Vanguard is the gold standard for investing in the financial independence community. Almost every podcast and blog will recommend it to you. It is obviously a great company, but there are few drawbacks to be aware of.
We think index investing is the way to go. John Bogle started index funds with Vanguard in the 70’s. The idea is that since most mutual funds don’t actually beat the market as a whole, and they charge high fees, it makes more sense to just have a passive fund that tracks the market as a whole. VTSAX is Vanguard’s total stock market index fund. It tracks the performance of pretty much every US-based stock. It does it with a 0.04% expense ratio, which means they charge $4 for every $10,000 invested.
Some actively managed mutual funds will charge 1% or more. That is a huge drag on your portfolio, especially considering most don’t beat or match the market in the first place. We definitely agree with Bogle’s philosophy of low fee index funds that track the market. Put as large a percentage of your income as you can manage into VTSAX and in a few decades, you’ll be very likely to have more money than you’ll know what to do with.
The pros are simple. It is a great company with a long history of offering great funds. It is also customer-owned, so the incentives align to your benefit. Just open an account and invest in low-cost index funds. Also, if you invest in their funds as we’d recommend, there are no trading fees.
There are some cons though. As much as I love the idea of Vanguard and just investing in VTSAX, the main downside is that the website isn’t very user-friendly. The end result is great, but getting there could be more pleasant. If you are new to investing and you want it to be as easy as possible, Vanguard might not be for you. They could really use some work on their user interface.
It’s pretty straight forward. I love Vanguard the company, and I love VTSAX. I use them myself, though not exclusively. The actual website isn’t very good in my opinion. If you can get past that, it’s a great way to do low-cost index fund investing. If user experience is very important to you, perhaps check out our Betterment review for an alternative option.