Vanguard 401k Options Trading

Vanguard 401k options trading

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The Vanguard Group is an American investment management firm, currently headquartered in Malvern, Pennsylvania. Specializing in mutual funds, asset management, ETFs, sub-advisory services, and brokerage services (the firm acts as an intermediary in the buying and selling of financial securities). The Vanguard 401k is one of the most sought-after retirement plans.

Founded in 1975 by John C. Bogle, Vanguard is currently the largest mutual fund provider and the second-largest ETF provider in the world.

With over 16,600 employees, Vanguard currently operates around the globe with offices in Australia, Europe, and Asia.

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The company had over $5.3 trillion worth of assets under management in 2018.

Vanguard Leadership Team

Mortimer J. Buckley – Chairman & Chief Executive Officer

Joe Brennan – Managing Director & Chief Risk Officer

Gregory Davis – Managing Director & Chief Investment Officer

John James – Managing Director & Chief Human Resources Officer

Anne Robinson – Managing Director, General Counsel, & Corporate Secretary.

Vanguard 401k Plan Overview

Here are the highlights of Vanguard’s 401k Plan.

Trading Experience

Trading is relatively expensive at Vanguard, since each trade carries a fee with it.

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This is why active investors prefer not to go with Vanguard. The following is the fee structure per trade of stocks and ETFs.

Setup & Plan Administration

Vanguard has a very streamlined setup process, along with easy integration with payroll services and banks.

You can download the entire 401k kit from the website.

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The kit has complete information regarding the account, a plan adoption agreement, and a basic plan document. Vanguard also helps set up the 401k plan as one of the employee benefits in the client’s company.

All your processes are carried out by the plan administrator, who also oversees each 401k.

Range of Features

Vanguard provides all its clients with research and analytics tools that you can use to research funds, before investing in them.

Trade smarter: A weekly perspective

You can view historical charts, do side-by-side comparisons, track the performance of several funds, and search for them according to your investment objectives. In addition, you can create a watch list to monitor funds that you are interested in.

Vanguard representatives are available at any time for investment advice and guidance.

Employees can’t draw loans from within their 401k plans.

However, they can rollover the previous 401k account(s) from previous employers, into a Vanguard IRA.

The company also has a mobile app for Android, Apple, and Kindle devices. The app shows you your account balance and performance, lets you read financial news, analyze your portfolio, as well as, research and trade funds.

Vanguard 401k options trading

You can also make mobile check investments using your device’s camera if you’ve had an account for more than 60 days.

Portfolio Analysis

Vanguard’s portfolio mostly consists of long-term funds. The company offers over 100 well-managed mutual funds, available to all 401k participants.

Clients with the brokerage option can also invest in low-cost and diversified ETFs.

In addition, the company now has over 3,000 no-transaction-fee mutual funds and commission-free online transactions for almost 1,800 ETFs.

Vanguard possesses a variety of target data funds.

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Unlike other companies, the target funds are some of the most low-cost in the industry.

The company also provides ‘Admiral shares’ that usually have extremely low expense ratios. They can go down to 39% lower than the standard funds.

Customer Service

While retail investors get good customer service, 401k participants sometimes have a hard time getting the support they need. This is primarily because all 401k plans have a plan administrator who acts as an intermediary between the client/participants and the company.

Since all customer service operations are done through a middleman, in essence, the participants are never in direct contact with Vanguard.

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This may cause some lag in the process, especially if your query is unique. Such a factor may not be suitable for small businesses since they usually require constant support.

Fees, Costs & Expenses

There are no setup fees or minimum investments needed for opening a 401k account at Vanguard.

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However, there is a minimum investment of $1,000 if you want to invest in funds.

The average fund expense ratio is 0.18% and 0.11% for investor shares and admiral shares, respectively. Furthermore, the average ETF expense ratio is 0.07%.

The annual account service fee is $20, but it can be waived if your account balance is greater than $50,000.

The following are the minimum investment requirements for Investor shares and Admiral shares:

Margin Rates

Here are the margin rates for Vanguard’s margin investing accounts:

Vanguard 401k Review

Vanguard has a solid 401k plan, however, it does have its positives and negatives.

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The following are the most noteworthy pros and cons of Vanguard’s 401k plan.

Vanguard 401k Pros

Here are some factors that set Vanguard apart as a brokerage company:

  • Vanguard has a BrightScope Rating of 86, which is higher than the average of 79 in its peer group.
  • The firm has a rating of 4/5 on Consumer Affairs.
  • Their 401k plan comes in the top 15% in terms of company generosity, account balances, total plan cost, participation rate, and salary deferral.
  • The company has a large selection of low-cost funds including over 1,800 commission-free ETFs.
  • Customer support for brokerage operations is always available and you can get advice on investments any time you want.
  • The company has a range of educational material on its website, where you can learn about retirement plans, investment strategies, and more.

Vanguard is known as the market leader in low-cost funds, and it continues to uphold that title.

Vanguard 401k Cons

The following are some reasons why Vanguard may not be the best choice for a brokerage company:

  • The trade commissions and fees are extremely high.

    This is discouraging for active traders with modest portfolios – for every trade they carry out, there are underlying fees and commissions involved.

  • There are no specific trading platforms or tools provided, which can further limit the trading experience.
  • There is always an intermediary plan administrator who provides customer support and service.

    How to Buy and Sell Stocks on Vanguard

    This can lead to a bad employee experience since direct contact is usually preferred.

  • The fees and costs favor Vanguard products since there are little to no fees on Vanguard’s own mutual funds and ETFs.
  • There is a $1,000 minimum for investing in funds, which is on the higher end.

While the trading fees are high, the funds themselves are low-cost. This is best suited to risk-averse people.

What is Vanguard Best Known for?

With over 19,900 active participants across the US and more than $5.6 billion in plan assets, Vanguard is best known for its low-cost funds.

Vanguard is best for:

  • Passive Traders
  • Penny Stocks
  • IRA Accounts
  • Beginner Investors
  • High-Balance Customers

Vanguard’s services have been known to result in increased employee retention.

This is due to a 401k plan through which they can invest in low-cost funds with minimal risk.

Other Brokerage Firm Alternatives

You can compare Vanguard with the following competitor companies to get a better picture of their service quality.

  1. E-Trade – Founded in 1982 in Palo Alto, California, E-Trade provides an electronic trading platform and stockbroking services featuring several kinds of financial assets.

    Headquartered in New York, the company generates an annual revenue of $2.873 billion.

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    E-Trade has a BrightScope rating of 80, over 4,700 active participants, and more than $384.4 million in plan assets.

  2. Wealthfront – The automated investment service firm was founded by Andy Rachleff and Dan Carroll in 2008. Based in Palo Alto, California, the company provides analysis, trading, and brokerage services for mutual funds, stocks, and several other financial assets. The company currently has more than $20 billion in assets under management.
  3. TD Ameritrade – The Toronto-Dominion Bank owned company was founded in 1971 and is currently headquartered in Omaha, Nebraska.

    It specializes in providing stockbroker services and an electronic trading platform to trade multiple financial assets including mutual funds, ETFs, and common stocks, among others. TD Ameritrade boasts over $1.5 billion in assets in the 401k market. The company generated $5.45 billion in revenue in 2018.

Compared to its competitors, Vanguard falls behind in terms of brokerage services, especially because of its high trade fees and a lack of a seamless trading platform.

Vanguard 401k vs Student Loan Benefits

A lot of people nowadays are slowly moving towards instant benefits rather than long-term benefits.

This is why almost 49% of millennials now prefer student loan benefits over 401k contributions.

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As a result, the following bills were introduced in Congress.

Retirement Parity for Student Loans Act

The following bill was passed in 2018 and aimed to allow employers to make matching contributions to their employees’ student loan payments. The idea was that as the employee makes payments, the employer matches that amount and gives it to the employee.

That is why it’s also referred to as salary reduction contributions to employees’ retirement plans.

Employer Participation in Repayment Act

A major setback was that employer contributions on student loan payments were heavily taxed. That is why the Employer Participation in Repayment Act of 2019 was introduced in the House and Senate in 2019.

The idea is to let employers make tax-free contributions of up to $5,250 to their employees’ student loan payments on both the principal and interest amounts.

FutureFuel.io is a company that offers student loan assistance as a benefit to the likes of Salesforce and even Transamerica. FutureFuel provides a dashboard for employees to manage their student debt and understand how close they are to paying it off.

Moreover, it syncs seamlessly with employer contributions that will show up directly on the dashboard.

Is the Vanguard 401k Plan Right for You?

Vanguard is generally known as the leader in low-cost funds, which makes it an excellent company to invest with.

Vanguard 401k Review: Is It Your Best Option?

However, it’s smooth sailing as long as you’re not trading, because there are high trading fees involved. Therefore, if you don’t like taking risks and prefer a laid-back investment strategy, Vanguard may be right for you.

However, if you’re an active trader, you might want to look at other options. In addition, small business owners may also find the services unsuitable since the intermediary plan administrator will limit their reach to the company itself.