Vanguard Review

Trade Experience

Vanguard recently updated its main menu, support center and website's mutual funds purchase flow. The Vanguard website's trading experience is not updated despite these changes. Trading pages, security profile and research pages all use real-time quotes. Market and security information displayed on the website have delayed quotes. The portfolio balances, holdings and security lookup pages display delayed quotes.

It makes sense, again, that real-time quotes do not automatically refresh, as passive investors are not eligible for them. Instead, quotes are updated as trades progress. It is possible to submit trades online in several clicks, so quotes do not need to be updated prior to submitting them. The good news is that tax lots are available before placing an order online.

Vanguard doesn't allow conditional orders or trailing stops. They also won't let you enter multiple orders at once. This process is extremely inefficient if you are an active trader or investor.

The trading experience is good for the target investor who buys and holds, slowly building a portfolio. The trading experience is not suitable for other investors who expect a flexible and responsive platform.

Mobile Experience

The Vanguard app is still light in terms industry features, even after a redesign. Similar to Vanguard's website and the app, stocks and ETFs quotes will show a delayed price until your order is placed. The app cannot be used to access non-Vanguard mutual fund options or funds. You can customize your "My Feed", which includes account information, news, blog posts, transaction history, performance, and other details.

A wide range of offerings

You can trade a wide range of assets as a Vanguard client.

• Stocks and ETFs are long-term; short sales limited

• Mutual funds (In addition the 130 Vanguard funds.)

• Bonds (Corporate and Municipal, Treasury, and CDs).

• Vanguard Personal Advisory Services & Vanguard Digital Advisor

• Foreign securities transactions

Types of Order

Vanguard's philosophy is focused on long-term investing. Therefore, the broker's order types are restricted to those that suit buy and hold investors. You can only place market, limit and stop-limit order types. Vanguard doesn't support trailing stops or conditional orders, and you can't stage orders for later entry. Multi-order trades on products other than mutual funds, are also not supported at the moment.

Trade Technology

Vanguard's order routing technology, like its trading platform, is simple. You cannot backtest, automate, or automate trading strategies, and you won't be able route your own orders. Vanguard's routing approach is simple, but it will be a hit with investors. It does not accept orders flow for equity or ETF orders.

Based on the most recent data, Vanguard reports a $0.0147 share price increase on stock orders. This was $0.0231 per share for 2021. The slight slippage is likely to reflect the stock market volatility. The broker claims that it reviews every order of clients and conducts regular and thorough quality control. Over 95% of Vanguard ETFs with a maximum of 2,000 shares have been executed at or near the spread (i.e. without spread cost) by the broker for 2021.

Vanguard doesn't offer a trade simulation. This is not surprising, considering that Vanguard was designed to encourage low-cost, long-term investing and discourage trading.

Prices

Vanguard joined zero-commission brokerage in January 2020, a long time after other brokers. Many Vanguard trades could have been executed without commission because of its many no-commission ETF options. These are the Vanguard costs:

• Vanguard does not charge commissions for ETF, OTCBB, or online equity trades. The base commission does not limit the number of shares that may be traded.

• Options trades are free of per-leg commissions. The per-contract commissions for options trades are $1. This is significantly more than the average online broker.

• Orders for 50 options contracts cost $50

• Investors who have accounts with more than $1 million receive 25 options trades free per calendar year, while those with $5 million and more receive 100. This free trade is a share with other commission-eligible transactions (25 total for options and transaction fee mutual fund).

• Clients with less than $1,000,000 in Vanguard ETF or mutual fund assets can trade an ETF online for $20 and a $25 broker-assisted call fee.

• Clients who have more than $1,000,000 in Vanguard ETF or mutual fund assets will be allotted 25 trades for $0, and it costs $8 to trade an transaction-fee mutual funds online or by phone.

• Vanguard charges a $25 live broker fee per trade. Live brokers are available for clients with accounts worth more than $1,000,000.

• Margin interest rates range from 10.75% on a $10,000 balance to 9.25% when you spend more than $100,000, as of August 2022.

• Fixed income transaction fees can vary. U.S. Treasuries have no commissions. CDs, corporate bonds and municipal bonds are subject to a $1 per $1000 face value fee for secondary markets transactions. 35 cents per trade are charged for mortgage-backed securities.

• Vanguard funds accounts below $10,000 have an annual fee of $20. This fee is waived if account statements are sent electronically.

• There are no fees for account inactivity, closing or transfer, exercise/assignment or receiving wires, checking out, sending checks or paper statements, and trade confirmations.

• Vanguard charges a $25 live broker fee per trade. Live brokers are available for clients with accounts worth more than $1,000,000.

• Outgoing wires are subject to a $10 surcharge, both domestically and internationally.

How this broker makes money for you and from you

Online brokers need to find profitable ways to make a profit as the industry sees fee compression in equity and option trades. Here are some of the ways Vanguard makes its money for you.

• Interest paid for cash:Vanguard charges a higher interest rate than the average of 0.38% and automatically transfers uninvested cash to a money market fund. All interest on idle cash is paid directly to you. Vanguard is different from other brokers who keep the difference between what they make on customer cash and what they pass on.

• Payment for Order Flow (PFOF:There are many brokers who use order flow payment as an additional revenue stream. Vanguard is not. Brokers who participate in order flow payment are paid for their services as a broker for placing your options and equity orders on specific trading platforms. Vanguard is not involved in PFOF.

• Stock loan programmes:Vanguard makes use of the stocks in its funds to take part in the stock loan program. The fund realizes modest returns by lending securities to its funds, which are then passed on to investors. Due to the existing within-fund lending program, there are no separate stock loans programs at an investor portfolio level.

• Price Improvement:Vanguard’s order router achieves a net price increase of $0.0147 per share. Vanguard's price improvement per option order is $0.0605

• Portfolio margin.Portfolio Margining works best for customers who trade derivatives to offset the risk in their equity positions. Vanguard does not want traders or derivatives traders as customers so portfolio margining is not offered.

Account and Research Amenities

Vanguard is a big broker but they don't have the account amenities and research capabilities that you would expect from a larger broker. Vanguard was designed for the target client who buys and holds, so they have eliminated almost all non-essential items.

Stock Screener

Vanguard offers a stock screener but it has limited functionality. You can choose from three pre-made screeners. However, you can create your own and save it for later use. Screens can't be used to screen stocks for technical indicators. Vanguard has a stock comparison tool which allows investors to compare stocks using a variety of metrics.

ETF and Mutual Fund Screener

Vanguard provides both an ETF-specific screening tool and a mutual fund screening option. This allows you to compare the characteristics of mutual funds and ETFs side by side.

Option Screener

Vanguard doesn't offer any specific screening tools.

Fixed Income Screener

Vanguard provides a fixed income screening tool. It has a list that includes all available CDs and bonds for retail investors. Vanguard clients can create a bond ladder, but they cannot use it for simultaneous buy orders.

Charting

FactSet developed Vanguard's charting functionality. Charts can be customized, but technical analysis is not available. The capability is also limited.

Calculators and Tools

Vanguard can help you to strengthen your financial toolset with a variety of resources that you can do yourself. Most of the tools offered by this broker are focused on retirement planning. Vanguard, for example, has a retirement plan worksheet, a retirement income calculator, a required minimum distribution estimator and a "when do you retire" tool. You can also use the investor questionnaire to help you create a diversified portfolio that aligns with your risk tolerance and your retirement goals.

Vanguard provides a college planning calculator, cost estimator, education savings calculator, and 529 plan tax deduction calculator.

Trade Idea Generator

Vanguard doesn't have a trade ideas generator.

News

Real-time streaming is not possible, but news from MT Newswires or Associated Press can be accessed.

Research by third parties

Vanguard provides daily market reports and third-party research from Market Grader and Argus. These reports are available for free to registered clients.

Cash Management

Vanguard automatically transfers idle cash into money market funds at a low cost ratio.

Fractional Dividend Reinvestment Plan - DRIP

Vanguard users cannot specify a dividend reinvestment when they purchase dividend-paying stocks. Once the security has been purchased and settled you will be able to decide whether to reinvest in the stock or receive cash. Vanguard offers two options: you can choose to make your decision at the account level which controls all purchases, or you could make your selection security by security. When a full share is not available, DRIP purchases can also be made with fractional shares.

SRI/ESG Research Amenities H4

ESG investing is now mainstream due to improved information and increased interest by investors who want to make an impact with their investments. Vanguard offers a dedicated section on its website that focuses on ESG investing and socially responsible investing. The majority of the funds are indexed and use an exclusionary strategy to exclude companies that do not meet certain ESG criteria. Vanguard currently manages one fund that is actively managed. This fund has an integrated strategy, which includes companies working towards ESG practices.

Portfolio Analysis

Vanguard's website provides real-time updates of portfolio reports and analysis. You can customize it and add holdings from other accounts. Realized and unrealized capital losses and gains are displayed in real time. You can also view margin, buying power, and account balances. Your unrealized short-term and long-term capital gains can be viewed as well. Vanguard has a sector analysis tool that alerts you when you are too exposed to a particular sector. This tool also takes data from any other financial accounts you have linked to Vanguard.

While there are capital gains reports available, they will not allow you to calculate the tax consequences of future trades. Turbo Tax will provide additional tax reporting. You can calculate both the internal rate of return and the time-weighted return. You can use the re-skinned Portfolio Watch to evaluate any portfolio rebalancing changes you are thinking of.

Vanguard does not have the ability to add notes to trades or keep a trading journal.

Education

Vanguard is a well-known institution that provides education to investors. Their content focuses on helping investors set financial goals and create a plan to achieve them. There are many educational resources, including blogs, news articles and social media commentary. You can also find webcasts about investment products, retirement, industry news and financial planning. Vanguard offers life stage planning tools that are useful for both beginners and experienced investors. Vanguard doesn't offer a paper trading platform, as previously stated.

Customer Service

• Telephone support is available Monday to Friday, 8am-8pm

• Vanguard does not provide live chat with customer support representatives for potential clients via your website, platform, or mobile app.

• Vanguard doesn't have chatbot capability but has an easy task search function in its client support center.

• You will always have access to financial advisers as a Vanguard Personal Advisor Services Client.

• Vanguard's service level will determine how long you are on hold.

Security and reliability

• Apple users can log into their accounts using biometric (face, fingerprint) recognition.

• Vanguard has excess Securities Investor Protection Corporation insurance (SIPC), provided by Lloyd's of London, London Insurers and with a total limit of $250 Million

• Maximum customer limit is $49.5million with a cash limit maximum of $1.75million per customer.

• Vanguard has not experienced any platform outages over the past four years.

• Vanguard has not reported any data breaches.

Transparency

Vanguard has not been subject to any major regulatory filings in recent years. It has a dedicated website to explain its pricing structure as well as fees. There will be information about the costs of stocks, ETFs and mutual funds as well as options contracts, fixed income, trading on margin, and fixed income. Information on client services, such as wire transfers, will also be easily found.

There are many account types available

Vanguard offers both the most common types of accounts as well as those that are specifically designed for college savings and small business retirement accounts. The following account types are available from Vanguard:

• Brokerage accounts for individuals and groups

• Corporate investment accounts

• 529 Savings Plans

• Uniform Gifts to Minors Act accounts (UGMA) or Uniform Transfers to Minors Act accounts (UTMA).

• Trusts

• Traditional individual retirement accounts (IRAs).

• Roth IRAs

• Spousal IRAs

• Simplified employee pension (SEP) IRAs

• Savings Incentive Match Program for Employees (SIMPLE), IRAs

• Small plan 401(k).

• Individual 401(k).

Final Verdict

Vanguard is the market leader in passive investing. Vanguard's entire ethos is built around buy-and-hold, low-cost passive investing. Vanguard customers use their broker to buy Vanguard funds. You may also have Vanguard funds in your account even if they are not Vanguard customers. By choosing Vanguard to be your online broker, you are committing to passive investment. If you do this, you reap the most benefits from Vanguard's basic--but very affordable--offering.

Vanguard's competitive advantage lies in its wide range of low-cost mutual funds and ETFs. Vanguard's platform, mobile app, and services will appeal to buy-and-hold investors, despite their limitations. Although the platforms aren't as easy to use or as up-to-date as Vanguard's competitors they can help you build a low-cost, diversified portfolio over the long-term. Vanguard clearly warns you not to use their trading tools for active investment if you're looking for strong trading tools.