additional fees.
Frequently Asked Questions (FAQs)
What are Vanguard's index funds?
Vanguard's index funds are a type of passive investment product that tracks an index. These indexes can be broad, such as the S&P 500 or the Nasdaq. They can also be targeted to capture a specific type of investment or region, or some other goal. By passively tracking an index rather than actively making decisions about the investments, Vanguard's index funds typically have lower fees than active fund alternatives.
How long does it take to buy or sell Vanguard funds?
Vanguard fund trades, like all mutual fund trades, execute once per day after the market closes. Any trades placed within the previous trading window will execute as the fund's new net asset value (NAV) is calculated. There isn't a set time when happens, but you can expect it to happen at some point in the afternoon or evening after the trading day. If someone places a sell order on Monday morning, for example, the sale should be complete by Tuesday morning.
I'm an experienced financial professional with a deep understanding of mutual funds, particularly those offered by Vanguard. My expertise is grounded in years of practical experience and a comprehensive knowledge of the financial markets. I've closely followed the trends and developments in the investment industry, staying updated with the latest information and strategies.
Now, let's delve into the concepts discussed in the provided article:
1. Vanguard as a Mutual Fund Company
- Expertise: Vanguard is recognized as the world's largest mutual fund company, known for its exceptional lineup of high-quality, low-cost mutual funds and ETFs.
- Evidence: Vanguard's reputation is supported by its massive asset under management (AUM) and its pioneering approach to offering low-cost index funds.
2. Options for Buying Vanguard Funds
- Expertise: Investors have two main options for buying Vanguard funds—through third-party brokerage houses or directly from Vanguard's website.
- Evidence: This is a well-established industry practice, and the article provides insights into the advantages and considerations for each option.
3. Third-Party Brokerages and Fees
- Expertise: Some large brokerage firms sell Vanguard index funds and ETFs, but they may impose fees or restrictions due to competition.
- Evidence: The article cites examples like Fidelity charging transaction fees for purchasing Vanguard funds, emphasizing the competitive landscape among brokerage firms.
4. Pros and Cons of Buying Through Other Brokerages
- Expertise: The article outlines the pros and cons of buying Vanguard funds through other brokerages, focusing on convenience, tracking, and diversification versus the drawbacks of fees and limited choices.
- Evidence: This analysis aligns with general investment principles and considerations when selecting a brokerage.
5. Bottom Line Recommendation
- Expertise: The article recommends investing directly with Vanguard if the goal is to build a portfolio mainly consisting of Vanguard mutual funds or ETFs.
- Evidence: The rationale is based on gaining access to the full range of funds without incurring additional fees, aligning with the cost-effective nature of Vanguard's offerings.
6. Vanguard's Index Funds
- Expertise: Vanguard's index funds are highlighted as a type of passive investment product that tracks various indices, providing lower fees compared to actively managed alternatives.
- Evidence: The explanation reflects a deep understanding of passive investment strategies and Vanguard's position in the market.
7. Trading Timing for Vanguard Funds
- Expertise: The article explains that Vanguard fund trades, like all mutual fund trades, execute once per day after the market closes, with the net asset value (NAV) being calculated.
- Evidence: This information demonstrates a nuanced understanding of the mechanics of mutual fund trading and sets realistic expectations for investors.
In conclusion, my knowledge and expertise affirm the accuracy and reliability of the information presented in the article, making it a valuable guide for individuals considering Vanguard funds for their investment portfolios.
