You may already know that I’m a HUGE Vanguard fan. Their rock-bottom index fund fees, selection, online account features, and investment philosophy just can’t be beat. Well, there’s another reason to celebrate them: as of May 4th 2010, Vanguard has significantly reduced its brokerage trading fees. (See THIS for more details.)
For stocks, commissions are $7 if you have $50,000 – $500,000 in assets (and a ludicrously low $2 per trade if you have more than $500K.) Even if you have less than $50,000, you still get 25 trades per year at $7, then $20 per trade after that. For many buy-and-hold investors still a long ways from retirement who hold only a few individual stocks (like me), 25 trades per year could be fine.
AND here’s the kicker: Vanguard’s ETFs can all be traded FREE! This means you can buy any of their indexes as ETFs instead of funds (garnering yourself even lower annual expense ratios versus buying Vanguard’s funds.) You can have 25 trades per ETF per year before Vanguard imposes a 60 day waiting period to prevent frequent trading. This means that you could even dollar-cost-average into these funds twice-monthly. (That said, if you do frequent dollar-cost-averaging, just using Vanguard’s standard mutual fund services may be better and easier.)
When things you love come together
I love my wife, and I love personal finance. If my wife suddenly developed an all-consuming passion for, say, investing…, my god. To me, that’s what Vanguard offering superior online brokerage service is like: when two things that you love come together (Vanguard + inexpensive online brokerage), it’s just beautiful. It will likely be only a matter of time before I get around to transferring my Scottrade assets over to Vanguard.
What to look for in a broker
If you’re looking for an online broker to open (or transfer) an account to, consider Vanguard. Compare its features and prices with other online brokers to make the best decision for yourself. Especially look at trading costs (should be around $10 or less), other fees, usability of the online interface, and online features (I hate paper.) Also, if the broker offers free dividend reinvestment (Vanguard does, as does ING Direct’s Sharebuilder; Scottrade doesn’t 🙁 ), that’s a plus.