Vanguard to Further Drive Down the Cost of Investing by Broadening Commission-Free ETF Trades

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Jul 02, 2018, 09:00 ET

VALLEY FORGE, Pa., July 2, 2018 /PRNewswire/ -- Vanguard today announced substantial reductions in the cost of investing with the firm by providing commission-free online transactions for the vast majority of ETFs. Vanguard, which has offered commission-free transactions of Vanguard ETFs since 2010, is broadening access beyond the company's 77 low-cost ETFs to nearly 1,800 offerings, including ETFs from BlackRock, Schwab, and SSgA. The program will exclude highly speculative and complex ETFs.¹

"Vanguard has led the industry in reducing the cost and complexity of investing for all investors for more than four decades. We've driven down the costs of funds. We've driven down the cost of advice. Now, we're driving down the cost of investing in ETFs," said Karin Risi, Managing Director of Vanguard's Retail Investor Group. "We believe giving investors access to a broad choice of low-cost, broadly diversified, commission-free investments is good for investors and good for the asset management industry."

Vanguard expects commission-free online transactions to be available in August and will include the majority of ETFs traded on the major exchanges, which constitutes the largest suite of ETFs available to investors without commissions.² Vanguard also offers a competitive fee schedule for individual stocks and bonds, with many investors paying as little as $2 for online equity transactions. In addition, Vanguard brokerage settlement accounts are allocated to the Vanguard Federal Money Market Fund (VMFXX)³, which currently yields 1.82%—more than five times the average market rate.⁴

Ms. Risi also noted that Vanguard has made considerable enhancements to its brokerage platform over the past several years and plans to invest additional resources to enhance the online experience and trading capabilities.

"Vanguard wants to be the premier provider for long-term investors who want the flexibility to hold a wide array of low-cost funds and ETFs, coupled with the convenience of interacting with a single firm," said Ms. Risi. "Investors will be able to assemble balanced, diversified portfolios from virtually the full universe of ETFs to meet their financial goals, add additional assets regularly, and periodically rebalance—all without paying a commission."

ETFs have grown tremendously over the past ten years, as a broader range of investors have increasingly gravitated to low-cost index strategies. Financial advisors have increasingly employed ETFs as low-cost, diversified building blocks on behalf of their clients and, more recently, retail investors are beginning to adopt ETFs as a preferred investment over actively managed mutual funds and individual securities.

With nearly $937 billion in global assets under management, Vanguard ETFs represent an extension of the firm's indexing leadership. Vanguard pioneered indexing for individual investors with the introduction of Vanguard 500 Index Fund in 1976. The firm, which introduced its first ETF in 2001, offers some of the industry's largest and best-selling ETFs; namely broadly diversified index strategies including the $97 billion Vanguard Total Stock Market ETF (VTI), the $90 billion Vanguard S&P 500 ETF (VOO), and the $72 billion Vanguard FTSE Developed Markets ETF (VEA).

In February, Vanguard broadened its ETF family beyond index-based portfolios by introducing the firm's first actively managed ETFs. Vanguard's five single factor funds seek to achieve specific risk or return objectives through targeted factor exposures—minimum volatility, value, momentum, liquidity, and quality. The sixth ETF follows a multi-factor approach. This week, Vanguard also announced plans to introduce two new ESG ETFs, expected to launch in September of this year.

To help investors better understand ETFs, Vanguard has developed educational content and interactive tools on its website, including a "Compare ETFs" tool that enables investors to conduct a side-by-side review of the expense ratios, portfolio characteristics, and other data of available ETFs.

About Vanguard

Vanguard is one of the world's largest investment management companies. As of May 31, 2018, Vanguard managed $5.1 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 397 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

All asset figures are as of May 31, 2018.

Trading limits, fund expenses, and minimum investments may apply. See the Vanguard Brokerage Services Commission and Fee Schedules on vanguard.com for full details.

For more information about Vanguard funds, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

All investing is subject to risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss.

Factor funds are subject to investment style risk, which is chance that returns from the types of stocks in which the fund invests will trail returns from the stock market. Factor funds are subject to manager risk, which is the chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.

¹Commission-free trades will exclude inverse and leveraged ETFs.

²Most clients will continue to pay the standard commission rate to buy and sell ETFs by phone; see commission schedule. This offer excludes 401(k) participants using the Vanguard Brokerage Option account. Please reference the details of your specific plan for a current commission schedule.

³ 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. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

⁴ Based on the highest published rates as of June 29, 2018, for settlement accounts at Charles Schwab, E*Trade, Fidelity, and TD Ameritrade, which, with Vanguard, represent the five largest retail direct brokerage providers.

SOURCE Vanguard