Vanguard is known for its proprietary mutual funds with low expense ratios. Fewer experts review the company because its brokerage services mainly support its fund business; investors give Vanguard high marks, however, because of its low-cost funds.
A $3,000 minimum for most new accounts. Vanguard offers a range of mutual funds, a robust website and good customer support. However, the company's website is multilayered and its investment options and fees can get confusing; consumers may want to confirm fees, costs and choices with a Vanguard customer-service representative before making an investment. (For example, you'll be charged $20 in annual maintenance unless you sign up for an electronic-only account.)
Most new accounts require a $3,000 minimum; IRAs are $1,000. While the interface is straightforward and facilitates trading and checking account balances, it's not set up for active traders. Founded in 1975, the company manages about $2 trillion in assets. Its web-based products are more formal and traditional, while offering modern resources. Mobile apps are available for iOS and Android, and also allow trading.
Best for long-term, Vanguard-fund investors. Vanguard is most suitable for buy-and-hold investors who own Vanguard funds; its no-commission mutual funds have the lowest costs in the industry. You'll also pay no fees to open up a Vanguard IRA; other funds vary in price. In addition to running funds, Vanguard offers stocks, options, bonds, CDs and foreign securities.
The price structure can be confusing (it varies based on how much you invest) so be sure to read the fine print on the website. Stock-trading costs are fairly steep, ranging from $7 per trade for the first 25 to $20 per trade thereafter. If you trade frequently and want advanced trading technology at a reasonable cost, experts recommend Interactive Brokers (Est. $0.005 per share); more moderate traders can also consider TradeKing (Est. $5 per share).
Offices and limited phone hours. Vanguard offers email and in-person help. Phone help is also offered, with limited hours (phone support isn't offered on Sundays). Its website isn't clear on all of its customer-service options, and it does not appear to have live chat. Experts generally praise Vanguard's customer service, and it tests very well in surveys by ConsumerReports.org and J.D. Power and Associates.
But several customers on message boards complain that the company's assistance is painfully slow and transferring money out of the brokerage is a laborious process that can take over a week. Not surprisingly, given that Vanguard's low-expense mutual funds are its main selling point, this online broker offers excellent educational resources on retirement planning.
1. J.D. Power & Associates
More than 3,600 investors who make all of their investment decisions without an investment adviser responded to J.D. Power and Associates' 2013 self-directed investor satisfaction survey. Vanguard is third with 795 out of 1,000 points, while Charles Schwab is second with 796 and Scottrade comes in first with 810.
Review: 2013 U.S. Self-Directed Investor Satisfaction Study, Editors of J.D. Power and Associates, June 17, 2013
ConsumerReports.org ranks the performance of nine discount- and four full-service brokerage firms based on a 2010-2011 survey of over 7,300 ConsumerReports.org subscribers. Vanguard is ranked third and scores especially well on customer service.
Review: Where to Put Your Money, Editors of ConsumerReports.org, Feb. 2012
Investor's Business Daily's website, Investors.com, identifies the best online brokers based on a survey of 10,250 Investor.com readers. Twelve categories are weighed, including low commissions and fees, where Vanguard scores well.
Review: Top 5 Online Brokers Ranked for Every Investor Type, Victor Reklaitis, Feb. 5, 2013
Blogger Mike Piper, a CPA, recommends Vanguard for IRAs because "the company is owned by the funds it runs rather than by outside shareholders." In addition to cutting costs, the investing model also has fewer conflicts of interest, Piper says. He also provides details on other companies and their feature and fee structures.
Review: Where Should I Open an IRA?, Mike Piper, April 11, 2012
Fewer than a dozen people review the Vanguard Group on this popular website, where it scores 3 out of 5 stars. However, there are a handful of complaints about very slow customer service that are echoed on other boards like the investing site BogleHeads.org.
Review: Vanguard Group, Contributors to Yelp.com, As of July 2013