The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: $_gone_amok on September 26, 2012, 11:30:56 AM
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I've been using a self directed online brokerage account managing most of my finances and I have about 25% in various Vanguard mutual funds. I'd like to switch my stocks to Vanguard funds over the next few years so I'll have around 75% in Vanguard funds. My question is, should I open a brokerage account with Vanguard directly or continue using my online brokerage account with TDAmeritrade and purchase Vanguard funds from there?
I know that I'll save a some money because Vanguard does not charge a fee for trading whereas TD does. But other than that I like the flexibility of purchasing other stocks as I see fit. What would you do?
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My gut tells me to go ahead and switch over to Vanguard, but my brain says you need to look at the fee structure for buying products from both companies and see what it will cost you. I would imagine that if 75% of your choices will be VG prodcuts, then I think they will be cheaper, and keeping fees low is an important part of wealth building. Glad you are thinking about that and not just being blindly loyal to the company you are already with.
References:
https://personal.vanguard.com/us/whatweoffer/stocksbondscds/feescommissions
https://www.tdameritrade.com/pricing.html
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As long as you don't pay commissions or fees for buying/selling Vanguard funds through TD, it's fine to stay with them - also as long as you get access to Admiral class shares. It adds to your margin borrowing ability.
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If you're willing to do ETF versions of the Vanguard mutual funds, TDAmeritrade offers commission free trades (http://research.tdameritrade.com/public/etfs/commissionfree/commissionfree.asp?fromSectionLeftNav=true (http://research.tdameritrade.com/public/etfs/commissionfree/commissionfree.asp?fromSectionLeftNav=true)) on a decent number of them. The main catch is a 60 day holding period.
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IIRC, TDAmeritrade's commissions on mutual funds are quite high. Of course, many (most?) Vanguard mutual funds are available as an ETF, and many of them happen to fall on TDAmeritrade's commission-free ETF list.
Whatever you do, keep this in mind: if you have a stock (or ETF) in a brokerage account at Vanguard, and you want to "swap" it for the mutual fund, then you have to sell the stock, wait the full three days for settlement, and only then you can buy the mutual fund. IOW, you incur market risk for the three day settlement. (If you have enough cash, you could wiggle around this.)
What's the harm in keeping two accounts? Keep a Vanguard account for all VG-related funds and ETFs, and keep another brokerage account for non-VG stuff.
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If you're willing to do ETF versions of the Vanguard mutual funds, TDAmeritrade offers commission free trades (http://research.tdameritrade.com/public/etfs/commissionfree/commissionfree.asp?fromSectionLeftNav=true (http://research.tdameritrade.com/public/etfs/commissionfree/commissionfree.asp?fromSectionLeftNav=true)) on a decent number of them. The main catch is a 60 day holding period.
This is what I'm doing now. If I recall correctly it is actually only a 30-day holding period instead of 60. The commission free selection is good enough for me.