Vanguard, the index fund behemoth created in 1975 by cheap investing genius John Bogle, debuted its discount brokerage in 1983. As of January 2, 2020, the trading subsidiary will join other online brokers in offering commission-free online trading for stocks to all of its customers. The standard per-leg cost for trading options has been abolished, however consumers will still be charged $1 per contract.
Since August 2018, Vanguard users have been allowed to trade exchange-traded funds (ETFs) without paying a charge, but this new pricing structure extends commission-free trading to all stocks. The old pricing system charged varied costs dependent on a client’s Vanguard balance, ranging from $2 to $7 for an equity transaction and $2 to $7 plus $1 per contract for options trading for individuals with balances less than $1 million. Clients with more than $1 million in Vanguard accounts qualified for 25-100 free transactions each month.
A Focus on Buy and Hold
Historically, Vanguard’s brokerage customers trade rarely and prefer to keep Vanguard-managed assets in their accounts, concentrating on the firm’s low-fee mutual funds and ETFs. The brokerage is intended at people who share Vanguard’s investment philosophy, allowing customers to supplement their mutual fund holdings with stocks and bonds.
Though Vanguard was hesitant to join the commission-free party, company representatives have previously said that their platform does nothing to promote trading. Options trading is strictly confined to single-leg trades. A significant inventory of secondary market fixed-income instruments is available for trading online for $1 per $1,000 face value.
Cash Sweep Program
Clients with cash may participate in the sweep program. As the default brokerage sweep option, the business provides a money market fund (Vanguard Federal Money Market Fund, which has a.11% yield as of July 2020 and a 0.11% fee ratio).
Vanguard has ambitious ambitions for 2020, aimed at their modest number of active traders and power users. The website’s most frequently visited pages are being revamped, and the mobile applications are being completely overhauled.
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