Just beginning: Vanguard or etrade

[48Nebraska]

Hello,

I just found MMM last year, and have been trying to learn about all the various investment options and vehicles.  Now I'm ready to start actually investing, but am running into some basic questions about what is the best way to actually purchase the funds.  I have an etrade account where I have bought stocks, and was thinking about using that account to purchase VTSAX or VTSMX.  Does anyone know about the pros/cons about buying Vanguard funds directly from Vanguard (i.e., open an account with them) versus using something like etrade to purchase the funds?  Any information would be greatly appreciated.  Thank you.
George

[hyla]

I have two vanguard funds that I've bought directly through Vanguard, and have been happy with their website.  Easy to navigate, you can conveniently set up automatic deposits if you want, and although some of the funds say they have a $20 annual fee you can avoid it simply by signing up to get your statements electronically instead of in the mail, so there are no fees at all. 

I have not used etrade so I can't compare the two.  In general, I'd say if they let you buy and hold vanguard funds without any fees and you are happy with their website, its probably fine to buy vanguard funds through them, but if they charge any fees at all, buy them direct though Vanguard instead.

[SaintM]

Vanguard doesn't remit a portion of sir annual expense fees to brokerages.  To compensate, brokers generally levy a transaction fee to Vanguard mutual fund transaction.  Mine would charge $45 on a purchase and a sale.

Bottomline, buy Vanguard mutual funds direct from Vanguard.

[SaintM]

BTW, where in Nebraska are you from?

[Dan_at_Home]

I would definitely recommend vanguard over etrade.  I was in a similar position a couple years ago having an online brokerage account.  I came to vanguard under the following logic.  Places like etrade are not as good as vanguard for a couple reasons.  (1) The obvious one is that with vanguard you don't have to pay a commission every time you want to buy more shares.  I put in money every time I get paid every 2 weeks, thus you save money with this.  (2) Most online brokerage accounts are geared towards short term traders, in other words, they want you buying and selling shares a lot.  This is bad for a mustachian due to tax laws.  Long term capital gains are taxed at much lower rates, thus to keep costs down you want to be selling as little as possible (i.e. maybe once a year to balance your asset allocation). 

As a mustachian, your goal is to build a stash for the long term, you want funds that keep you funded for years or decades in FI.  In general, short term trading is not the way I recommend building a stash or holding the stash (unless you happen to be a pro at this short term trading).  For most people, plain old index funds from vanguard offers lower costs and fits better with the mustachian lifestyle in my opinion.

[48Nebraska]

Thank you all so much for the quick response and good information.  I think because Vanguard is going to end up being a large piece of my FI life, I'll open an account with them directly.  It's amazing how large the Mustachian clan has grown over the last year.  I love how Mustachians are always willing to help a fellow Mustachian.  I just wish I could find more of people like you in real life!

SaintMichael - I was born in Lincoln General Hospital, grew up mostly in California, but my heart is still in the Midwest and bleed Husker red!  Are you living out there now?  After I reach FI, I plan to heading back out to that area, but maybe Omaha or Kansas City, MO. 

[SaintM]

48 - I grew up in Omaha and went to college and law school in Lincon, but the Air Force took me away 14 years ago. I still have a number of friends there and visit from time-to-time, but I can't see us moving back.

[48Nebraska]

Saint Michael, as much as I love the Cornhuskers and enjoy the midwest, I cannot see myself moving back to Lincoln as well.  However, Kansas City is a beautiful city and I heard Des Moines is also pretty nice.  Similar type development happening in Omaha as well though.