Vanguard conjures up an epic image of low-cost, indexed-based mutual fund investing. Its funds boast some of the industry’s lowest expense ratios (going as low as 0.04%) compared to its competitors. Since 1975, it has grown to become one of the largest no-load mutual fund companies in the U.S.
This leader in low-cost investing recently extended commission-free trading for options and stocks to all of its clients. Vanguard also has a pipeline of brokerage enhancements in 2020, including a redesigned mobile app, a new trade path and an updated online experience. While the cost of investing on this platform has been reduced, Vanguard encourages all of its investors to look beyond commissions and take into account the all-in cost of its brokerage relationships, including expenses, fees and opportunity costs.
How to Open a Vanguard Brokerage Account
Follow these instructions to open your Vanguard brokerage account.
- Fill Your Personal Information.
You need to navigate the “open an account” page and choose the individual brokerage account option. After choosing your account type, fill in any personal information requested (email, address, citizenship, phone number and Social Security number). You will also need to add your employment information if you are currently working.
Similar to other brokerage accounts, Vanguard wants to know whether you are associated with a stock exchange, broker-dealer or the Financial Industry Regulatory Authority (FINRA). You will also answer whether you or any close family members are a policymaking executive, a board member or 10% shareholder of a publicly-traded company.
After getting through these questions, proceed to the next step.
- Pick Your Investments.
As you open your brokerage account, you’ll be asked to pick your preferred investments. Vanguard has a host of ETFs and funds available to choose from. If you are not sure which way to go, discuss your options with a Vanguard funds professional.
- Set up Funding.
Most online brokers make it optional for you to fund your account at this stage but Vanguard places it early in the account setup process. All you need at this stage is your checking account’s number and routing information. You could also mail a check later.
Here, you may also learn about Vanguard’s money market settlement fund. When you open your brokerage account, you also set up a settlement fund where your money is held before it is invested in any assets. This settlement fund is created simultaneously with your brokerage account. After adding all your account information, proceed to Review Your Information.
- Review and Sign.
Here, you’ll essentially be going through the information you provided to confirm its accuracy. You will also formally agree to open your brokerage account at this stage, so read and understand all information regarding the rules and fees. If all your details are correct, accept the account terms and proceed to create your online login.
- Set up Your Login.
Vanguard’s final step is setting up your secure web access. Here you choose a username and password, which you’ll use to access your online account. You’ll also answer a few security questions that add an extra layer of security in case you need to recover your forgotten password. With your account ready, you can view your balance and performance history.
Congratulations! You can start trading.
How to Fund Your Vanguard Account
Vanguard offers a few ways through which you can move money into your brokerage account for trading online. Here are some key points to know:
- Bank transfers are the quickest and safest way to fund your brokerage account.
- Setting up automatic deposits means you will never forget to invest.
- Assets in a different Vanguard account held in your name could pay for a trade in your current account.
Here are the common Vanguard account funding options.
1. Bank Transfers
Transferring funds electronically from your credit union, bank or savings and loan to your Vanguard brokerage account offers a safe and convenient way to trade online. The electronic transfers use the Automated Clearing House (ACH) network and Vanguard doesn’t charge any fees for them.
Electronic banking also allows you to send scheduled and automatic deposits to your brokerage account. This automatic investing lets you stick to your investment plan while simplifying your portfolio management.
2. Direct Deposits
Income from the government, your employer or other sources can be sent directly to your brokerage account. Once you set up the direct deposit service, it remains active in your Vanguard account until you delete it.
3. Mailing a Check
You can also add money into your Vanguard account through a check. Just follow the simple instructions on your account when you choose “Check” to fund your account.
4. Transfer Assets From Another Vanguard Account
Do you need assets from another Vanguard account to cover your trade? You can easily move assets held in your name into your new settlement fund.
Understand What Fees You Need to Pay
Vanguard charges a $20 annual fee for its brokerage account. However, this fee can be waived if you register with any premium account, have a minimum of $10,000 in ETFs and Vanguard funds or choose to have your account statements and paperwork sent electronically. The company also charges $7 per trade for the first 25, after which the cost increases to $20 per trade.
A nice perk with Vanguard is that it doesn’t charge you for placing an order on its funds through phone, unlike other brokers. The company has no account minimum, so you can open a brokerage account without funding it immediately. You will still need enough funds to purchase a full share of any of its securities since Vanguard does not allow investors to buy fractional shares.
How to Research the Stocks to Buy
Familiarize yourself with an investment before you decide to buy stocks. Start by finding out what the company does and the sector it operates in. Get a feel for its position in the market, sector prospects and main competitors. Take an extra step to research the management team. Who is running the company? Analyze the annual report for some insight into the directors and the board members. Are they buying shares in the company, indicating confidence?
As part of the research, analyze the company performance. Historical performance isn’t a reliable indicator of future performance, so look into the company finances. Look at the accounts and annual reports for a broader view of its finances. Find out how other brokers view the stock. You should also know when is the right time to buy stocks. While it can be difficult to get your timing right, keeping an eye on the news is crucial. Assess the impact that news and markets may have on your investments.
Start Fee-Free Fund Investing Today
Vanguard is a big name in the funds space, with assets worth trillions managed by its funds. This broker is a great option for clients investing solely in the company’s funds. Vanguard offers thousands of mutual funds, most of which can be traded with no transaction fee. There’s no account minimum, so you don’t have to fund your account upon opening.
Besides its educational materials, Vanguard’s site also includes tons of retirement-planning calculators, tools and resources for all investors. While you can easily trade ETFs, individual stocks and bonds on Vanguard, its system lacks some of the advanced stock-screening tools available on other brokerage firms.
Vanguard offers personalized investment services, which combine financial advice on how to buy stocks on Vanguard with automated recommendations based on your investment objectives.