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Vanguard Review 2024: Low-Cost Investing On The Path To FI

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.

We have updated our Vanguard review for 2024 to clearly lay out the most notable pros and cons of this investing platform and why it’s a FI community favorite year after year. We’ll look at why people so often recommend it as the best place to invest your FI funds, what types of accounts you can open, and what to expect when using it.

If you head over to the ChooseFI Facebook group and ask for investment recommendations, you will inevitably have someone suggest a Vanguard fund. In Financial Independence circles, Vanguard is one of the most well-known names thrown out for low-cost funds investing.

What Is Vanguard?

To many in the FI community, Vanguard is the best option for low-cost investing. Founded in 1975 by John Bogle, the brokerage boasts $7.1 trillion in global assets under management.

Vanguard has more than 30 million investors scattered across 170 countries. It has international offices in China, the Netherlands, Hong Kong, Australia, Japan, Canada, France, and many more countries.

What makes Vanguard unique is the way they structure the investment firm. Unlike other mutual fund companies, Vanguard is client-owned, with no outside owners seeking profits. This means that shareholders own the funds and, in turn, own Vanguard. The Vanguard Group, birthed from the organization’s founding members, only owns 9.06% of Vanguard (far from controlling interest).

The results? Lower investment costs and a company that puts clients first. This has led to strong fund performance over time, making Vanguard a leader in the space.

Is Vanguard the Best Place to Invest?

If you’re looking for low-cost investing, Vanguard is one of the best options. However, it comes with a set of pros and cons, which we will discuss further. What makes Vanguard stand out is the sheer number of no-load, low-cost fund options.

Vanguard is a good solution for buy-and-hold investors (also called “position trading” – an investment strategy where an investor buys financial or non-financial assets to hold for the long run. Pioneered by Warren Buffett). This makes it a good fit for those pursuing Financial Independence. The low-cost options combined with the service and selection offered by Vanguard make it hard to beat.

One of the most recommended Vanguard funds in the ChooseFI community is VTSAX. It’s a total stock market fund, which means you invest in the entire U.S. stock market. It also has one of the lowest expense ratios at 0.040 percent.

Here’s a list of some of our favorite Vanguard funds:

  • 13% return over the last 10 years: Vanguard Total Stock Market (VTSAX)
  • The first index fund for individual investors: Vanguard 500 Index Fund (VFIAX)
  • In the top third of category peers: Vanguard Mid Cap Index Fund (VIMAX)
  • 8.31% return over the last 10 years: Vanguard Real Estate Index Fund (VGSLX)

Is Vanguard the Best Low-Cost Option?

If you’re looking for a low-cost, no-frills investing option, Vanguard is the company to choose. The company has staked its reputation on offering some of the lowest expense ratios on index funds and exchange-traded funds.

Vanguard also offers commission-free online transactions on many ETFs (currently around 1,800). It has also lowered the investment minimums on many of its cheapest index funds, making it a good deal for newbie investors.

If you’re saving and investing toward Financial Independence, Vanguard offers the best selection of funds that follow the stock market and don’t cost an arm and a leg. This strategy is best for buy-and-hold investors, which makes Vanguard a good fit for the ChooseFI community.

Dive deeper: Dollar-Cost Averaging and Low-Cost Index Funds

Vanguard Investment Products

When it comes to mutual funds, it’s difficult to beat the variety and cost that Vanguard offers. You can pick from more than 150 mutual funds and exchange-traded fund (ETF) options.

Investors can buy and sell Vanguard funds at no cost, and Their fund expense ratios are among the lowest of any investment company.

Choose from a variety of types of funds from several asset classes. You can create a diversified portfolio that focuses on the S&P 500, the entire U.S. stock market, international funds, by sector, or a mix that fits your risk tolerance.

Vanguard also offers the option to buy direct individual stock shares or funds managed by other firms. However, prepare to pay higher fees for anything outside the Vanguard fold.

Other Vanguard investment options include individual bonds, certificates of deposit (CDs), and money market mutual funds. These can be good options for adding diversity to your portfolio or earning interest on the cash you will need in the short term.

Vanguard also offers managed portfolios for a fee. This involves working with a personal investment advisor who will manage your investment portfolio.

Like several other firms, Vanguard also offers a robo-advisor option. However, to develop a strategy, you’re required to have an initial life consultation with an advisor.

Account Options

Here is the current Vanguard account offering:

  • Individual Retirement Accounts (IRAs): Vanguard gives you the option to open a traditional (pre-tax) IRA or a Roth (post-tax) IRA. This can be a good option to supplement your existing retirement account, such as a 401(k). In addition, building a Roth IRA conversion ladder can be great for accessing funds during early retirement.
  • Taxable accounts: If you’ve already maxed out your tax-advantaged account and still have money left over, consider investing in a taxable account. Vanguard allows you to invest in stocks, bonds, mutual funds, and CDs.
  • 401(k) rollovers: If you move from employer to employer, you’re usually left with retirement accounts at different institutions. Vanguard can be a great place to roll over and merge old 401(k) or 403(b) accounts since they make the process easy and painless. As a bonus, there are no penalties or fees for rolling over an old retirement account to a Vanguard IRA.
  • Simple, SEP, and Solo 401(k): If you’re self-employed, you will appreciate Vanguard’s selection of funds targeted at business owners. To build up your retirement savings, you can easily open a Vanguard Simple, SEP, or Solo 401(k) account.
  • 529 plans: One option for saving for your child’s higher education is by using tax-advantaged accounts such as 529 plans. Vanguard offers the option to open a 529 plan and reap the benefits of tax-free savings for college.
  • Annuities: While annuities are not a product often mentioned in FIRE circles, it’s good to know that Vanguard offers this option. You can get both a fixed income and a variable annuity through Vanguard. They have some of the lowest rates in the industry for this type of product, so do your research if you’re considering an annuity.

Dive deeper: How And Why To Set Up A Roth Conversion LadderBuying And Selling Costs

Buying and Selling Fees & Costs

Vanguard has built its company on the promise of low-cost investment options. Fees and investment costs can eat into your portfolio returns and lower your long-term earnings. This is why it’s among the most recommended in the FIRE community.

One tenet of Financial Independence is to buy and hold securities for a long period. This makes Vanguard’s pricing structure tailor-made for this type of investing. Here’s what to expect price-wise when investing with Vanguard:

  • Vanguard mutual funds: FREE
  • Vanguard Exchange-Traded Funds (ETFs): FREE if you buy or sell 25 times in a year or less
  • Other stocks and ETFs: $7 per trade
  • Other no-load mutual funds: $20 per trade
  • U.S. Treasuries: FREE
  • Options: $7 +$1 per contract

Vanguard does not offer futures and forex (foreign exchange market) trade options.

Looking at the buying and selling costs above, it’s easy to see that a buy-and-hold strategy is the cheapest way to invest with Vanguard. Investors who trade funds and securities often, especially outside the Vanguard fold, may be better off with one of the competitors.

When it comes to long-term investing, free is hard to beat. Mutual fund expense ratios are some of the lowest in the industry, offering savings of more than 50 percent over the competition.

This can make a big difference when your investments reach six and seven figures, as is often the case with many FIRE followers.

If you want to see how switching to Vanguard will affect your portfolio, there’s a handy calculator on their website. Just plug in the required numbers to get an idea of your savings over the long haul.

Dive deeper: Investing 101 | The Ultimate Guide To Investing 

Investment Minimums

Vanguard does not have account minimum requirements so that you can add any amount to your investment account. However, investing in mutual funds requires a few hundred to a thousand.

Other firms just need a few hundred to a few thousand dollars to open an account. This can make it difficult for new investors to start and build their portfolios.

Some funds require a minimum investment of $3,000, but Vanguard has recently lowered the threshold with a few options starting at $1,000. Another positive is that Vanguard offers the option to buy a single share of a Vanguard ETF, dropping the barrier further.

Even if you have only a few hundred dollars to get started, you can build a well-diversified, low-cost portfolio in a few months.

Vanguard investment minimums can vary between different account types. Do your research before getting started so you’re not disappointed if you don’t have enough. Vanguard makes it easy to open a new account and figure out if you meet the requirements.

Dive deeper: How To Open Accounts With Vanguard, Fidelity, and Schwab

Research & Analysis Tools

Vanguard’s offerings may disappoint if you love analyzing data and running scenarios. Their research platform is clunky and fairly limited, making it difficult to analyze new securities or run simulations.

You can use no customizable charts or tables to evaluate different investment options. If you’re looking for data to support your investment decisions, you will have to dig through PDF files and do your own analysis.

The high trading fees and lack of research and analysis tools make Vanguard a subpar option for day traders. If you’re investing for the long term, Vanguard offers a portfolio watch feature that will give you some insights into how your investments are doing.

Vanguard Pros And Cons

Investing for Financial Independence differs from investing for traditional retirement. If you have one, you will need to accumulate a large portfolio that will support you and your family for the rest of your life.

While Vanguard is often recommended as the best option for stashing your early retirement cash, it has pros and cons. You need to evaluate how Vanguard compares to other investment options before deciding where to invest.

The Pros

Here are some pros of choosing Vanguard to manage your investments:

  • Low costs: You won’t find many other brokerages that can compete with Vanguard on cost. Comparing their mutual funds against other options shows savings of more than half. This can make a big difference when investing large amounts of money.
  • No minimum requirements to open an account: Unlike other brokers, Vanguard does not require you to deposit thousands of dollars to open an account. There is no minimum dollar amount to open a Vanguard account. This can vary between account types, so always double-check.
  • Ease of account opening: Vanguard makes it easy to open a new account, especially if you want to roll over an investment account from another institution. They will complete your rollover in a tax-efficient manner, which is very helpful.
  • Fund performance: If you’re a long-term investor, you will be happy to know that more than 90 percent of Vanguard’s mutual funds outperformed their peer-group 10-year averages. Just keep in mind that past performance is not indicative of future performance.
  • No-fee ETFs: Trading Vanguard ETFs is free. Many competitors charge a per-trade fee, so this can save you a bundle. ETFs are a great way to diversify your portfolio. Remember that you can’t buy or sell the same ETF more than 25 times a year.
  • No sales pressure: Because Vanguard is an investor-owner, there is no outside pressure to push its product offerings. If you’re with another investment firm, it can be a nice change of pace not to be bombarded with actively managed fund recommendations.
  • Simple offerings: Vanguard makes it simple and easy to use its products. If your goal is long-term investing, you will appreciate this when building your portfolio.

The Cons

Here are some cons to consider when evaluating Vanguard for your investments:

  • Buying and selling costsThe costs of buying and selling stocks through Vanguard make it unsuitable for day traders. If you’re looking for a platform to make multiple trades a day and to trade non-Vanguard funds, your costs will add up. There are other options with lower trading fees that would be suitable for frequent traders. Vanguard is best for buy-and-hold investors.
  • High fund initial investment minimums: While there is no minimum to open most types of Vanguard accounts, investing is a different story. Many of the funds Vanguard offers have high investment minimums, sometimes requiring thousands of dollars. While they’ve added more funds with lower minimums, it will limit your selection.
  • Limited research tools: If you love researching and analyzing your portfolio, Vanguard may not be the right platform. There are no pretty drawing tools, trend lines, or volume data to help you with your investments. As mentioned previously, this is partly because Vanguard does not cater to day traders but works best with a buy-and-hold strategy.
  • Expensive non-Vanguard funds: If your goal is to build a portfolio of funds from different institutions, prepare to pay up. While Vanguard funds and ETFs are cheap, mutual funds from other institutions are more expensive.
  • High day trading costs: Vanguard’s steep per-trade costs make it unsuitable for day trading. If you like to buy and sell multiple securities every day, there are other lower-cost options better suited for this style of investing.
  • Limited investment options: Vanguard has sufficient offerings for most investors to build a well-balanced portfolio. You can buy the most common investments, such as stocks, bonds, and mutual funds. However, investors interested in commodities, futures, and the like should look elsewhere.

The Bottom Line

When it comes to low-cost investing, you will be hard-pressed to find a better option than Vanguard. As we’ve reviewed throughout this post, Vanguard offers low-cost mutual funds and ETFs that appeal to the buy-and-hold investor.

Because Vanguard is investor-owned, you won’t be targeted with managed fund offers. Even if you’re interested in their personal advisory services or robo-advising option, you will still pay less than the industry average.

This is one reason that Vanguard is often recommended in Financial Independence circles. Just do a quick search for Vanguard in the ChooseFI Facebook group, and you’ll get hundreds (if not thousands) of posts recommending their funds.

For those of us investing for the long term, Vanguard offers cheap funds with low expense ratios and above-average performance. This is the perfect recipe for those working toward Financial Independence.

Do you invest with Vanguard? What has been your experience? Share in the comments.

Dive deeper:

vanguard review
Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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