Vanguard Account for Small Investments

[alex.wilsonii]

I've been doing a lot of reading about investing of late (The Intelligent Asset Allocator, A Random Walk Down Wall Street, MMM's own post on stocks: http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/ (not to mention the entire blog!)). I've never invested in Index funds or bonds, but I've certainly been convinced of their advantage when compared to general stock purchases and/or when mixed in a portfolio with them. Currently, my portfolio is just a small one of blue chip stocks that I've invested in through Scottrade.

Of course, I intend to save like mad and grow my portfolio, but as I'm still paying off student loans (and expect to for another couple of years), my investments won't be growing so fast as to get above the $50,000 range anytime soon. This is where my doubts about Vanguard start to come in.  Comparing Scottrade to Vanguard, with the information I've been able to find, it seems like Scottrade is the way to go for now since my portfolio's overall worth will be relatively small and Scottrade tends to have cheaper commissions and no account maintenance fees. However, I know Vanguard allows for automatic dividend reinvestment and there's no fee for investing in Vanguard Index funds. Since I want to start investing more in Index funds and bonds, along with my current portfolio, I'm very interested in Vanguard. I'm just nervous I'll regret that decision or will end up paying more to maintain the portfolio than is wise.

So, Vanguard users, what are your impressions of Vanguard? Do you agree that for smaller portfolios (under $50,000), it might not be as advantageous, or do you think, given I want to invest more in bonds and Index funds anyway, the fees wouldn't be that bad? Finally, I notice it says that the first 25 trades are $7, but that is very vague - the first 25 trades in how long? The first 25 trades of the year? Of the life of the account? etc?

Thanks a lot for any information you can provide!
-Alex

P.S. One last question - anyone know how easy (or not) it is to transfer an account from one broker to Vanguard? If I make the switch, I'd like to keep my portfolio all in one place.

[judgemebymyusername]

I'm not going to go into the details in my response at this time, but feel free to ask questions.

1) You should focus on paying off your student loans first and foremost. Consider the interest rate on your loans, which is probably around 6%, to be the same as purchasing a fund that has a guaranteed 6% return rate. In the current economy, you'd be crazy not to invest your money in something with that kind of guaranteed return.

2) You shouldn't be investing in individual stocks. If you are going to anyways, you should only be doing it after you've maxed out your employer's 401(k) to $16.5k, and a Roth IRA to $5k. You should be investing in the 500 index or entire market indexes in those accounts. Only then should you gamble on individual stocks. Everything you're doing in Scottrade now is costing you fees and is taxed. Not wise.

3) Vanguard is the most mustachian investment broker, period. The company is awesome, the website is easy to use. There is no downside to investing in Vanguard. Unless you hate money. ;)

4) It's easy to transfer from your current broker to Vanguard. That being said, if I were in your shoes, I'd sell all of your Scottrade stocks and put the money into a Money Market Fund to serve as an emergency fund until you gain more knowledge on investing. I apologize for sounding condescending. I was exactly like you a year ago, all the way down to closing my Scottrade account and starting a Roth IRA at Vanguard.

[velocistar237]

If you open a Vanguard account, there are no commissions on buying or selling Vanguard ETFs, and I don't think there are minimums. The expense ratios are insanely low. There are minimums for the mutual funds (e.g., VFINX), but I would recommend using ETFs, just make sure you understand what they are and how they work.

https://personal.vanguard.com/us/whatweoffer/etfs/mutual-fund-vs-etf
https://personal.vanguard.com/us/funds/etf/all

[astadt]

I used to have a Vanguard account under 50K (its now one over 50K) and I cant say enough about them. They have two types of accounts that you might be interested in.

First is the Brokerage account similar to the one you have with Scottrade.
Pros- Free Vanguard ETF trading
       - A bunch of free network Mutual funds (stick with the ETFs)
Cons-Some of the highest Commissions out there for a discount brokerage account.

Next is the standard Vanguard account- I have this kind
Here you can buy shares of Vanguards super awesome, super cheep mutual Funds- Again I love these. I have a taxible account and a ROTH IRA with them (you can open the Roth in the Brokerage as well). There are no account fees* (and the fees for the funds are very low). * theres a $20 account fee that is waived if you go paperless billing.
My only negative about my experience is customer service. Im in the military and move around alot. Its very difficult to change your account information so currently my account is frozen until I get back in the US (kinda frozen I can keep adding shares just not sell them, but that works for me ;) ).

Hope that helps

[Danielle]

I'm really interested in Vanguard ETFs as well, but I'm still a while off from investing (gotta pay my parents back).  How much would be an ideal starting investment?  $1000? $5000?  Less or more?  I might start another Orange savings account to save up for this :)

[MEJG]

If you're interested in investing at Vanguard most funds have a 3,000 minimum.  So I would try to save at least that so you can get into one good fund (the total stock market comes to mind).

[Danielle]

Thanks MEJG.  20somethingfinance just posted on ETFs and recommends Vanguard as well.  This article is a good way to compare costs and whatnot.

http://20somethingfinance.com/7-online-brokers-with-commission-free-etf-trades/

[MEJG]

Hey Danielle, I've got a Roth IRA in a vanguard account.  I've looked into EFTs vs. their standard accounts and for me a standard account was a better idea.  You'll have to look into the ups and downs for your own situation of course.  If you're looking for something for the longer term, plan on investing on a semi-regular basis and want to reinvest dividends you might want to lean towards a standard account (from what I remember when I started looking).

[TLV]

I'm currently with vanguard funds for my Roth IRA and main taxable account. I'd like to switch to ETFs, for the ability to buy right away (instead of a day or two after the order), the lower expense ratio, and eventually to be able to sell without losing the ability to add more for several months. However, Vanguard won't let me open a brokerage account because of my employer. All brokerages have restrictions if you work for the stock exchange or a FINRA firm, but Vanguard won't allow it (apparently) because I work for a publicly traded company. Anyone else had this problem?