How to Buy Vanguard Index Funds

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The Steps to Buy a Vanguard Index Fund 

You can invest through the 401(k) provider as well as choose any of the two following options:

  • Purchase directly from Vanguard
  • Open a brokerage account 

You will need to decide which account type to choose from, such as a taxable, traditional, or Roth IRA account. You will have to look at different index fund portfolios and depending on how much you want to invest and whether you would like to make additional monthly payments, you can choose the index fund you want to go for. 

There are also plenty of other solutions that make it easier for the average investor to buy index funds. M1 Finance is one such innovative solution where you can build a custom portfolio by picking ETFs and stocks according to personal preferences. You can set up target allocation for every security. Through intellectual automation and fractional shares, M1 invests your money. This allows you to capture the full potential of your money in an easy and simple way. 

RELATED: What is An Index Fund?

How to Open an Account at Vanguard?

To open your Vanguard account, as discussed above, you have to follow the steps below: 

  1. You have to decide which funds you want to buy. You can take advice and help from Vanguard to make this choice. 
  2. After selecting the funds, you have to choose a type of account based on the savings goals you have in mind. 
  3. You can open your account online in 10 minutes with as little as $1,000/ 

M1 Finance works even more simply and with fewer costs. M1 works commission-free since the beginning, something Vanguard didn’t do until 2020. M1 doesn’t have any service fees, but Vanguard has a $20 fee. M1 also offers fraction shares, checking accounts, tax minimization, and automated rebalancing. Out of all of these amazing features, Vanguard only offers automated rebalancing to high-value accounts. 

How to Select an Index Fund at Vanguard?

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Vanguard offers more than a hundred ETFs and index funds that you can choose from. Depending on the portfolio mixture and the amount you can spend on fees and minimums, you can choose any of the following funds.

  • Vanguard 500: The S&P 500 was the first index fund that gave average investors access to the top 500 companies that hold 75% of the total value of the stock market. The minimum investment is $3000, and the expense ratio is 0.04%. 

  • Vanguard Total Stock: This fund gives you access to the entire equity market of the US. The minimum investment is $3000, and the expense ratio is 0.14%.

  • Vanguard Total Bond: You will have access to all the investment-grade bonds in the US with 70% government and 30% corporate bonds. The minimum investment is $3000, and the expense ratio is 0.15%.

  • Vanguard Balanced: This index fund is a mixture of 60% stocks and 40% bonds to ensure balanced growth and stability. The minimum investment is $3000, and the expense ratio is 0.19%.

  • Vanguard Growth: This index fund uses a buy-and-hold method for the stocks in large companies within sectors that have large potential for growth. This includes industries like financial, consumer, and technological services and products. The minimum investment is $3000, and the expense ratio is 0.17%.

  • Vanguard Small-Cap: This index fund is for small publicly-held companies. It is aimed at investors who want to diversify away from large companies. The minimum investment is $3000, and the expense ratio is 0.17%.

To narrow down the choice among these different Vanguard index funds, you can chat with a financial advisor or do the research yourself. You can customize your portfolio based on your understanding of the market. Some people also prefer investing in an all-in-one fund since you can invest in many different areas through a complete portfolio. 

How to Buy an Index Fund?

Here is how you by an index fund through any brokerage platform:

  1. Decide what you want to buy
  2. Choose an index based on capitalization and company size, asset type, industry, market opportunities, and geography. 
  3. Check on registration costs and minimums 
  4. Open a brokerage account 
  5. Purchase index funds from brokerage firms. 

Does Robin Hood Have Vanguard Index Funds?

Vanguard is famous for offering its ETFs, mutual funds, and index funds commission-free. But they do have a wide variety of third-party brokers that you can purchase their funds from. They have negotiated agreements with such brokers to make some of their funds available for purchase without commissions. Others still come through particular broker fees. 

If you are looking to invest through Robin Hood, you can buy popular Vanguard index funds. They don’t take commissions on many index fund portfolios like the S&P 500. 

What is the Cost for Vanguard Index Fund Shares?

Investors need to make a minimum investment initially, around $3,000 to$10,000. The annual costs to maintain the fund also need to be paid. This is known as the expense ratio, which is based on a percentage of the cash you have invested in the fund. There are two main types of Vanguard index funds that you can invest into. Depending on the one you choose, you will have to pay different amounts in upfront and annual fees. Here are the two shares and their cost.

Admiral Shares

  • The minimum upfront cost is a minimum investment between $3,000 and $100,000. 
  • The average expense ratio is 0.11%.

Investor Shares

  • The minimum upfront cost is a minimum investment between $1,000 and $3,000.
  • The average expense ratio is 0.18%.
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