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investing with vanguard

vanguard's intention is to discourage speculation and have longer term stable assets. founder john Bogle was one of the first to create an index fund which is a type of mutual fund that tracks an index of stock prices like the s&p 500. By "tracks", what is meant is that the index fund is a portfolio with holdings that are intended to mimic the stocks that comprise the index. IE one that tracks the S&P 500 would contain shares of 500 different stocks (?).

Warren Buffet recommends them as safe for investors in later years of life, or even just for the average investor to use them.

In practice, on average index funds beat the performance of actively-managed mutual funds over an extended period (10 years I think?).

strategy, then allocation

A Bogleheads guide suggests pick rough categories for the portfolio first, then within those buckets pick specific items.

etfs

An etf is an exchange-traded-fund. It's a variation on an index fund that can be traded like a stock, rather than once daily. It also has different taxation - only being subject to gains tax when sold.

prices, fees, minimums

As a starting point, see vanguard mutual fund fees and minimums

  • fees for withdrawing funds
    • You can use Electronic Bank Transfer (EBT) or Wire Transfer.
      • Vanguard does not charge for EBT, but your bank might.
        • EBT withdrawals take time to process (2-3 days). You can use EBT to buy vanguard funds right away. Other products like ETFs or stocks, you have to wait 7 days.
      • "Vanguard Brokerage charges a $10 wire fee for each holding you are redeeming from" (if your assets are under 1 million)
  • fund management fees, expense ratio
  • securities transaction fees
    • this seems to be something not unique to vanguard, but set by the sec
    • On the order of fractions of a cent "At the moment, the fee is $21.80 per million dollars of sale proceeds. That's $0.0218 per thousand dollars."
    • Looking up a more recent one "The Section 31 assessment on round turn transactions in security futures also will remain at $0.0042 per transaction."
  • commission fees
    • etfs
      • "All ETFs are subject to management fees and expenses; refer to each ETF's prospectus for more information. All ETF sales are subject to a securities transaction fee. Account service fees may also apply."
    • mutual funds
      • more complex fees for non-vanguard funds.
      • for vanguard funds "A few Vanguard mutual funds charge special purchase and/or redemption fees that are paid directly to the funds to help cover higher transaction costs and protect long-term investors by discouraging short-term, speculative trading. Those fees vary from 0.25% to 1.00% of the amount of the transaction, depending on the fund."
      • most vanguard trades seem to be no fee
    • stocks
      • no fee online, for "ASSETS INVESTED IN VANGUARD ETFs® & MUTUAL FUNDS"
      • "All stock sales are subject to a securities transaction fee. Account service fees may also apply."
    • options
      • they seem to want to discourage options trades, first several are free, then get fees
    • cds and bonds
      • bonds besides US treasuries CDS and other govt bonds may be either unavailable or have fees in primary and secondary market.
      • notably, eg, mortgage-backed securities are $35/trade
    • other services
      • wire transfers - "$10 wire fee for each holding you're redeeming" but also "While Vanguard doesn't charge a fee for electronic bank transfers or wire, your bank may charge you a fee." (?) Sounds like charges redemption fee, but not for the transfer.
  • account service fees
    • for brokerage account, $20/yr. you can waive the fee by simply opting into electronic delivery of statements.
  • minimum investment to avoid penalty or cost
    • you gain access to more services over 50,000. Summary
    • etfs require no minimum besides cost of one share
    • mutual funds have minimums
      • investor shares 1000 for certain vanguard retirement funds, 3000 for actively managed funds, for investor shares
      • admiral shares 3000 for most index funds, 50000 for most actively-managed funds, 100,000 for sector-specific
      • Admiral shares seem to be a way to give you a lower expense ratio. Here are the share classes

good starting points

If the key is the index fund:

For inflation hedges