Author Topic: buying Vanguard Index Fund shares  (Read 3160 times)

mad9q

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buying Vanguard Index Fund shares
« on: July 06, 2016, 12:34:11 PM »
Can someone please walk me through how to purchase shares of an index fund, specifically VFINX?  I went to my brokerage account and it looks like there is a $19.95 commission as opposed to the typical $7.95 for equity trades.  Does this sound right?  TIA. 

Cycling Stache

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Re: buying Vanguard Index Fund shares
« Reply #1 on: July 06, 2016, 12:42:36 PM »
Are you in the United States?  Just go directly to Vanguard's site to set up an account.  I believe you need $3k to buy into VFINX and other of the main index funds.  After that, you can make any dollar amount contributions you want.

seattlecyclone

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Re: buying Vanguard Index Fund shares
« Reply #2 on: July 06, 2016, 12:44:03 PM »
Yes, buy direct to avoid trading fees.

Jack

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Re: buying Vanguard Index Fund shares
« Reply #3 on: July 06, 2016, 12:50:53 PM »
No, that's not right. If you want to avoid paying ridiculous commissions, use Vanguard as the brokerage (i.e., open an account at Vanguard) and buy the shares there.

(There are other places that let you buy Vanguard funds without a commission, but your current brokerages apparently isn't one of them so going with Vanguard directly is the simplest advice.)

Another option would be to buy VOO, the ETF equivalent of VFINX, at your current broker (or using Robinhood). That might have lower overall costs even after the $7.95 equity trade fee because the expense ratio is lower. It depends how often and how many shares at a time you plan to buy vs. how long it would take you to build up the $10,000 balance to convert VFINX to VFIAX.

mad9q

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Re: buying Vanguard Index Fund shares
« Reply #4 on: July 06, 2016, 01:13:13 PM »
Thanks all.  This is an ESA fund -- not sure if it is worth the hassle of trying to transfer, if the laws allows without penalty.  I will look into VOO.  Thank you. 

Jack

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Re: buying Vanguard Index Fund shares
« Reply #5 on: July 06, 2016, 01:39:47 PM »
This is an ESA fund -- not sure if it is worth the hassle of trying to transfer, if the laws allows without penalty.

Yep, things can get weird (and fees can get harder to avoid) with more restrictive things like ESAs, HSAs, 401ks, etc.

I will look into VOO.

VOO, VFINX and VFIAX all have exactly the same holdings and performance. The difference is as follows:

  • VOO - 0.05% expense ratio; a $7.95 fee per trade*; can be bought at any time during the trading day; must buy whole shares*
  • VFINX - 0.14% expense ratio; a $19.95 commission per trade*; must be bought at end-of-day NAV; can buy fractional shares; minimum investment $3,000*
  • VFINX - 0.05% expense ratio; a $19.95 commission per trade*; must be bought at end-of-day NAV; can buy fractional shares; minimum investment $10,000*

Unless end-of-day prices or the ability to buy fractional shares are very important to you -- or unless you can get that $19.95 commission waived somehow -- from the information you've provided it sounds like ETFs are better for you.

(* depending on your brokerage -- it is possible for brokerages to allow fractional shares of ETFs, or to allow mutual fund holdings in amounts below the Vanguard minimums, etc. You'll have to check your brokerage's rules.)

mad9q

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Re: buying Vanguard Index Fund shares
« Reply #6 on: July 06, 2016, 07:47:58 PM »
Thanks Jack.  Great info.  VOO was a 7.95 trade!

 

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