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If you’ve heard about low-cost index funds making it easier than ever for anyone to invest, you’ve got Vanguard to thank for that. Vanguard’s founder Jack Bogle popularized the index fund with the intention of slashing away fees and making investing more accessible for everyone. Decades later, Vanguard is still one of the top online discount brokerages and it got a swanky new face lift.
Let’s explore the pros and cons of Vanguard, plus all of the new features and the time-tested benefits of this OG of investing.
Vanguard Review Summary
- Vanguard is a discount online brokerage that offered the first index fund investing options to regular investors (that’s you and me!)
- Vanguard takes the guesswork out of investing with Target Date Funds and LifeStrategy funds while still allowing you to DIY your portfolio
- Vanguard recently unveiled their Vanguard Digital Advisor, making it easier than ever to invest like a pro
- Vanguard offers investment accounts for retirement and beyond, including taxable brokerages, 529s, UTMA/UGMAs, and more
- Vanguard also recently updated its website and app for a sleeker, more user-friendly experience
Vanguard Pros & Cons
Start with the Vanguard pros and cons to see if this low-cost brokerage might meet your investing needs. Then, read our full Vanguard review for a more in-depth analysis of Vanguard features and benefits–and some exciting new changes!
Pros
- Large variety of low-cost funds to help passive investors meet goals
- Zero-commission choices for ETFs, stocks, options
- Variety of investment types to meet mid-range and long-term goals
- No account minimums
- Offers educational resources and stock analysis
- Responsive to customer feedback
Cons
- Platform is not as well suited as other for active trading
- Active traders and those looking to take a deep dive might find research and data to be limited
- Some funds do have minimum investment amounts
- No cryptocurrency trading
- No fractional shares publicly available (pilot program launched in December 2021)
How Does Vanguard Work?
There is a lot of overlap between Vanguard and other online brokerages. Vanguard has ample offers for DIY investors, who can choose from over 170 mutual funds or 80 ETFs. Many of their funds have some of the lowest fees in the industry.
With Vanguard, you can also take a more passive approach to investing. You can explore “set it and forget it” funds that you invest in yourself, including Target Date Retirement funds and LifeStrategy funds. Or you can invest through the Vanguard Digital Advisor. This roboadvisor gives digital advice tailored to your investing situation. For people who want the most support, you can work with Vanguard Personal Advisor Services. To invest, you can work with the Vanguard website or their recently updated mobile app.
To get started with Vanguard, you choose the type of investment you’d like to do. Whether you want to save for retirement, put money aside for your child’s college fund, or hit some other goal, you can likely find the investment option with Vanguard. After deciding on the type of account you want to open, you will complete an online application. Once approved, you are ready to invest!
What Does It Mean That Vanguard is Investor Owned?
While it’s true that Vanguard mostly operates like other discount brokerages, there is one aspect of how Vanguard works that sets it apart. Vanguard is investor owned. While most investor firms are publicly traded, Vanguard is different. At Vanguard, the funds own the company. So when you buy a Vanguard fund, you become an investor and an owner.
That investor-owner structure allows Vanguard to dodge the conflict of interest that can sometimes happen when a company has to keep both a group of shareholders and its investors happy at the same time. This structure is also what helps Vanguard offer investment choices with some of the lowest fees around. It’s also certainly why they take a customer-first approach.
How Do I Open a Vanguard Account?
Vanguard wants it to be simple and easy to open an account.
Step 1
When you are ready to open a Vanguard account, go to their personal investors website and select Open New Account.
Step 2
If you are new to Vanguard, you will click the I’m New to Vanguard option.
Step 3
Input some basic information about your goals and the type of investment you’d like to open. Note that the Vanguard site offers a lot of support on how to choose the right investment account type!
Step 4
After you’ve selected the type of account you want, you will enter your personal information.
Step 5
Then, you create your online account with a username, password, and security questions.
Step 6
After you’ve created your online account, you need to enter banking and employment information as requested. This allows Vanguard to fund your investment as soon as your account is open.
Step 7
Once the account application is processed and your account is open, you are ready to invest!
Vanguard Features and Benefits
Vanguard remains a favorite among investors. The variety of Vanguard features is a big reason why it is still such a fan favorite.
Let’s breakdown some of the main Vanguard features and benefits, including different types of funds and investing tools, to see how Vanguard might support your investing journey:
Vanguard LifeStrategy Funds
Are you feeling a little overwhelmed with how to start investing? LifeStrategy funds can cut down on the guesswork. These funds combine different amounts of stocks, bonds, and cash to create an asset allocation that matches your needs. Vanguard will help you think through the length of time you intend to invest, plus your goals and level of risk. Then, you can choose to invest in one of these LifeStrategy funds.
There are four different Vanguard LifeStrategy Funds:
- LifeStrategy Income Fund
- LifeStrategy Conservative Growth Fund
- LifeStrategy Moderate Growth Fund
- LifeStrategy Growth Fund
Because these funds are professionally managed, you don’t have to deal with the headache of rebalancing your own portfolio. But because they’re also Vanguard funds, the fees are still much lower than the industry standard. That makes these Vanguard LifeStrategy Funds worth exploring for any DIY investor who wants to work a little–or a lot–less!
Vanguard Digital Advisor
Vanguard continues to offer a variety of funds to take the guesswork out of investing, from their Target Date Retirement funds to the LifeStrategy funds. For investors who want a bit more support while still paying low fees, Vanguard recently introduced their version of a roboadvisor.
The Vanguard Digital Advisor offers professional money management that combines human insight with cutting edge financial technology. You work with the advisor to set your goals, retirement and otherwise. Then, it charts a custom plan for you, allowing you to monitor your progress. If your goals change, the advisor adapts with you.
While new to the scene, Vanguard Digital Advisor is already turning heads. In fact, it received NerdWallet’s award for best low cost roboadvisor in 2021.
To get started with Vanguard Digital Advisor, you need $3,000. Fees stay low–under $2 for every $1,000 invested. While the cost is higher than some of their other DIY options, Vanguard Digital Advisor is still incredibly low cost. Vanguard is so confident you will appreciate all it offers, you can try it fee-free for the first 90 days.
Vanguard Personal Advisor Services
If you want hands-on, personalized support from, well, a person, then Vanguard Personal Advisors Services is worth exploring. Their advisors don’t work on commissions. Instead, they are fiduciaries. That means that they have no outside interest or incentive–their job is to put you first.
After working with you to review your goals, Vanguard Personal Advisor Services will set you up with an investing plan using low cost funds to meet your goals .
In order to be eligible to work with an advisor, you need to have at least $50,000 in investments. Fees cost up to 0.3%, or $150 a year for a $50,000 investment. That’s still dramatically lower than the fees charged by many other financial institutions.
ESG Funds
Anyone who is interested in socially responsible investing (SRI) will be excited to know that Vanguard has an offering for that as well. You can explore Vanguard’s site to see all of their ESG funds, or funds that focus on environmental, social, and governance issues.
Let’s take a closer look at the focus of these ESG funds:
- Environmental – Conservation and protection of the environment through initiatives like waste management, emissions, and clean energy
- Social – Relationships within the company and community demonstrated by safety standards, employee relations, and community impact.
- Governance – Leadership within the company involving ethical business practices, transparency, and voting rights.
Currently, Vanguard offers two mutual funds and three ETFs that fall within the ESG category. To help investors make sure their money aligns with their values, you can learn more about the funds on the Vanguard site.
Vanguard Mobile App
One Vanguard feature that was commonly criticized was user experience with Vanguard. The website and mobile app felt dated and clunky.
However, the Vanguard mobile app–dubbed Beacon–got one facelift already and continues to be a work in progress. Vanguard says they are continuously rolling out new features and aiming to improve its functionality based on customer feedback.
The three main parts of the Vanguard Mobile App include:
- Portfolio – Keep tabs on your account balances and the big picture of your finances.
- Transact – Move money, make trades, and manage your account balances.
- Support – Get help and provide feedback for future Vanguard features you want to see.
Currently, you can use the Vanguard mobile app on Android and Apple devices. The app supports most investment accounts, not including SEP IRAs, 403bs, or 529 plans at this time.
Vanguard Investment Options
With a variety of account typements and investment options, there is a good chance that Vanguard can help you hit some of your investing goals.
Let’s review some of the most popular Vanguard investment options.
Active or Automatic Investing
Vanguard offers hundreds of low-cost index funds and ETFs for investors to choose from when creating their own portfolios. They can also use Vanguard Target Date retirement funds and LifeStrategy funds to simplify the DIY investing process.
For a more passive investing option, Vanguard offers their Digital Advisor, which is a roboadvisor service that creates and monitors a customized investment plan. Additionally, Vanguard also offers their Personal Advisors Services for people who want to work with fiduciaries.
Retirement Options
Vanguard offers investors the opportunity to save for their retirement through IRAs. You can choose from rollover, traditional, Roth, or spousal IRAs. Small business owners also have the option to save for retirement in several different ways. Small business retirement options include:
- Individual 401K
- SIMPLE IRA
- SEP IRA
- Small plan 401k
Vanguard Investment Fees
Vanguard pioneered low-fee investment options and their commitment to low fees remains.
Investors can use Vanguard to:
- Access dozens and dozens of low-fee index funds and EFTs
- Trade online stocks, ETFs, and Vanguard mutual funds for $0 commission
There are some Vanguard investment fees that you want to be aware of. And for those of you who are really cautious about fees, there are even a few ways that Vanguard allows you to dodge one fee in particular.
Let’s take a closer look at Vanguard investment fees:
Account and Advice Fees
Most accounts come with a $20 annual charge called the account and advice fee. In some instances, this fee can’t be changed. For example, 403b investors pay the fee annually regardless. But in other instances, Vanguard will waive the fee if you meet minimum account balance thresholds or even something as simple as enrolling in e-delivery of your statements.
Vanguard Digital Advisor Fees
To use the Vanguard roboadvisor, you will pay a small fee. Vanguard Digital Advisor charges a 0.15% fee for their services. All advisory fees are waived for the first 90 days.
Vanguard Personal Advisor Services Fee
More personalized human support comes at a higher cost. Thankfully, Vanguard Personal Advisor Services are still dramatically lower than the cost of working with most financial planners. Vanguard charges a 0.3% fee to work with their fiduciaries.
Vanguard Customer Service
Vanguard believes in putting its customers first. That’s that investor-owned model in action. One of the clearest ways to see that is through Vanguard customer support.
Anytime you need support, you can reach out to Vanguard customer service. Their website is already full of calculators, tools, tutorials, and guided support. If you need more support, you can call Vanguard Personal Investors Support at 877-662-7447 from 8AM to 8PM ET Monday through Friday.
Types of Accounts Supported
Once you set up your Vanguard account, you are likely wondering how to fund it. There are a variety of ways that you can move money into your Vanguard account.
Bank Transfer
You can either do an electronic bank transfer (EBT) or wire transfer after you connect a bank account. Additionally, investors can also set up automatic deposits to keep your investments growing.
Direct Deposit
To automate your investing, you might consider setting up direct deposit. The most common option is to set one up through your employer. You can also have your Social Security money or tax refunds deposited directly into certain Vanguard accounts.
Send in a Check
Investors can also send in checks. Note that when you mail in a check, you also need to submit a deposit form. That will help make sure your money gets where it needs to go.
More details about funding your Vanguard accounts are available on their website.
Vanguard FAQ
Vanguard is one of the most popular investment options around. But just because you’ve heard the buzz about it, doesn’t mean that you don’t also have questions.
That’s why we researched the most commonly asked questions about Vanguard and dedicated our Vanguard FAQ section to them.
Is Vanguard Safe?
Are you asking yourself, “Is Vanguard safe?” It makes sense that you want to protect your investments. Vanguard understands that. As a result, they prioritize your account security.
Vanguard encourages investors to use security features, such as two-factor identification and security keys to keep their login information safe. You can also set up account activity alerts to keep an around-the-clock eye on your accounts. Vanguard also recently rolled out the option to let investors use voice verification. You can access account information by phone after you confirm your identity with the sound of your voice.
In addition to these security features, Vanguard also uses SSL validation encryption to protect your data.
Investors should remember that investments are not guaranteed. Your accounts are not FDIC-insured, like checking or savings accounts. As a result, investing always carries the risk of loss.
Is Vanguard Good for Beginners?
Recently, Vanguard added more options, like their roboadvisor, to offer more support to beginner investors.
However, many beginners will be priced out of fund minimums of $1,000 or more. If you have the cash set aside, Vanguard can be a great beginner option. However, if you are looking to invest with a smaller balance, you might consider other brokerage or investing app options.
How Much Do I Need To Invest With Vanguard?
There is a $0 minimum requirement to open an account with Vanguard. However, many Vanguard funds do have a minimum requirement of $1,000.
Additionally, once you have $3,000 in most index funds, you get access to Admiral Shares. The fund is the same, but the expense ratio gets slashed even more. That means it costs even less for you to hit your financial goals.
If you intend to use Vanguard’s advisors, the minimum requirement is steeper. You need $3,000 invested to access their roboadvisor and at least $50,000 to work with their human advisors.
Bottom Line: Is Vanguard Worth It?
Since Vanguard addressed one of the biggest pain points for users by improving the user experience with their new mobile app, Vanguard truly is a solid brokerage choice. They offer a wide range of account types, plus you can choose from hundreds of low-fee funds. Whether you want to DIY your own portfolio or get support from a roboadvisor or a human advisor, Vanguard pledges to keep their fees low.
New investors who are looking for more support with low or no roboadvisor account minimums may find themselves looking elsewhere. The same is true for investors who are looking to build portfolios with cryptocurrency.
Vanguard Alternatives
Vanguard is the original low-fee index fund brokerage. While Vanguard remains incredibly popular with investors, it is possible that there might be a better investment option for some people.
Review our favorite investing apps for 2021, and then check out these Vanguard alternatives:
Swan Bitcoin
Cryptocurrency is here to stay. If you are looking to add Bitcoin to your portfolio, then you’ll have to look beyond Vanguard. That’s where Swan Bitcoin might come in. Investors can use Swan to make instant Bitcoin purchases with their bank accounts. Plus, you can also set up automated Bitcoin savings plans to keep your investments growing. Bitcoin and other crypto likely should not replace your other investments, but Swan can certainly complement a more traditional Vanguard portfolio.
See our full Swan Bitcoin review here.
Acorns
Vanguard can be a great brokerage for beginning investors. But we understand that some people want to work with a roboadvisor right away. That’s why that $3,000 minimum can be a real barrier to new investors.
In that case, you might explore your options with Acorns. Acorns allows investors to set up traditional, recurring investments without worrying about minimums. They also have a really unique Round Up feature that can make investing feel accessible to all. By linking a credit card, you can start investing with just a few cents. That’s because Acorns rounds up all of your purchases and sets the spare change aside. Once you round up five dollars in change, their roboadvisor gets to work.
See our full Acorns review here.
Fidelity Investments
Fidelity Investments is a brokerage that is very similar to Vanguard. For investors who are really looking to cut costs, you might be interested in exploring one of four Fidelity ZERO Funds. These funds have no expense ratios.
Additionally, investors who are looking for human support might be excited to know that Fidelity has Investor Centers in several different states. So if you are looking for a brokerage with a brick-and-mortar component, Fidelity might be the right choice for you.
See our full Fidelity review here.
