Vanguard Review: Pros & Cons

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Most Vanguard reviews focus on the firm’s bread and butter: its low-cost index funds.

The Vanguard Group is not a comprehensive financial services company. But it does have some products other than index funds that money expert Clark Howard recommends.

In this Vanguard review, I’ll explain the specific areas where the investment company excels and point out some things about the company that may make you want to pick a different brokerage firm.

I updated this article in July 2024 and I review it every six months.

The Vanguard Group Review: Quick Look

Company Name	The Vanguard Group
Company Type	Investment company
Key Features	Low-cost index funds, financial advisors
Downsides	Not well-designed for trading, lax customer service
Best For	Passive investors, especially those with at least $50K to invest

What Is Vanguard?

Commissions	Minimum Deposit	Robo-Advisor	Financial Advisor	Android App Rating	iOS App Rating
$0 for stocks, ETFs and options	$0	Yes	Yes	3.5	4.7

Founded in 1975 and headquartered in Malvern, Pennsylvania, Vanguard had $9.3 trillion in assets under management as of March 2024.

Founder Jack Bogle invented index funds. He championed a low-cost, long-term investing philosophy that continues to define the brokerage firm today.

Vanguard is more limited in scope than some of its competitors. For example, it doesn’t offer banking services. And its customer service has fallen behind in recent years. But its no-frills, long-term approach makes it perhaps the best investment company for long-term, passive portfolio management.

Who Should Use The Vanguard Group?

Because of Vanguard’s unique structure, let’s first discuss who shouldn’t use Vanguard.

It’s not for you if you can’t meet Vanguard’s minimum investment requirements.

It’s also not for you if you want to be an active trader, as Vanguard doesn’t cater well to the needs of investors who trade in individual stocks.

If you want a modern website and app plus strong customer service, you’ll need to look elsewhere.

However, if you subscribe to a diversified, low-cost, long-term style of investing — as many smart people do — it’s an excellent brokerage choice. Here are some examples of the types of investors that Vanguard serves well:

Retirement investors. Vanguard caters to most long-term investors. But retirement investing is the guiding star of its philosophy. That extends to its fees and costs, its tools, its educational content and the way its Certified Financial Planners operate.
Investors with plenty of capital. You can invest at Vanguard with as little as $1,000. But $3,000 is the threshold for most of its funds as well as its robo-advisor. If you want unlimited access to a team of fiduciary financial advisors, prepare to invest at least $50,000. There are higher investment thresholds that unlock greater benefits.
Low-cost buy-and-hold investors. Vanguard is synonymous with index funds (which can be ETFs or mutual funds). It doesn’t have any zero-expense ratio funds like Fidelity, but it’s hard to beat its volume of quality, low-cost funds.
Investors who prefer to keep things simple. If you prefer simplicity (maybe you’d rather spend your time doing other things?), Vanguard is an excellent choice. You can invest in a simple target date fund or get crazy and split your money between a total stock market, an international and a bond index fund.

Where Vanguard Shines

If you aren’t sensing some themes at this point in my Vanguard review, you will within a few paragraphs.

Here are some of the things that Vanguard does well:

Robust selection of low-cost index funds. According to Morningstar and Vanguard, Vanguard’s average expense ratio as of Dec. 31, 2023, was just 0.08%. That’s much cheaper than the 0.44% average. As you’d expect for a company defined by its index funds, Vanguard has an impressive variety of low-cost options with strong track records.
Inexpensive access to human financial advisors. For an annual fee of at least 0.30%, you can get a full-fledged fiduciary to assist you with financial planning. Clark is a big fan of Vanguard’s Personal Advisor.
Strong long-term planning resources. Vanguard’s tools and technology generally lag behind other investment companies. But it more than holds its own when it comes to retirement planning. Vanguard offers a sophisticated, thoughtful approach that includes human advice, tools and calculators. That’s on top of its educational focus on retirement.
Free trades. Vanguard started to offer commission-free trades on stocks, ETFs and options in 2020.
No Payment for Order Flow (PFOF). Many brokerage firms claw back some of the revenue they’ve lost on commission-free trading by routing your orders through high-frequency traders. These market makers pay for the right to execute orders because they can profit by doing so. But as a result, customers often don’t get the best possible price. Vanguard doesn’t engage in this controversial practice for equities.

Where Vanguard Falls Short

New Fees Irk Clark, Other Investors

Vanguard instituted a new wave of fees effective July 1, 2024. The headliner: you now must pay an exit fee of $100 if you want to close your Vanguard account and move your investments to another company.

Vanguard customers also now owe $25 per broker-assisted trade. So if you want to call and have a human make your trade rather than handling it yourself online, it now costs you.

Clark is more upset about the exit fee. He says the fee for broker-assisted trades is pretty standard. The exit fees make Vanguard “just as bad” as the bank-based brokerages that he’s long criticized. He also doesn’t appreciate that the rules apply to long-time Vanguard members and not just new customers going forward.

“Vanguard’s been making changes over the years that I really don’t like,” Clark says. “Vanguard is owned by its account holders. But the account holders are not being asked for input on this stuff. They’re just being handed edicts. And that’s not the way this should play.

“And, you know, I might as well talk to the wall. Because I don’t care who it is, nobody at Vanguard listens. They make their own internal decisions.”

Clark, a long-time investor with Vanguard, doesn’t plan to close his Vanguard account.

Clark Calls Out Vanguard’s Customer Service

Vanguard’s narrow focus means completing even common tasks on its website or app, like buying and selling individual stocks, isn’t easy. The Vanguard app spent several years with a rating below 2.0 on Android, for example.

The company also doesn’t offer many of the “side” products that go with investing such as banking services.

However, the biggest issue Clark has with Vanguard is its customer service. On his podcast, Clark described the company as going through a mid-life crisis.

“I love Vanguard. I’ve been a customer of Vanguard for decades. But the customer service has got to become a focus,” Clark says.
“So this is a callout to Vanguard, one of my children: You’re a little errant right now. You’re off the path. If you’re going to continue to be the company of the future and not the past, you’ve got to get [your customer service] together.”

Vanguard’s Other Shortcomings

When it comes to your investing experience, Vanguard also has a few other shortcomings:

Not set up for active traders. The company doesn’t hang a virtual sign that says “no active traders allowed,” but it might as well. Vanguard lacks the tools and platforms necessary to compete in this area. In many ways, active trading runs counter to the investment philosophy that Bogle instilled in his company when he founded Vanguard.
Limited research and data. Vanguard doesn’t offer its clients the depth of research and tools that Fidelity and Schwab do. That makes sense, as Vanguard focuses on index funds. You can invest in individual stocks through Vanguard, but the company doesn’t make it easy nor does it appear to encourage it, given the research and data resources it provides.
Little focus on user experience. If you want a sleek user interface, modern graphics, a top-notch mobile app and seamless trading, you’ll have to look elsewhere. But those things probably aren’t important to you if you’re focused on passive investing.
High minimum investment requirements. What’s considered “high” in terms of investment minimums? That’s relative, to an extent. But there are plenty of investment companies with minimums of a few hundred dollars or even less. Most Vanguard funds require an investment of at least $3,000, which isn’t ideal for those without much capital.

What Makes Vanguard’s Index Funds So Attractive?

It’s impossible to do a reasonable Vanguard review without putting a spotlight on the company’s index funds.

To be clear, Vanguard isn’t the only company that offers low-cost index funds. For example, the Fidelity Zero funds feature zero expense ratios (and no investment minimums). Schwab and others also offer some attractive low-cost index funds.

But Vanguard’s average expense ratio of 0.08% across all of its mutual funds and ETFs as of December 2023 dwarfs most investment companies.

The exact data changes often, but the long-term performance of Vanguard’s funds are consistently favorable. Its best-in-class expense ratios have something to do with that. But the strong performance also says something about Vanguard’s ability to manage these types of funds.

Vanguard has prioritized ETFs in recent years, designating specific ones as “Select ETFs” based on low costs, liquidity and diversification according to the company website. ETFs are preferable to mutual funds for individuals with taxable accounts, so customers should welcome the company’s improvements in this area.

Vanguard also has target date funds in five-year intervals through 2070 with expense ratios of 0.08% and minimum investments of $1,000. Clark highly recommends target date funds.

Vanguard’s Personal Advisor

An industry-standard fee for a full-service financial advisor hovers around 1%.

That number varies widely based on a laundry list of factors. But accessing quality, trustworthy advice from a fiduciary while paying 0.30% in annual fees is nearly unheard of. That’s the opportunity that Vanguard’s Personal Advisor (PA) offers.

This is the premium version of Vanguard’s Digital Advisor, which is the company’s entry-level robo-advisor. The Digital Advisor charges 0.15% in annual fees (plus expense ratios). It requires a $3,000 minimum investment.

PA is more of a hybrid. If you’ve invested a minimum of $50,000 across any Vanguard asset, you’ll get access to a team of fiduciary financial advisors. If you give Vanguard at least $500,000 in assets, you’ll get a dedicated advisor rather than the “first available.” There are thresholds at $5 million (0.20% annual fee), $10 million (0.10%) and $25 million (0.05%) that earn you favorable pricing as well.

Perhaps it’s confusing to say that Vanguard will manage your investments through its robo-advisor even with PA. After all, you’re getting full access to a well-reviewed team of advisors. But just like a typical robo-advisor, with PA, you’ll start by filling out a questionnaire about your assets, age and risk tolerance.

Vanguard strongly encourages a phone or video call with a CFP, even if you want to follow the company’s standard recommended allocations.

Customers can attach their PA account to a traditional IRA, a Roth IRA or a taxable investment account.

Great Alternatives to a Regular Savings Account

Interest rates at banks have bounced back from historic lows less than three years ago. The best high-yield college savings accounts pay more than 4% interest.

If you want to put your emergency fund into something that could generate more than 4% APY, Vanguard is a wonderful choice.

Especially if you don’t need those funds immediately, Clark advocates for Vanguard’s short-term bond index funds when interest rates are low and money market funds when interest rates are better, like in 2024. Vanguard’s money market funds are also a good alternative to stashing your emergency fund in a savings account at an online bank or credit union.

If you’re a high-income earner, look specifically at municipal money market funds. They’re tax-free. Depending on your tax bracket, you could pay up to 37% on the interest you earn from a savings account. But municipal money market funds are exempt from taxes.

Frequently Asked Questions About Vanguard

Can I Buy Individual Stocks Through Vanguard?

Yes, you can buy individual stocks from Vanguard. You can even short-sell a stock. Vanguard does a nice job securing you the best price on your orders.

However, the way you buy stock on Vanguard is clunky, slow and even a little buried on its website.

What’s the Difference Between ETFs and Mutual Funds?

If you’re thinking about investing with Vanguard, you’ll want to understand the differences between ETFs and mutual funds.

Both can be actively managed and can be index funds, which are passively managed.

Mutual funds and ETFs are professionally managed collections of stocks and/or bonds. You can buy mutual funds only after the trading day is over. ETF shares trade when the stock market opens like ordinary stocks.

You can make automated contributions to mutual funds.

ETFs are preferable from a tax perspective, especially if you have a taxable account (as opposed to a retirement account). That’s because mutual funds are required to distribute capital gains to shareholders, which the government taxes.

Does Vanguard Pay Interest on Uninvested Cash?

Vanguard doesn’t offer a cash management account. So its customers can’t earn interest on uninvested cash. As such, Vanguard also can’t act as a replacement for a traditional bank, unlike some of its biggest competitors.

However, Vanguard offers money market accounts, CDs and short-term bond funds. All of those are designed to preserve your savings and perhaps earn more on your money than a typical savings account.

Can You Explain Vanguard’s Client-Ownership Structure?

Vanguard is client-owned, so it doesn’t have any investors other than its shareholders. That’s unique for an investment management company.

It means the company doesn’t need to appease private owners, doesn’t feel pressure to extract more profit from its customers and doesn’t have to be concerned about its stock price.

Vanguard is like a co-op for investing just as a credit union is a co-op for banking. If you own shares in a Vanguard fund, you are a part-owner of Vanguard.

What Are Admiral Shares?

Admiral Shares are a different class of shares within Vanguard’s funds (as opposed to Investor Shares).

As of July 2024, Admiral Shares offered expense ratios that were 52% lower, on average, than Investor Shares.

Vanguard is already known for offering the most inexpensive index funds, on average, in the industry. Admiral Shares represent a chance to lower the price even further. But you’ll need to meet higher minimum investments:

$3,000 on most index funds
$50,000 for actively managed funds
$100,000 for some sector-specific index funds

Vanguard lowered its Admiral Shares minimum for most index funds from $10,000 to $3,000 in 2018.

Final Thoughts

I’ll always have a soft spot for Vanguard. As a child, the Vanguard Total Stock Market Index was one of the first investments I ever made.

More people than ever are subscribing to Vanguard’s low-cost index fund strategy.

As I’ve discussed in this Vanguard review, if you’re looking for something specific such as a target date fund, Clark’s recommended blend of index funds or a savings account alternative, it’s great. But if you also plan to do anything else (including investing in individual stocks), you’ll probably need to consider a second brokerage firm.

Vanguard’s advice services are provided by Vanguard Advisers, Inc. (“VAI”), a registered investment advisor, or by Vanguard National Trust Company (“VNTC”), a federally chartered, limited-purpose trust company. The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. See VAI’s Form CRS and each program’s advisory brochure here for an overview. VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.