Be aware of the benefits and drawbacks of each option.
If you are interested in purchasing mutual funds, you have most likely heard of Vanguard, which is the largest mutual fund firm in the world. Free of commissions and other sales-related fees, Vanguard's lineup of exchange-traded funds (ETFs) and mutual funds are among the best in the industry in terms of both value and quality (or "loads"). You can purchase Vanguard funds either through a third-party brokerage firm such as TD Ameritrade or Charles Schwab or directly through Vanguard's website. Both of these choices are available to you. If you already have an account at a third-party brokerage firm that provides Vanguard funds, the most straightforward method is to purchase the funds through your existing brokerage account. Nevertheless, third-party brokerages may impose additional costs or restrictions in connection with these purchases. Here is how to make your choice.Key Takeaways
Purchasing Vanguard funds directly through Vanguard will result in the lowest overall cost. Other large brokers offer a smaller number of Vanguard funds, and these products often have higher prices. If you already have one, it is most convenient to add Vanguard funds to your portfolio through the intermediary of a broker.Where Can You Purchase Funds From Vanguard (Besides Vanguard)?
As a result of the widespread acceptance of Vanguard's index funds and exchange-traded funds (ETFs), many prominent brokerage firms have begun offering these products alongside those of their very own. On the other hand, given that these companies are also Vanguard's direct competitors, the amount of Vanguard funds that they make available is frequently restricted. Additionally, the cost is higher. For instance, if you want to purchase Vanguard's flagship index fund, the Vanguard 500 Index (VFIAX), you can do so through Fidelity. However, doing so will require you to pay a transaction charge. There is a cost associated with investing in the Fidelity 500 Index (FXAIX) because it is a competitive fund with the same holdings. It is not in Fidelity's best interest to make it easy for investors to buy funds offered by competitors without charging them any additional fees or costs. TD Ameritrade is the largest brokerage firm in the United States and offers investors access to the greatest number of Vanguard funds. However, TD Ameritrade's commissions and fees on Vanguard funds are complex and variable. You won't be subject to such additional fees if you make your purchase of Vanguard funds directly from Vanguard.The Advantages and Disadvantages of Purchasing Vanguard Funds through Other Brokerages
Purchasing Vanguard funds through other brokerage firms or mutual fund companies is the same as purchasing any other mutual fund or ETF from a company that is in direct competition with Vanguard. In general, the benefits relate to ease of use, whereas the drawbacks center on costs.Pros
- One benefit of buying from a single brokerage is that you can put together your whole investment portfolio with just that one company.
- It is simpler to keep track of your holdings if you reduce the number of accounts you have access to and keep only the ones you need.
- Diversification: The advantages offered by brokerage businesses and fund companies are distinct from one another. Vanguard, for example, excels at indexing but does not offer many actively managed funds.
Cons
- Your overall return on investment (net return) will decrease if you purchase shares of an exchange-traded fund (ETF) or a mutual fund and pay the associated transaction charge or commission each time. Also, it goes against the main reason people buy Vanguard funds, which is to save money.
- There is a possibility of finding Vanguard funds at other brokerage firms. However, it is quite likely that these other brokerage firms will not offer all of Vanguard's funds.
Bottom Line
Investing directly with Vanguard Investments is the best route to take if your goal is to construct a portfolio that is predominately made up of Vanguard mutual funds or exchange-traded funds (ETFs). You will not be required to pay any additional fees, and you will have access to the complete selection of funds and ETFs that are made available by Vanguard.Questions That Are Typically Asked (FAQs)
What kinds of index funds does Vanguard offer?
The index funds offered by Vanguard are a sort of passive investment product that follow the performance of an index. These indexes can be quite comprehensive, like the S & P 500 or the Nasdaq, for example. They can also be tailored to attract a particular kind of investment, a particular region, or some other target, depending on the objective. Averagely, Vanguard's index funds have lower fees than the active funds that are also available. This is because they just copy the performance of an index instead of making their own decisions about which investments to hold.When buying or selling Vanguard funds, how long does the process typically take?
Trades in Vanguard funds, like with trades in all other mutual funds, are only executed once a day, after the market has closed. During the time that the fund's new net asset value (NAV) is being determined, any trades that were placed within the prior trading window will be executed. There is no set time for this to happen; however, you can expect it to happen somewhere in the afternoon or evening after the trading day has ended. For instance, if someone enters a sell order on Monday morning, the transaction should be finalized by Tuesday morning at the very latest.