Thinking of Opening a Vanguard Brokerage Account? Here’s Exactly What You Need to Know!
Are you ready to take control of your financial future and start investing, but you're a little overwhelmed by where to begin? Maybe you've heard of Vanguard, with its reputation for low-cost index funds and ETFs, but you're worried you don't have enough money to get started. You're not alone! A common misconception is that you need thousands of dollars just to walk through the door.
Let's clear the air right now and walk through everything you need to know, from the minimum investment to the account opening process and all the fees in between.
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| How Much To Open A Vanguard Brokerage Account |
Step 1: The Initial Investment - It's Probably Less Than You Think!
Let’s get straight to the most important question: How much money do you need to open a Vanguard brokerage account?
The great news is that you don't need any money at all to open the account itself!
That's right, the initial minimum investment to simply open a Vanguard Brokerage Account is $0. This is a fantastic entry point for beginners. You can set up the account, get familiar with the platform, and then decide how and when you want to fund it.
So, if you're wondering, "Do I need a huge lump sum to even get started?" The answer is a resounding no. You can open the account for free and fund it later. But what about when you're ready to actually invest your money? That's where the minimums for specific investments come into play.
Step 2: Understanding Vanguard's Investment Minimums
Once your account is open, the amount you'll need depends entirely on what you want to invest in. Vanguard offers a wide range of investment products, and each has its own minimums.
Investment Minimums for Vanguard ETFs
This is where Vanguard truly shines for new investors. Vanguard's Exchange-Traded Funds (ETFs) are a great way to get started with a small amount of money.
Tip: Absorb, don’t just glance.
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The Minimum: Just the Price of One Share! You can buy a Vanguard ETF for as little as the price of a single share. Many of their popular ETFs, like the Vanguard S&P 500 ETF (VOO), trade for a few hundred dollars per share, but some can be much less. Even better, Vanguard offers the ability to buy fractional shares of their ETFs for as little as $1. This is a game-changer for new investors, allowing you to buy tiny pieces of a diversified fund with very little capital.
Investment Minimums for Vanguard Mutual Funds
Mutual funds, which are often a cornerstone of Vanguard's offerings, typically have higher minimums than ETFs. It's important to understand the different share classes.
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Vanguard's Admiral™ Shares: This is the primary share class for most of Vanguard's index mutual funds. The minimums for these are:
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$3,000 for most index funds. Vanguard recently lowered this minimum from $10,000 for dozens of its popular index funds, making them more accessible.
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$50,000 for most actively managed funds.
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$100,000 for certain sector-specific index funds.
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Special Mutual Funds with Lower Minimums: There are a couple of excellent options for those who don't have $3,000 ready to go.
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Vanguard Target Retirement Funds: These are "all-in-one" funds that automatically adjust their asset allocation as you approach your target retirement date. They have a lower minimum investment of just $1,000.
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Vanguard STAR® Fund: This is another diversified fund of funds with a $1,000 minimum.
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So, while you can open the account for free, you'll need at least $1,000 to buy into certain mutual funds or at least $1 to buy a fractional share of a Vanguard ETF.
Step 3: Navigating the Fees (and How to Avoid Them!)
Vanguard is known for its low costs, but there are a few fees you should be aware of.
The Annual Account Service Fee
Vanguard charges a $25 annual account service fee for each brokerage and mutual fund-only account.
But here's the best part: this fee can be easily avoided!
You can get this fee waived by meeting one of the following conditions:
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Signing up for electronic delivery of account-related documents. This is the easiest way to waive the fee and something everyone should do. It's good for the environment, too!
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Maintaining a balance of at least $10,000 in Vanguard funds and ETFs.
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Having a Vanguard-affiliated advisory service account.
So, with a simple click to opt for e-delivery, your account can be held for $0 annually in service fees.
QuickTip: Highlight useful points as you read.
Commissions and Trading Fees
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Vanguard ETFs and Mutual Funds: There is a $0 commission for buying or selling Vanguard ETFs and mutual funds online in your Vanguard account. This means you can trade these products without worrying about extra transaction costs.
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Stocks and Non-Vanguard ETFs: You can also trade individual stocks and ETFs from other companies. Online trades are commission-free.
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Other Fees: Be aware of potential fees for things like broker-assisted trades (placing a trade over the phone), wire transfers, or transferring your account to another brokerage.
Step 4: The Step-by-Step Account Opening Process
Ready to open your account? The process is straightforward and can be done online in just a few minutes.
Here's what you'll need to have ready:
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Personal Information: Your name, address, date of birth, and Social Security number.
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Financial Information: Your bank account and routing numbers to link an external bank account for funding.
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Employer Information: Your employer's name and address (if applicable).
The process itself involves these key steps:
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Choose Your Account Type: On the Vanguard website, select "Open an account" and choose the "Brokerage account" option. You'll specify if it's an individual or joint account.
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Provide Your Personal Details: Fill out the online application with your information.
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Link Your Bank Account: Connect your bank account to your new Vanguard brokerage account. This is the source for funding your investments.
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Fund Your Account (Optional at Opening): You can choose to fund the account immediately or do it later. Remember, there's a $0 minimum to open it.
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Review and Submit: Carefully review all the information you've entered and submit your application.
Once your application is submitted and approved, you'll be able to access your new brokerage account. It’s that simple!
Step 5: Funding Your Account and Making Your First Investment
Congratulations, your account is open! Now, let's talk about getting your money in and invested.
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The Settlement Fund: When you transfer money from your bank account to Vanguard, it first goes into a "settlement fund." This is essentially a money market fund where your cash sits, earning a small return, until you decide what to invest in.
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Transfer Time: It can take 3 to 7 business days for your money to fully transfer from your bank and be available in your settlement fund for investing. Be patient!
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Placing Your Trade: Once the money is settled, you can log in, go to the "Buy & Sell" section, and choose your investment. You can buy ETFs, mutual funds, stocks, and more.
Now, you're officially an investor!
Related FAQ Questions
Here are 10 quick answers to common questions about starting your investing journey with Vanguard.
Tip: The details are worth a second look.
How to open a Vanguard brokerage account for free?
You can open a Vanguard brokerage account with a $0 initial deposit. There is no minimum required to set up the account itself.
How to avoid the annual $25 Vanguard account fee?
Simply sign up for electronic delivery of all your account documents. This is the easiest way to waive the fee.
How to invest in Vanguard ETFs with a small amount of money?
You can invest in Vanguard ETFs by buying fractional shares for as little as $1. This is perfect for building a diversified portfolio on a budget.
How to invest in Vanguard mutual funds with a low minimum?
To invest in mutual funds with a lower minimum, look for the Vanguard Target Retirement Funds or the Vanguard STAR® Fund, both of which have a $1,000 minimum investment.
How to choose between an ETF and a mutual fund?
QuickTip: Don’t ignore the small print.
ETFs trade like stocks throughout the day and have lower minimums (often just one share). Mutual funds are priced once a day and typically have higher minimums but can be easier for setting up automatic investments.
How to use Vanguard's robo-advisor?
Vanguard offers a robo-advisor service called Vanguard Digital Advisor. To enroll, you need at least $3,000 in a Vanguard Brokerage Account.
How to buy Vanguard S&P 500 ETF (VOO)?
You can buy shares of the VOO ETF in your Vanguard brokerage account for the price of one share, or even fractional shares for as little as $1.
How to get my money into my Vanguard account?
You can link your external bank account and initiate an electronic bank transfer (ACH). The money will first appear in your account's settlement fund.
How to start a retirement fund with Vanguard?
Consider opening a Vanguard Brokerage IRA (Traditional or Roth). While the brokerage account itself has no minimum to open, you'll need to meet the investment minimums for the funds you choose to buy, such as the $1,000 for a Target Retirement Fund.
How to set up automatic investments with Vanguard?
Once your account is open and funded, you can set up recurring, automatic investments from your linked bank account into the funds or ETFs of your choice, making it easy to stick to a consistent investment plan.
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