M1 Finance

Vanguard: Trading Fractional Shares of Stock


2020: Does Vanguard offer buying of partial (fractional) shares of high value stocks such as Berkshire Hathaway (BRK.A), Amazon (AMZN), Tesla (TSLA), Google (GOOG), or Facebook (FB)?



Buying Fractional Shares of Stock on Vanguard


You cannot directly buy a fractional share of stock (such as Berkshire Hathaway or Google) on Vanguard or any of its traditional competitors such as TD Ameritrade or Etrade. However, you can invest in partial shares of stocks by using a $0-commission brokerage firm called Sofi Invest.


Open Sofi Invest Account


Buy and sell stocks at no cost. Plus, there are no account minimums.

Open Sofi Account


Vanguard New Account Application

Opening an account with Vanguard SIPC is undoubtedly one of the weakest areas of their product. The actual informational part of the account creation process is somewhat standard: they ask for customer name, home address, social security number, etc. The main reason for the low score in this category is the wait. Once a user has successfully given all of their information and chosen a username, Vanguard takes almost three weeks to finish setting up the account and withdraw the funds. This is, by far, one of the longest account creation waiting times in the industry.

There is no minimum deposit requirement to open Vanguard accounts as well as no minimum account balance requirements. Broker is charging $20 annual account maintenance fee if a client did not sign up for electronic statements.


Vanguard Mutual Funds Review


Vanguard Group is one of the largest providers of mutual funds in the world. Vanguard family mutual funds include a collection of 117 actively managed mutual funds, and over 150 U.S., exchange traded and international funds and financial portfolios. These funds focus on a number of financial goals, risk levels, sectors and returns. Vanguard mutual funds expense ratios range from 0.05% to 0.93%; and the firm's 55 ETF's expense ratios range from 0.05% to 0.34%.

So which mutual funds should investors choose for their portfolio? They all differ in performance, portfolio composition and expenses. We did the research and below list top Vanguard mutual funds in the most popular categories:


Vanguard customers have access to more than 16,000 mutual funds, which is one of the largest selections in the industry. These funds come from hundreds of fund families. Many of the funds have no load and no transaction fee.

A mutual fund screener is available on the Vanguard website, although it's a little cumbersome to find. It only displays up to 250 results. Users can narrow down the results by specifying various criteria, such as total return, expense ratio, asset class, or fund category. Additional search options include manager tenure, turnover rate, beta, and R-squared. Besides the screener, the Vanguard website also has a few articles on mutual fund investing. Compared to Fidelity and Schwab, the Vanguard site seems to have less educational information on mutual funds and is harder to navigate.

Vanguard mutual funds have a $3,000 minimum initial purchase amount. Non-Vanguard funds vary from $1,000 to $5 million. Some fund families have a lower investment minimum for IRA's. Vanguard charges $20 for each Vanguard mutual fund with a balance below $10,000. However, this fee can be eliminated by signing up for electronic delivery of account documents. Transaction-fee funds cost between $8 and $35, depending on account balance.


Vanguard Partial Shares


IRAs


Vanguard offers Roth, Traditional, Inherited, Rollover, SEP, and SIMPLE IRA's. The fee schedule for these retirement accounts is the same as for a regular account. There is a $20 account fee, although this can be waived by investing at least $50,000 in Vanguard funds or enrolling in electronic statements. There are no setup or inactivity fees for an IRA, and there is no minimum deposit to open one.

After logging into the site, Vanguard customers will find good information on IRA's. There is an article that explains the difference between the Roth and Traditional accounts. There is information on estate planning and converting a 401(k) into a an IRA. A required minimum distribution calculator estimates the minimum amount that must be withdrawn from an IRA in a tax year based on IRS rules.


Recommendations


With Vanguard's large selection of mutual funds, the broker is a great option for investors who primarily trade that product. The Vanguard funds have low expense ratios and cover many asset classes and economic sectors. Combined with 55 Vanguard ETF's that also are free to trade, the broker is hard to beat in the realm of fund trading.


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Vanguard Review Summary


Vanguard is a juggernaut in the world of personal finance. They have been making waves in the financial services industry ever since their founding in 1975 by John Bogle. Bogle founded Vanguard on the premise that well-diversified low-fee funds would outperform most other investment choices.

Since then, Vanguard has offered their signature ETFs and other funds with some of the lowest fees on the market. The company has grown, and now offers IRAs and investment brokerage accounts to investors who want to setup an account with them.

But there is a reason Vanguard is well known for its funds and not for its brokerage services. High trading commissions for active investors (unless they are rich), non-intuitive website design, and basic trading and research tools make it hard for the firm to compete effectively in the extremely dynamic industry of online investing and trading.

Vanguard offers several tiers of service: depending on the total amount of assets users invest in Vanguard products, their transaction fees and other costs can vary quite substantially. For example, several of Vanguard’s mutual funds offer different “share classes,” with decreasing share cost and expense ratios available to those who can make a larger initial investment. The lowest initial investment is $1,000, and applies to, among others, all of Vanguard’s “Target Retirement” funds. These are a good option for IRA investing, claiming to maintain an appropriate balance of assets based on the indicated retirement date. Also, once an IRA is established and the initial investment is made in one or more funds, recurring automatic investments of as low as $1 can be made and are never subject to any transaction fees. Users should keep in mind, however, that each fund owned will incur an annual fee of $20 that can be easily avoided simply by signing up for account access on Vanguard.com and agreeing to receive statements and other information electronically.

Vanguard customers pay $7 for the first 25 stock and ETF trades in a year, and the price soars to $20 per trade thereafter if they have less than $50,000 in Vanguard mutual funds and ETF's. Most of Vanguard's customers will be in this category. Investors can receive on average two trades per month at $7 with this fee schedule.

The company charges annual fees for IRA accounts: $25 for SIMPLE IRA, $15 for 403(b)(7), $20 for Individual 401(k)/Roth 401(k) plans (waived for paperless or $10,000+ accounts), and $20 for 529 plan. Because of that the firm did not make it into our Best Brokerages for IRA list.

The main advantage Vanguard offers over most other brokers, is their own ETFs that clients could get commission-free (of course, there is expense fee charged by the ETF) as well as their low cost mutual funds. We also like free dividend reinvestment and an ability to dollar-cost-average mutual funds investing.

To sum up Vanguard review: because of all the above reasons, we recommend Vanguard brokerage services mostly to customers who want to invest almost exclusively in Vanguard's own family of mutual funds and ETFs. For everybody else there are other online brokerage firms. to consider.