Disclaimer: We're not financial advisors and all investing has risks!

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Best Online Broker

As of January 2020

Vanguard

THE JOAT'S Advice

With Vanguard already charging some of the lowest fund fees in the industry across the board, they justifiably offer no incentives or promotions for new customers signing up.

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what we like

Best for those looking for: A venue to stash long-term savings which you do not intend to touch for years. For shorter-term trading, we recommend checking out our pick for Best Trading Platform
Simplest and cheapest way for investors, of any knowledge and wealth level, to manage their savings
$0 commissions to buy and sell all stocks, ETFs and Vanguard mutual funds
Wide range of low-cost ETF and mutual fund options with easy to understand descriptions of where exactly your money is going
Attractive all-in-one options, like their Lifestrategy Funds and their Balanced Index Fund (VBIAX), which provide the most straightforward and cost/time efficient way for any investor to become their own financial advisor
Account application process is fully online and can be completed within 15 minutes

keep in mind

Vanguard finally bit the bullet in January and decided to join the herd in going commission free for buying & selling stocks and ETFs/funds. This was previously one of the only deterrents for choosing an online broker
Not built for short-term trading by design. If you are interested in more shorter-term trading, we recommend checking out our pick for Best Trading Platform
Vanguard has restricted after hours trading as well. They do not offer you the ability to trade pre-market and their after hours trading ends at 6:30pm EST. If pre-market or after hours trading is important to you, TD Ameritrade may be a better fit for your needs

review

Your brokerage account is meant to be the place you park your excess savings over and above that which you need for short-term and medium-term expenses. We are talking about the money you earn which you want to put away and not see for decades. When debating how to approach such a daunting decision, the three things you probably care most about are:

1) Which one will allow me to sleep easiest at night?

2) Where will I save the most money on fees, commissions and taxes?

3) Which one is the easiest to use/understand?

Prior to a few years ago, Vanguard was the clear cut, no-brainer choice. For decades they were the only shop in the space which truly looked out for the retail investor and tried to maximize the user experience while also keeping costs low. They quietly grew to become a behemoth with their founder, Jack Bogle, leading the now ubiquitous trend into passive investing. Eventually, everyone else was forced to catch on which led to the wave of low cost ETFs, index funds and $0 commissions that we see today.

Advancements in technology have made it so that there has never been an easier time for an investor to become their own financial advisor. Ironically, much of this same tech has also made it significantly harder for an investor to avoid distractions.

While there are endless options out there for investors to choose from and many which may offer lower commissions on certain products and better user interfaces, we find that for inactive passive investors there is just something special about Vanguard funds that makes it easier for an investor to tune out noise and stick to a consistent process. Maybe it’s the low fees, maybe it’s the brand name, but once you start purchasing Vanguard products you will likely want to keep buying more of them throughout your lifetime. In fact, CEO Tim Buckley remarked that only 4% of customers liquidated their equity holdings in the 2008-09 bear market.

As a result, we still recommend choosing Vanguard and considering using their LifeStrategy Funds as it remains the simplest and most efficient way to become your own financial advisor and take control of your long-term savings.

Sizing Tips & FAQs

Which types of accounts can you open with Vanguard?

Vanguard offers everything from individual/joint personal accounts to IRAs, 401K rollovers, Annuities and 529 college savings plans.

Which one should I open with Vanguard?

We’re not financial or tax advisors and you should do your own work to figure out what exactly is best for you, but we’ll try to give you our take on the best way to think about this:

– If you are at a point in your life where you are generating enough cash over your expenses to start putting some away for retirement 20-40 years from now -> max out your IRAs, both Roth and Traditional

– If you are at a point in your life where you are generating enough cash over your expenses but may need to access it within the next 5-10 years (for a downpayment or wedding, for example) -> open an individual/joint personal accounts

– If you just left a job and have a 401K plan at your old employer which you’d like to move over and take control of -> Go through the 401K rollover process and move this money into an IRA

– If you are trying to save money for your child’s education and live in an eligible state -> take a look at 529 plans

Is there a minimum amount I need to invest?

You can start investing in any of their ETFs for as little as the price of buying one share. But, if you want to buy into one of Vanguard’s mutual funds, you will need at least $3,000 in most cases.

What are all the costs/fees I should be aware of? Are there any hidden ones?

If you choose to receive statements and documents electronically, there are no annual service fees. Otherwise, a $20 fee is charged annually.

When you buy/sell a Vanguard fund or ETF, you will pay $0 in commissions. As of January 2020, if you buy/sell any stock or ETF, you will also pay $0 in commissions. If you choose to buy the mutual fund of a different company, you will likely pay a small commission. Check out this page for a full list of trading fees.

I don’t know much about the markets and this stuff is all a little overwhelming. Which funds/ETFs at Vanguard should I buy?

Again, we are not financial advisors and there are risks to every strategy. But if you are deciding to make a leap towards passive investing on your own and have a multi-decade time horizon, we highly recommend checking out their Admiral 60/40 balanced index fund, Vanguard’s Life Strategy Funds or their Target Retirement Date Funds. They make it as easy as possible for you to find a fund which suits your investment objectives. Right now they offer four different Life Strategy funds which have varying mixes of stocks/bonds. The common philosophy has stated that the more bonds you hold, the more risk averse you are and vice versa for stocks. With the Life Strategy Funds you can choose between an 80/20 mix of bonds/stocks up to a a 20/80 mix of bonds/stocks. Vanguard will handle all the rebalancing for you. It’s as turnkey as you’ll find in the market.

It’s worth noting that these funds are best suited for tax deferred retirement accounts as there are other options out there which might be a little more tax efficient for those investors looking to open an individual, taxable account.

Their full list of ETFs can be found here should you want to build your own portfolio yourself.

Can I open an account at another broker and still invest in Vanguard’s funds/ETFs?

Yes, you definitely can. And this is a solid option also if you already have your assets at another broker and don’t feel like moving them. Just make sure your broker has jumped on board the $0 commissions band wagon. This will allow you to buy/sell Vanguard ETFs for free. However, be aware that you will likely still pay a commission to buy/sell Vanguard mutual funds.

I have money at another broker. How annoying will it be to transfer it over to Vanguard and how long will it take?

This is easily the number one reason why most people are scared to move money from one place to another. Brokers now make it very easy to switch. Once you open an account at your Vanguard and give them your authorization, they will handle it all for you behind the scenes using what is called an ACATS transfer. They will work with your old broker to make sure all your cash/investments are efficiently brought over without any impact on your taxes. You won’t even have to sell whatever you hold at your old broker if you so choose. The entire process can be completed in as little as a week typically.

Have another question?

Related Products & Links

TD Ameritrade | Charles Schwab | Fidelity

All three brokers are strong options outside of Vanguard. Each offers $0 commission trades on stocks/etfs/options and solid online/mobile platforms. You can even purchase Vanguard ETFs like VOO, VTI and BND there for free.

TD is a particularly impressive and easy to use option with a very solid attached trading platform in Think Or Swim which is our top pick for Best Trading Platform. It’s worth noting that Charles Schwab recently announced an acquisition of TD Ameritrade in late 2019, so we will have to see how that merger unfolds and what changes clients can expect going forward.

Interactive Brokers

We are huge fans of Interactive Brokers (IB) in general, but the learning curve is admittedly a little higher for the average, novice investor. We much prefer their offering as one of our top choices for those looking to trade on a shorter term basis. They came out with a platform named IBKR Lite which offers unlimited $0 commission trading and is geared towards those who are looking for a simpler interface. If you know your way around Interactive or consider yourself to be a little more savvy with the markets, you may want to consider using IB for all your investment needs. However, for everyone else, stick to Vanguard for your long-term investments and IB for your short-term trading.

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