Should You Transition Your Vanguard Account? (2023)

Vanguard has been attempting to persuade clients to transition their funds to their brokerage account platformfor some time now. If you hold a Vanguard fund, you have likely seen emails or pop-ups asking you to transition your funds. If you do not currently have a Vanguard brokerage account, you are probably among the many other customers wondering if you should make the transition.

Transitioning your Vanguard account is not mandatory but may yield some benefits. With a transitioned brokerage account you will be able to hold mutual funds, ETFs stocks, bonds, and CDs and enjoy additional insurance from Lloyd’s of London.

In this article, we’ll go over whether you should transition your Vanguard account and the potential benefits of doing so. I’ll also highlight some of the disadvantages of doing so and we’ll go over exactly what happens when you make the transition.

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1 Is transitioning your Vanguard account mandatory?

2 Benefits of transitioning to a Vanguard brokerage account

(Video) Vanguard ETFs and Index Funds - What You Should Know

3 Disadvantages of transitioning to a Vanguard brokerage account

5 The bottom line

Is transitioning your Vanguard account mandatory?

Many Vanguard users have been reporting the appearance of a pop-up screen asking them to transition their account for some time now. It is essential to understand that while Vanguard insists on doing this, it is voluntary.

Should You Transition Your Vanguard Account? (1)

Vanguard themselves have confirmed that customers are not required to transition if they do not wish to. So, the choice is really up to you. Let’s weigh the benefits and disadvantages of transitioning to get a better idea of what you should do.

(Video) How Could Vanguard Let This Happen..

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Benefits of transitioning to a Vanguard brokerage account

Should You Transition Your Vanguard Account? (2)
  • A way to diversify your investments: Transitioning is a way to diversify your portfolio.With a Vanguard brokerage account, you can hold mutual funds, ETFs, stocks, bonds, and CDs. You will also be able to hold ETFs from other companies. You can hold all of these in one account, making for more simplicity in managing your investments.
  • Brokerage clients are insured by both the SIPC and Syndicates at Lloyd’s of London: All securities, including mutual fund holdings, are insured up to $500,000 USD (including $250,000 in cash claims) by the SIPC (Securities Investor Protection Corporation). Additionally, Vanguard has secured extra cover from Syndicates at Lloyd’s of London, which offers an aggregate limit of $250 million for all claims of securities and cash.It also incorporates a per client coverage limit of $49.5 million for securities and $1.9 million for cash.
  • Account management that is simple and hassle-free: You will receive more simplified records in the form of one statement and one consolidated tax form in the first year after the move to the new platform. The Vanguard brokerage platform also offers personal advisor services that include a customized financial plan, goal-setting, and investment advice. The personal advisor service does come with a fee of 0.03% of your total assets.
  • Fast fund transactions: When you sell a stock or bond, you can reinvest your profits in Vanguard funds right away.You also will not pay commissions when you buy or sell Vanguard mutual funds or ETFs.
  • Fee-free transition: Vanguard does not charge any fees, nor are there any tax implications for transitioning to the brokerage platform.
  • Transitioning may help lower overall costs: Vanguard insists that streamlining their services and phasing out the old platform can help keep costs low for investors. Since Vanguard is known for its low-cost investments, this could be one reason to make the transition.If more people transition, Vanguard could consolidate costs and keep offers low.

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Disadvantages of transitioning to a Vanguard brokerage account

  • The brokerage platform leaves something to be desired: Some users report that they are unhappy with the brokerage platform. The Vanguard app does not get the best of reviews, as opposed to some other brokerage services.Vanguard users report that the app feels a bit outdated and could do with newer and more user-friendly features.The usability is somewhat lacking, and as a whole, the platform seems quite outdated compared to other brokerage platforms.
  • You cannot direct dividends from one fund to another: If you transition to a brokerage account, you won’t be able to redirect dividends and capital gains distributions from one mutual fund into a different one. You will also be unable to transition them into a sweep account.You will need to either reinvest shares of the distributing holding or distribute them in cash to your money market settlement fund.
  • Some employers may have restrictions on brokerage accounts: If you or your spouse are an employee of a financial services company, the employer may not allow you to have a brokerage account with Vanguard. If you are in the financial services industry,you should check with your employer to see if you are permitted to hold funds in a Vanguard brokerage accounton your current contract.
Should You Transition Your Vanguard Account? (3)

You cannot set up transfers in kind on certain investments.

These investments include:

  • CDs held directly with a bank
  • Certain options
  • Limited partnerships and private placements
  • Certain mutual funds and other investment products are offered exclusively by your current firm
  • Certain low-priced securities traded over the counter (OTC) or on the pink sheets market
  • Commodities
  • Annuities
  • Life insurance policies

The minimum on funds is higher than some other brokerage platforms.

While minimums on mutual funds are somewhat common, many brokers waive the fees if investors agree to certain terms, such as monthly auto-deposits. With Vanguard,most fund deposits are set at a minimum of either $1,000 or $3,000 USD. This may be a bit high for novice investors or those looking to set up a fund with a smaller deposit.

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What will happen to my accounts if I transition?

Most services will still be available on the brokerage platform.Some services will require you to fill out new forms, such as check writing.You will only need to fill out the form if your brokerage account does not have check-writing available already. It is important to understand that check-writing privileges that you had on Vanguard funds will not carry over to the new brokerage account, and this is when you will need to submit a form and get a new checkbook.

Should You Transition Your Vanguard Account? (4)

You will also need to establish any third-party access on your new account. This means that agents will not have immediate access to your account unless you grant access after transitioning.

How long does the transition take?

The move will usually complete on the next business day if you transition before 4 p.m. EST. Mutual find assets will usually appear in your account on the second business day.

(Video) How to Open a Vanguard Account (Step by Step for Beginners)

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The bottom line

When it comes down to it,making the transition of your Vanguard account is not a bad decision. The good outweighs the bad, as there aren’t too many disadvantages associated with making the move. Along with the benefits, transitioning will put an end to you being bothered by those pesky pop-ups and nagging messages about moving to the new platform!

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Marvin Allen

Hi! My name is Marvin. I am on a path toward financial freedom. On this blog, I share thoughts and ideas on Personal Finance & Investing.

I started this blog because I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.

To track my progress towards complete financial independence I use Personal Capital. Most of my monthly surplus I invest in Vanguard ETFs with M1 Finance. I use the dividends (plus their 'borrow' option) to invest in real estate deals with Fundrise.

Finally, I invest the real estate distributions into startups using Mainvest and high-yield real estate debt with Groundfloor.

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FAQs

Do I have to transition my Vanguard account? ›

You can move your Vanguard mutual funds into your existing brokerage account and keep that account number. You'll no longer need your separate mutual fund account. I want to keep the same investments. Your investments won't change.

How often should I rebalance my portfolio Vanguard? ›

Check your portfolio at least once a year, and if your mix is off by at least 5 percentage points, consider rebalancing.

Is Vanguard transitioning to a new platform? ›

We'd like to inform you that Vanguard is retiring its legacy brokerage platform by the end of 2021. When you transition your account into a Vanguard Brokerage Account, your current investments will move into this new account platform. There are no fees or tax consequences in completing this transition.

What are the cons of Vanguard? ›

Vanguard review Fees
ProsCons
• No inactivity fee• High margin rates
• Free stock and ETF trading• High fees for non-free mutual funds
• Some mutual funds and bonds are also free to trade

How often can I exchange Vanguard funds? ›

"As a result of client feedback, Vanguard has updated its frequent-trading policy. Investors who exchange or redeem out of a Vanguard fund will be eligible to purchase or exchange back into the same fund 30 calendar days later.

Can I move assets from one Vanguard account to another? ›

You can move your assets into a new or existing individual, joint, or custodial account. If you're a current Vanguard client, we'll show you the account options for your transfer. If you're new to Vanguard, select Open a new account for this transfer.

Does rebalancing increase returns? ›

Rebalancing usually does not increase long-term investment returns. It may reduce the volatility of your investment portfolio and keeps the asset allocation in sync with your risk tolerance.

When should you reallocate a portfolio? ›

You may set a rule for yourself to rebalance any time the stock portion of your portfolio grows to 85%. This is a fairly standard rule of thumb to follow, though you may choose a different percentage instead. For example, you may decide to rebalance if your asset allocation changes by 10% or 15%.

How important is rebalancing your portfolio? ›

Rebalancing your portfolio will help you maintain your original asset-allocation strategy and allow you to implement any changes you make to your investing style. Essentially, rebalancing will help you stick to your investing plan regardless of what the market does, helping you to stick to your risk tolerance levels.

Is Vanguard or Fidelity better? ›

While both apps are well-rated on the App Store, Fidelity has far more reviews. Vanguard has 4.7 stars from about 170,000 reviews, while Fidelity has a 4.8-star rating from some 1.9 million reviews. 23 Overall, we found that Fidelity's app offers more functionality and will be valuable to a greater range of investors.

What is the difference between a Vanguard account and a Vanguard brokerage account? ›

When you open an account with Vanguard, there are two different account options. First is a mutual fund account which only holds Vanguard mutual funds. Second is a brokerage account that can hold individual stocks, ETFs, individual bonds, and non-Vanguard mutual funds.

Is Vanguard federally insured? ›

Although a money market fund seeks to preserve the value of an investment at $1 per share, it cannot guarantee it will do so. Investment in this Investment Option is not insured or guaranteed by the FDIC or any other government agency.

Is Vanguard good for beginners? ›

Vanguard funds are some of the best mutual funds for beginners, because of their wide variety of no-load funds with low expense ratios. But even advanced investors and other professionals use Vanguard funds. Once you become more experienced, you may be able to combine several of these Vanguard funds into one portfolio.

Can you lose money with Vanguard? ›

Vanguard Cash Reserves Federal Money Market Fund and Vanguard Federal Money Market Fund: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so.

What if Vanguard goes out of business? ›

If the fund company goes bankrupt, the assets would remains the same, one would just have to hire a new company to manage it. In addition, one of the features specific to Vanguard is that it is set up as client-owned.

Does Vanguard charge to exchange funds? ›

Vanguard Brokerage doesn't charge additional fees for a purchase, a sale, or an exchange of any load mutual fund offered through our program.

Can I buy Amazon stock through Vanguard? ›

The top 5 mutual funds that hold Amazon stock include Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and the SPDR S&P 500 ETF Trust (SPY).

Do I pay taxes if I exchange mutual funds? ›

The Internal Revenue Service considers a mutual fund exchange the sale of one fund and the purchase of another. You will be responsible for capital gains tax on mutual fund gains if you exchange your fund at a profit, just like you would in an outright sale.

What is a sweep out Vanguard? ›

Sweep Out means that money got taken out of that fund and either withdrawn from the account entirely, or used to purchase another investment within the account. If no transactions were ever made outside of the initial deposit, everything should still be in the settlement fund.

How long does it take to withdraw from Vanguard? ›

Follow the on-screen instructions. When you withdraw cash it can take up to 5 business days to be paid to your bank account.

Can I transfer stocks to Roth IRA? ›

The IRS allows you to move either cash or property from your traditional IRA to your Roth IRA. Stocks count as property, which means that rather than taking out cash from your traditional IRA and putting it in a Roth IRA, you can simply take out the stocks and redeposit them in your Roth IRA.

Should I rebalance when the market is down? ›

You should rebalance your allocation in equity or any other asset class if it has substantially become underweight. Else, you should continue to remain invested with the existing allocation even though the stock market has tanked today (February 24).

Is rebalancing necessary? ›

While it's important to review your investments on a regular basis, making changes to your portfolio to rebalance is not always necessary and ultimately depends on your age, goals, income needs and comfort with risk. In fact, sometimes rebalancing may do more harm than good, especially if done too often.

Is automatic rebalancing good? ›

Having a balanced portfolio ensures your asset allocation is still on track for your investment goals. If you're more of a hands-off investor, then automatic rebalancing is an excellent feature to have because it does the work for you.

When should you switch mutual funds? ›

WHEN YOU CAN THINK OF SWITCHING IN MUTUAL FUNDS
  • If you want to move from debt to equity funds or vice versa.
  • If you're going to make a switch from regular to direct funds.
  • If you're looking to choose a fund with better returns.
  • If you want to move from growth to dividend fund.

What is a danger of over diversification? ›

The biggest risk of over-diversification is that it reduces a portfolio's returns without meaningfully reducing its risk. Each new investment added to a portfolio lowers its overall risk profile. Simultaneously, these incremental additions also reduce the portfolio's expected return.

What percentage of portfolio should be in one stock? ›

The old rule about the best portfolio balance by age is that you should hold the percentage of stocks in your portfolio that is equal to 100 minus your age. So a 30-year-old investor should hold 70% of their portfolio in stocks.

What is a negative consideration of rebalancing? ›

“Rebalancing too often could result in a lot of transactions” and fees, UBS's Lowy said, adding that too many sales in a taxable account can trigger damaging capital gains taxes. Even when rebalancing is wise, it's best to use techniques for minimizing taxes that can be triggered by sales.

What is a good portfolio balance? ›

Typically, a balanced portfolio has a 50/50 or 60/40 split between stocks and bonds. And because you have a mix of stocks and bonds, you are balancing your risk level — and your possible return on investments. Having a balanced portfolio means striking a balance between preserving your capital and achieving growth.

How much cash should I hold in my portfolio? ›

A common-sense strategy may be to allocate no less than 5% of your portfolio to cash, and many prudent professionals may prefer to keep between 10% and 20% on hand at a minimum. Evidence indicates that the maximum risk/return trade-off occurs somewhere around this level of cash allocation.

Which is better Charles Schwab or Vanguard? ›

In our 2020 Best Online Brokers reviews, Charles Schwab earned higher scores than Vanguard in every category we ranked, which includes Best Overall, Best for Beginners, Best Stock Trading App, Best for Day Trading, Best for International Trading, Best for Low Cost, and Best for ETFs.

Is TD Ameritrade better than Vanguard? ›

Is TD Ameritrade better than Vanguard? After testing 15 of the best online brokers over six months, TD Ameritrade (95.41%) is better than Vanguard (62.82%). TD Ameritrade delivers $0 trades, fantastic trading platforms, excellent market research, industry-leading education for beginners and reliable customer service.

Can I have both Vanguard and Fidelity? ›

The answer depends on you and your investment goals. There's no reason you can't have accounts with both Fidelity and Vanguard (among others).

Can I buy stocks through my Vanguard account? ›

There's no minimum initial investment for stocks and ETFs—it's the price per share. You'll pay no commission to trade ETFs & stocks online in your Vanguard Brokerage Account. You can start trading right away, but must pay for your trade within 2 business days after the day you initiate the trade.

Does Vanguard charge fee for closing account? ›

Vanguard charges no closing, transfer or inactivity fees. There is a $20 annual account service fee for all brokerage accounts and IRAs. Waived for clients who sign up for statement e-delivery.

Which is better Vanguard or Robinhood? ›

After testing 15 of the best online brokers over six months, Robinhood (64.85%) is better than Vanguard (62.82%). Robinhood is very easy to use; however, now that all online brokers offer $0 stock and ETF trades, Robinhood's lack of trading tools and research leaves it a step behind the competition.

Why is Vanguard so cheap? ›

Vanguard has no outside investors. The company is owned by its funds, and the funds are owned by their shareholders, which is everyone who invests with Vanguard. This structure is why Vanguard funds have low fees. Those low fees mean more money in the pockets of Vanguard's investors/owners.

How do I protect my Vanguard account? ›

Protect your accounts
  1. Security codes. When you log on to your Vanguard account from a device we don't recognize, we'll send you a unique, 6-digit number via text. ...
  2. Account activity alerts. ...
  3. Trusted contact. ...
  4. Security keys. ...
  5. Voice verification.

What is the lowest risk Vanguard fund? ›

Vanguard Short-Term Corporate Bond ETF (VCSH, $77.74) is a low-risk index bond exchange-traded fund that offers investors a healthy yield of 3.6%.

What is a good Vanguard portfolio? ›

What are the best performing Vanguard funds? Based on 10-year average annual returns, the top-performing Vanguard fund is the actively managed U.S. large-cap growth fund (VWUSX) at 20.74%. The passively managed large-cap growth index fund (VIGAX) comes in second with 19.32%.

Which Vanguard fund has the highest return? ›

Fastest growing Vanguard funds worldwide in May 2022, by one year return. The fastest growing investment fund managed by U.S. asset management company Vanguard is the Vanguard Energy Index Fund. Over the year to May 1, 2022, the mutual fund generated an annual return of 60.64 percent.

How do I choose Vanguard funds? ›

How to buy Vanguard mutual funds
  1. Check your employer-sponsored retirement plan. The easiest way to buy Vanguard mutual funds is through your 401(k) or 403(b), if they are among the investment choices. ...
  2. Invest through a tax-advantaged brokerage account. ...
  3. Choose your funds.
Apr 29, 2022

How many index funds should I have in my portfolio? ›

Hold one fund each in Large, Mid and Small Cap category. Within the same theme/market cap, you need not have more than two funds as a thumb rule. You will do extremely well with one fund. If the need arises, stretch it to two but not beyond that.

How many Vanguard ETFs should I own? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.

How can I double my money in one year? ›

Here are some options to double your money:
  1. Tax-free Bonds. Initially tax- free bonds were issued only in specific periods. ...
  2. Kisan Vikas Patra (KVP) ...
  3. Corporate Deposits/Non-Convertible Debentures (NCD) ...
  4. National Savings Certificates. ...
  5. Bank Fixed Deposits. ...
  6. Public Provident Fund (PPF) ...
  7. Mutual Funds (MFs) ...
  8. Gold ETFs.

Is Hargreaves Lansdown better than Vanguard? ›

Vanguard vs Hargreaves Lansdown - customer reviews

Just over 60% of respondents classified Vanguard as "excellent", with 55% of reviewers putting Hargreaves Lansdown into that category. Hargreaves Lansdown received praise for its efficiency and good customer service, while Vanguard got plaudits for its low fees.

How many individual investors does Vanguard have? ›

Vanguard is made up of more than 30 million investors, all with unique stories and individual goals.

How much money do you need to start investing with Vanguard? ›

Investor Shares

$1,000 for Vanguard Target Retirement Funds and Vanguard STAR® Fund.

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