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Vanguard DRIP: Dividend Reinvestment Program


Vanguard dividend reinvestment program fee, commission, fractional shares. Vanguard DRIP plan enrollment for stocks, mutual funds, ETFs, and ADRs. Is it free?



Vanguard DRIP Program


While not all brokerage houses offer a Dividend Reinvestment Plan, also known as a DRIP, Vanguard does and the broker doesn't charge a dime for the service. Vanguard's DRIP will convert cash dividends into additional shares of a security that pays a dividend. Eligible assets include stocks and ETF's. Mutual funds can also be enrolled in dividend and capital gain distribution reinvestments.

Brokerage accounts at Vanguard are automatically enrolled for DRIP service. If you want to un-enroll a particular security or your entire account, you can give the broker a call at 1-800-992-8327 and a company associate will adjust your account. You can also contact the firm through its secure messaging system or by snail mail.

Besides the DRIP service, there are several other options available for cash dividends. They can be automatically transferred to a brokerage account's settlement fund, which is a Vanguard money market mutual fund. A dividend can also be transferred to an external bank account or cut and mailed as a paper check. The same choices are available for capital gain distributions that are paid by a fund.

These options you can choose for yourself. Simply click on the holding in your Vanguard account, scroll down to the bottom of the security details page to the place where it says 'Holding options.' Here you can edit the reinvestment options.

Changes need to be made two business days or more prior to the payable date of a dividend; otherwise, the older option will be effective when the distribution is paid.


Eligibility


There are certain requirements that must be met in order for a security to be enrolled in the broker's DRIP service. A security must be held in street name, for example, before the security's record date. This simply means that Vanguard's name must be on the electronic record, and normally it is.


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Details of Vanguard's DRIP


Some securities Vanguard does not permit under its DRIP service. Foreign stocks, American Depository Receipts (ADR's), Unit Investment Trusts, and a minority of domestic stocks are not eligible.

Vanguard will not allow a stock's cash dividend to be reinvested as additional shares if it has an average daily trading volume that the broker deems excessively low. Some corporate events may cause the broker to implement the same policy. These include reorganizations and mergers.

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Some types of dividends are ineligible for Vanguard's DRIP service. These include special dividends, optional dividends, and dividends paid on securities held in your name but outside of a Vanguard account.

Vanguard reserves the right to make a stock or ETF eligible or ineligible for its DRIP service at any time, with or without notice to its clients. So if you have any concerns or questions, be sure to give the broker a call.


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Keeping Track


Vanguard records all reinvestment transactions. These reports can be found on your monthly brokerage account or on-line in the account history section.







Optionshouse vs Vanguard Introduction


While Vanguard emphasizes index funds, OptionsHouse (now owned by Etrade - Etrade Review ») offers low stock and option commissions. The two brokers also differ in other key areas. This article will compare the two firms and see which one is the overall better value.


Customer Service


Vanguard has customer service associates who are available on the phone during the week from 8 o'clock in the morning until 10 in the evening, EST. Regrettably, the broker does not offer any weekend hours.

Vanguard's website does have an internal messaging system, but there is not an on-line chat feature. The company does not have a network of local branches, although Vanguard does offer financial advice at extra cost.

Like Vanguard, OptionsHouse only provides customer support during the week. There are no weekend hours. Unlike Vanguard, however, the firm's website does have on-line chat during normal company hours. Investment advice is not available at OptionsHouse, and the company does not have any brick-and-mortar locations.

Overall, it's pretty close here.


Mutual and Exchange-traded Funds


More than 16,000 mutual funds are open to new investors on the Vanguard website. Of these, over 2,000 have no transaction fee and no load. The broker manages its own selection of mutual funds. There are 127 currently available for purchase. They are all no-load, no-transaction-fee products. They have expense ratios under half a percentage point. Some of them are less than 10 basis points. Vanguard charges $35 for a transaction of any fund that isn't on its NTF list.

OptionsHouse doesn't put much importance on mutual funds, although it does offer trading in them. Every mutual fund costs $20 at OptionsHouse, in addition to any load a fund may carry. The transaction fee is applied to purchases, sales, and exchanges. Unlike Vanguard, the broker doesn't have a mutual fund screener.

On the ETF side, Vanguard manages its own lineup of 55 funds. Like the company's mutual funds, the ETF's have very low expense ratios. They are also free to trade. Unfortunately, OptionsHouse doesn't provide a list of commission-free ETF's.

Vanguard is the easy winner in this category.

Trading Tools


Trading at Vanguard takes place on the broker's website because it doesn't have a desktop platform. The website has many important features, but it can be difficult to navigate sometimes. Unfortunately, there isn't a trade bar on Vanguard's site. Orders for securities are simply placed on web pages.

Vanguard's web-based charting is fairly basic. There are four graph styles available. A few technical indicators can be used. A chart on Vanguard's site can't be displayed the width of the monitor.

The situation at OptionsHouse is pretty much the opposite: the broker's website is rudimentary, and all trading occurs on the OptionsHouse platform. The software does not have any requirements. The program has many useful features, including charting, security research, option chains, and watchlists. Unlike Vanguard's website, a chart on OptionsHouse's platform can be displayed full screen. The platform also has paper trading.

OptionsHouse is the winner here.


Mobile Apps


Traders at Vanguard can buy and sell securities using Android, Apple, and Kindle Fire. Stocks, ETF's, and Vanguard mutual funds can be traded, but non-Vanguard funds can only be traded on the firm's website.

The Vanguard app has mobile check deposit and limited research. There are no charts for securities, only indexes. Vanguard's platform is one of the few that allows account documents to be downloaded in pdf format.

OptionsHouse customers can trade on iPhone, iPad, iPod touch, mobile web, and Android. Elementary stock research can be performed on the platform. There is no mobile check deposit, however. Paper trading is available on the broker's mobile app, one of the few companies to provide the feature.

Neither the Vanguard app nor the OptionsHouse platform offers live streaming of business news.

Overall, it's too close to call.


The Cost of Trading


One of the lowest commissions in the brokerage industry can be found at OptionsHouse. Equity transactions are just $4.95. Derivates cost an additional 50¢. A margin debit under $10,000 at OptionsHouse currently costs 8.0%. An account with the broker has no minimum opening balance and carries no on-going fees. There are no setup, maintenance, annual, low balance, or inactivity fees.

Vanguard has a much more complicated pricing schedule compared to OptionsHouse. A small account at Vanguard (which the broker defines as under $50,000 invested in Vanguard mutual and exchange-traded funds) pays $7 for the first 25 stock and ETF trades in a calendar year. After that, the commission shifts to $20. Large accounts receive lower commissions, while very large accounts can receive $0 commissions.

Options at Vanguard are a flat $1 plus a base charge, which varies based on account size. The small account pays a $20 base. A margin balance under $10,000 currently is charged 7.75%.

Securities accounts at Vanguard come with some $20 yearly fees. They can be eliminated by signing up for e-delivery of account documents. Accounts that meet the broker's $50,000 threshold are also exempt. The broker does not require a minimum deposit amount.

Vanguard loses here because of its higher cost structure for those who are not rich.

Research & Education


Neither the OptionsHouse website nor the platform has much material on it. The website has a few articles that discuss buying and selling options. There is also a very useful glossary of investing terms. On-demand webinars are posted on the OH website.

Although searching through the Vanguard site is somewhat cumbersome at times, there is a lot of material. The broker's website has screeners for all securities. Analyst reports for equities can be downloaded free of charge from MarketGrader and Argus.

Vanguard succeeds in this category.


Vanguard vs Optionshouse: Outcome


Vanguard won 2 categories, OptionsHouse was victorious 2 times, and there were 2 ties. It's a draw. Vanguard is the better choice for fund investors, while stock and ETF investors would be better off with OptionsHouse.


Updated on 2/1/2018.