Top rated Vanguard competitors in 2019. List of brokerage companies alternatives offering low priced investing services.

Vanguard's Top Competition



As you see, Vanguard is facing stiff competition not only from giants of brokerage industry - TD Ameritrade, Fidelity Investments Etrade and Charles Schwab, but also from low-cost brokers - Firstrade, M1 Finance and Ally Invest.

Vanguard Brokerage Accounts

Vanguard is best known as a low-cost leader in index funds and passive investments, but Vanguard also offers services geared toward more active investors with their online brokerage.

What are the advantages of a Vanguard brokerage account?

Vanguard brokerage services offer investment products and services that are not available to individual clients.  Vanguard brokerage allows clients to purchase Vanguard exchange-traded funds (ETFs), bond ETFs, stocks, options, and ETFs from other companies.  For example, an individual could use the Vanguard brokerage service to buy stock in Apple, municipal bonds, or a sector ETF that’s specific for health care.  

What is an ETF and what is a mutual fund?

Both mutual funds and ETFs are simply a basket of stocks.  The particular collection of stocks may be determined by an index (index mutual fund) such as the S&P500 index or by a money-manager (actively managed fund).

What are the differences between ETFs and mutual funds?

Trading. Mutual fund shares are priced once per day at the end of the day.  Mutual fund transactions occur after the market closes.  Unlike mutual funds, ETFs offer intraday trading.  Shares can be bought and sold just like a stock, and prices will vary throughout the day.

Transaction costs.  In most cases, there are no transaction costs to purchase or sell Vanguard mutual funds.  Some fees may apply depending on the fund and length of holding.  For Vanguard ETFs, there are no commissions, but transactions are limited to 25 times for the same ETF in a 12-month period.  For ETFs from other companies and individual stocks, there is a commission for each transaction, which depends on the number of transactions and total account balance.

Automatic Investing.  There is no option for automatically investing in Vanguard ETFs, whereas Vanguard mutual fund investors may establish regular buy and sell orders electronically with their bank.

Minimum amounts.  Most Vanguard mutual funds require a minimum investment of $3000 or $1000 for target retirement funds and the Vanguard STAR fund.  Vanguard admiral funds, which have lower expense ratios than Vanguard investor funds, require a $10,000 minimum account balance in that mutual fund.  For Vanguard ETFs, there is no minimum purchase amount and even a single ETF share may be purchased.

What are the advantages of ETFs over mutual funds?

ETFs allow for greater flexibility in trading, and may have additional tax savings compared to conventional mutual funds.  ETFs also have lower minimums to invest.  Generally, the expense ratios for Vanguard ETFs and Vanguard mutual funds are the same.  For example, the Vanguard ETF that follows the S&P500 (VOO) has the same expense ratio .04% as the corresponding Vanguard index fund (VFIAX).


Vanguard Competitors


Why choose Vanguard brokerage?

Vanguard brokerage is geared toward passive investors who want to purchase low-cost Vanguard ETFs.  Investors looking to purchase many individual stocks or trade frequently will be better served at another brokerage such as Robinhood, Fidelity or Charles Schwab that have lower transactions costs.

There are no Vanguard inactivity fee for all broker accounts.

Does investing for retirement require a Vanguard brokerage account?

No.  Buy-and-hold investors can replicate most Vanguard ETFs with Vanguard mutual funds.  Over long periods of time, there is no advantage to trading mutual funds during the day compared to when the market closes.  Expenses between mutual funds and ETFs are similar, and tax savings are minimal.  Lastly, investors benefit from dollar-cost averaging their investments and are more protected from market herd behavior to buy or sell, when their purchases and redemptions occur regularly and automatically through electronic bank transfer.

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