Vanguard Review Update

Investment, which is an integral part of finance is one aspect a lot of people look into as they seek to multiply their funds, but these decisions need to be made with proper consideration, having been provided with all the information one might need.

A lot of investments have gone wrong in the past, not just because of the usual cause and effect that happens in the stock market, but also as a result of the fact that most people were not armed with the right information they needed.

Here is a review of the Vanguard group;

The vanguard group was founded by John Bogle in 1975. Vanguard which is a US stockbroker, is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

It is a low-cost index based mutual fund investing company. Being a mutual fund company, it doesn’t have its own funds, but makes use of investors’ funds to make deposits in securities and make profit.

The structure of vanguard wasn’t designed for short-term investors or those who trade frequently, but it was designed for long-term investors. Bogle who happens to be the founder of Vanguard, realised that most of the actively-managed mutual funds were not meeting up to the market indices.

He had to then create the first index fund, a low-cost mutual fund which was able to match the performance of a specific index. 

Vanguard offers a low-cost investment option and various investment account types which one could invest with. Vanguard which happens to be the largest provider of mutual funds and the second largest provider of exchange-traded funds (ETFs) in the world, coming right behind BlackRock’s ishares, doesn’t just base their activities on mutual funds and ETFs but also offers brokerage services, variable and fixed annuities, educational account services, financial planning, asset management and trust services.

With all you have just read, it would seem like Vanguard is the best investment option and you might want to jump on it almost immediately. But just like every investment platform, it is important that you know exactly what you are getting into.

To assume that it is the right option for you, based on the judgement or recommendation of others, might be a risk itself. So, what would be best in a case as this, would be for you to understand its pros and cons which will further guide you in making your investment decisions.

WHAT ARE THE PROS OF VANGUARD?

INVESTMENT EDUCATION – Vanguard provides a lot of resources which intending investors can go through, especially those planning for retirement and other future goals that would be of benefit to them. On its website, one is provided with tools that will guide them in making adequate plans towards retirement or as it may concern other distant goals.

LOW COST – This happens to be like a major advantage with Vanguard, their costs are quite low, though some other competitors have tried to slash their costs in a way it’s lower than that of vanguard just so they can attract some investors who have their eyes on cost, Vanguard has been able to maintain its stand.

Considering the fact that some automated portfolio managements have taken advantage of this to use its ETFs to ensure that their expenses stay low, one of those are robo-advisors. If you are looking to keep cost low then you might want to consider Vanguard.

Apart from Vanguard’s mutual funds and ETFs being low, they are also less expensive than what is being seen as the industry average.

PERFORMANCE OF FUNDS – Based on reports gotten from Vanguard, 88% of their funds did better than that of their peer-group average over the last 10 years. This is great news for one who wouldn’t mind investing long term.

One has to also take cognisance of the fact that past records may not always determine future occurrences, but such information could actually help boost investors level of trust and confidence to take the necessary decisions. Afterall there are always risks to be considered before making investments.

ABSENCE OF CONFLICT OF INTEREST – All of Vanguards funds are owned by its shareholders and they don’t have any outside investors who own part of the funds. With Vanguard, you are not pressured to buy other products like some other brokers try to make you do. As an investor you know quite well that there is a way some brokers try to cajole you to make further purchases, leaving you in a confused state sometimes, as to whether to make the purchase or not. 

It is quite different with Vanguard, and you also tend to get more return on your investment as you are not paying anything to the managers.

Just like you’ve had the PROS to Vanguard, there has to definitely be other aspects to it, the not so good part which you might also want to consider before making decisions.

WHAT ARE THE CONS OF VANGUARD?

NOT SUITABLE FOR RESEARCH ANALYZING DATA – When it comes to research and analysis of data, the Vanguard platform doesn’t really offer much advantages, as it is limited in certain ways. The absence of trend lines and volume data makes you unable to make your investigations.

One may say, it’s fine since they weren’t really structured for day traders, but one can’t ignore the fact that you might need to make some sort of research when studying a new security. Unlike other platforms where you can customize your charts and more, with Vanguard that benefit is not given to you.

NO STREAMING OF REAL-TIME DATA – There is usually a delay in the display of pricing data on the website and app, this can be a major problem, as a little delay in information when it comes to investing can make one take a wrong decision. It would have been better if data isn’t delayed to enable investors respond quickly to changes in prices.

DAY TRADERS MAY SPEND MORE – Those who trade on a daily basis, might want to consider other options. A charge of $7 is made for each trade, this seems to be okay. But if you need to make more trades daily, you will end up spending more.

Not all the PROS and CONS are stated here, but it’s obvious that there could be more to the ones listed here.

A quick look at how Vanguard performs in other areas such as customer services, usability and security.

CUSTOMER SERVICES – Vanguard has a phone support system that offers customer services between the hours of 8a.m – 8p.m and this only runs from Monday to Friday and weekends are exempted. In the absence of an online chat option, messages can also be sent through the website, and you can be guaranteed that it is secure.

They can also be reached on Twitter as they have active online presence over there to respond to your complaints and enquiries.

EDUCATION – Like it was stated as one of the PROS, Vanguard offers investment education to clients, this is to assist them in setting long term financial goals and also aid them in achieving those goals. These educational tools are in form of articles, podcast and research materials that guide clients in making right choices. 

There are no physical events made available by Vanguard but they have a couple of videos, and their own YouTube channel.

USABILITY – For a start at Vanguard, the process can be quite lengthy, considering the process with other brokers. Despite the fact that you can begin the process of setting up an account online, you would have to wait for a couple of days before you can log in. 

Including some other options would require that you sign some documents electronically and wait for another week. The application of Vanguard is easy to navigate, with buying and selling made easy. Features such as watchlist which other brokers make use of on all platforms aren’t available on Vanguard’s app.

SECURITY – The app is secure as one can log in with biometric, which could be facial or finger print recognition. This is safer than a regular log in with Email and Password or any other option.

Considering also that from November 2019, there has been no breach at any of their locations which would make customers feel unsafe.

OFFERS FROM VANGUARD – There are multiple investment options available on Vanguard. Vanguard customers also get to invest in the following, but this can’t be done online. The other possible investments are;

-       Bonds (Municipal, Treasury, corporate)

-       Stocks and ETFs long

-       OTCBB ( Penny Stocks)

-       Simple (Single leg) options

-       Multi-leg options via its live brokers.

-       International (New Zealand, Australia,  Canada, Europe, through live brokers)

TRADE EXPERIENCE – One who trades frequently will find that the Vanguard website isn’t up to date with recent trends. Though efforts are being made to modify the website, one can’t guarantee that it would meet up to the standard of some other brokers.

Trading on Vanguard’s website can be quite challenging, especially when it comes to multiple trades. This further proves that it is not suitable for daily traders and is more workable for those who intend to buy and hold stocks and not trade frequently on the platform.

For the mobile trade experience there is also a level of delay in displaying price. Charts are not available on the app, as well as daily changes. For most of the things you might need to do, the app would still direct you to the website.

ACCOUNT AMENITIES – The account amenities for Vanguard includes;

-       There is no offer for a stock loan program.

-       Portfolio margining is not been offered at Vanguard.

-       With Vanguard, cash is automatically swept into a money market fund.

-       Customers who have signed up with Vanguard can choose to enrol dividend-paying stocks in a DRIP program.

RESEARCH AMENITIES – When it comes to research options there might be some limitations, one is the fact that they offer limited charting options, with no technical analysis. This is quite limiting for customers.

They have news for individual stocks provided by MT Newswires and the Associated Press.

Screeners are limited and are not available for options, except the ones for stocks, mutual fund and ETFs.

Some other tools are available on Vanguard which are focused on retirement planning. There is also an asset allocation questionnaire which guides you to a diversified portfolio that matches your risk profile.

COST – In January 2020, Vanguard removed commission on online stock, option and ETF trades. Before then, most of its trade were already being executed without commission. Here are a few things you should also know.

-       A covered call trade of 500 with 5 contracts inclusive, is going to cost $5.

-       Any order for 50 options contract costs $50.

-       The fee for live broker is $20 - $50 per trade, this depends on the asset class. Live brokers can be accessed for free by those who have above $1,000,000 in their accounts.

-       There are no fees for inactivity, sending checks, account closure or transfer, receiving checks, paper statements or trade confirmations. But there is a free for outgoing wires, which cost $10.

-       There no commission charges for ETF, online equity, or OTCBB trades.

-       For very small accounts, there is an annual account service fee of $20. (Very small accounts being $10,000in Vanguard funds).

-       For funds outside the No Transaction Fee program, mutual fund commission is $50. (For clients with $500,000-$1,000,000, it is $40). Clients who have over $1,000,000 in their accounts do not pay any commission.

With all these, one may be wondering how these brokers make money. You can’t assume they make no money. There are various ways brokers make money which may not actually be visible to you, but as they make money, most times it also benefits you.

Some of the ways they make money include;

STOCK LOAN PROGRAMS - When the stock held in your account is loaned to another trader for the purpose of selling stock short, the program generates revenue for brokers. The revenue generated from loaning stock with its customers is usually not shared.

INTEREST ON CASH – Interest income is generated from the difference between what they can earn on customer cash balances and what is being paid to you on your idle cash. A higher percentage of interest is usually paid out to its clients, while uninvested cash is moved to a money market fund.

PORTFOLIO MARGIN – Portfolio margining is not common with Vanguard; such can reduce the amount of margin that is needed based on the total risk that is calculated. 

Vanguard has proven to be of great benefit to those who have been able to work with them over time. Just like every other broker, they have their good side and bad side as well which we have been able to review to an extent. Like it was clearly stated, there are more which can’t be exhausted here.

It is up to you as an investor to consider it critically before you make your investment, this review was made in no way to recommend Vanguard to you, it was just to present you with information that will aid your investment decision.

You can always consider other brokers, as there are numerous ones out there. Place them side by side against each other to find the one that suits you and will match exactly what you are in need of.

However, Vanguard is strong when it comes to low-cost ETFs and mutual funds. If you are an investor willing to invest long term and not so much into daily trading and short-term investment then Vanguard might just be a good option for you.