You can’t help but respect what Vanguard has achieved over the years.
Vanguard is an investment company that has stood the test of time. It popularised fund investing in the 1970s, offering ordinary people an easy way to access the markets at low costs. Today over 50 million people use its products, with its LifeStrategy funds being some of the most popular in the world.
It’s not the most flashy or exciting firm – but it is one of the most reliable, consistently performing well across the years. However, we do feel it’s starting to fall behind newer companies. Most notable is InvestEngine which has even lower costs and, not being tied to just the Vanguard funds, can offer a wider selection of investments.
✅ Reliable service.
📈 Low costs.
📱 A great reputation.
🏦 Can only invest in Vanguard funds.
💸 No app.
📜 Can be relatively expensive for larger portfolios.
📱 Newer app-based companies are offering a wider choice at a lower cost.
Vanguard is a prominent wealth management company renowned for its investor-centric approach and emphasis on long-term, low-cost investing. On its platform, you will only find Vanguard’s own funds – which have become famous within the industry. This helps it streamline operations, maintain cost efficiency and ensure all the products it offers are in line with its philosophy.
It was established in the United States in 1975 by John C. Bogle, a pioneering figure in the investment world. He championed low-cost index funds, revolutionizing the industry and advocating for the individual investor’s interests. When he started out, people laughed at him for thinking investors would want funds that offer average market gains rather than aiming for huge market-beating profits. They’re not laughing now.
Expanding its operations to the United Kingdom, Vanguard sought to bring its distinctive investment philosophy to a wider European audience. Today in the UK it offers index funds, Exchange-Traded Funds (ETFs), mutual funds, and pension products, all designed with the goal of providing value and reducing investment costs for clients.
Recently, Vanguard has furthered its commitment to accessibility and convenience by launching its own investment platform in the UK. This platform is designed to offer investors a direct and simplified way to access Vanguard’s array of investment products, enhancing the overall user experience and maintaining the company’s position as a leader in the investment sector.
[.custom-color]Vanguard has a choice of 5 accounts.[.custom-color]
ISA (Individual Savings Account): This provides a significant tax advantage, allowing up to £20,000 (as of 2023) to be invested annually with all profits and dividends being tax fee. For instance, if you invest £15,000 and it grows to £20,000, the £5,000 profit is exempt from taxes.
Junior ISA: Designed for parents and guardians saving for their children, it offers similar tax benefits to an adult ISA but has an annual limit of £9,000. This account helps build savings for a child’s future, with the total sum becoming accessible when they turn 18.
SIPP (Self-Invested Personal Pension): Contributions to a SIPP are eligible for tax relief at your highest rate of income tax. For basic rate taxpayers, this means for every £80 contributed the government will add another £20, effectively making a £100 investment. Higher and additional rate taxpayers can claim further tax relief through Self Assessment tax returns.
General Investment Account: A standard, non-tax-advantaged investment account suitable for investments beyond the limits of tax-efficient accounts.
Vanguard Managed ISA: This is a specific type of ISA offered by Vanguard, where the investments are managed by its own professionals, providing an option for investors who prefer a hands-off approach. It has the tax benefits of a normal ISA.
[.custom-color]The fees are very reasonable.[.custom-color]
Platform Fee: Vanguard charges an account fee, which is a percentage of your invested assets. This fee is set at 0.15% but is capped at £375 a year. This means you won’t pay any platform fees on balances over £250,000 which makes it very attractive for larger portfolios.
If you decide to go for the new Managed ISA account you will be charged an additional 0.3% management charge.
Trading Fees: You can only trade Vanguard funds on the platform and these are free. However, there is a delay of 2-3 days from when you purchase them to the order going through and this can lead to some price fluctuations. It’s not an issue for most as Vanguard is about long-term investing rather than day trading – but if you do want an instant trade it will cost £7.50.
Let’s compare how these fees work out against some competitors when trading funds. In the table below we’ve also worked out how much various competitors would charge you at different portfolio sizes if you traded one fund (listed in GBP) a month:
Note: There will also be ongoing fund fees which are charged by all the providers. These average 0.22% on Vanguard.
As you see, Vanguard is pretty good value when compared to a traditional percentage-based broker like AJ Bell – especially as your pot becomes larger. ii and Freetrade are interesting comparisons because their flat fee structure means they become good value compared to Vanguard as your portfolio grows. InvestEngine we included just because of its ridiculously low costs.
[.custom-color]Currently, there are 85 funds you can buy through Vanguard.[.custom-color]
Index Funds: These funds track specific market indices, providing exposure to a range of markets and sectors with low expense ratios. They include both equity and bond index funds, covering UK, global, and specific regional markets.
Exchange-Traded Funds (ETFs): Vanguard ETFs offer similar benefits to index funds but are traded like stocks on an exchange. In practice, you won’t notice any difference.
Active Funds: Managed by professional fund managers, these funds aim to outperform their benchmarks through strategic investment choices. They cover a variety of asset classes and strategies.
LifeStrategy Funds: These are a series of multi-asset funds that offer a blend of equities and bonds in fixed proportions, designed to cater to different risk tolerance levels. The higher the level of equities the more risky they are considered. These funds are rebalanced regularly to maintain their asset allocation.
The LifeStrategy funds have become famous across the financial world for their reliability of returns – that was until 2022 (see our performance section below).
Target Retirement Funds: Tailored for retirement planning, these funds adjust their asset allocation over time, moving from a growth-oriented strategy to a more conservative approach as the target retirement date approaches.
Bonds and Fixed Income Products: Vanguard offers a range of bond funds, including government, corporate, and global bonds, providing options for income-focused investment strategies.
ESG Funds: For investors interested in sustainable investing, Vanguard provides Environmental, Social, and Governance (ESG) funds, which consider ethical and sustainability factors in the investment process.
[.custom-color]Vanguard returns have been consistently good – but they are never extraordinary.[.custom-color]
A lot of their funds are just tracking markets, so they tend to simply reflect market conditions overall. However, their LifeStratgy Funds don’t do this, so let’s have a look at how they’ve done.
So as you can see, 2022 was a very difficult year for these funds. To be fair, it was a difficult year for the whole economy as it struggled to rebalance the effects of COVID-19. However, these funds look to be returning to growth this year. For example, the 80% equity fund has a 3.65% growth in the rolling 12 months to November 2023.
[.custom-color]We opened an account and it was very confusing.[.custom-color]
As soon as we started the process we were asked to pick the funds we wanted. It was presented in a very unfriendly way and the supporting literature was just dense corporate documents. We were also not allowed to put any less than £500 into any fund.
If you’re signing up you will need to have a bit of knowledge of which funds you want to invest in first which we think goes against their philosophy of making investing accessible to all.
[.custom-color]Vanguard’s platform is much improved, but it’s still quite basic.[.custom-color]
Vanguard’s web interface has recently had a facelift and now looks modern and uncluttered. When using the platform we liked how we could dig down into a reasonable amount of info via the “Investments” tab. Here we could see each of our holdings, the percentage they made up on our total portfolio, their current value and the change since we bought them. Further, we liked that we could use a toggle to select an even more detailed view and get a breakdown of our portfolio by asset class, ongoing charges, the number of units we held of each fund and the price per unit. We also got details of the geographical location of our assets via the insights tab which also gave a rundown of the top ten individual companies we had bought into via the funds. The graph displaying the value of our portfolio over time complete with the rate of return was nicely displayed.
So it gives all the info you could need and will satisfy the curiosity of most passive investors.
However, we found it really disappointing that Vanguard doesn’t have an app in the UK. We thought this must be a mistake and even downloaded the US app to check if we could access out account this way. We couldn’t and we think that’s pretty unforgivable in 2023.
[.custom-color]Customer service is poor.[.custom-color]
Vanguard allows you to get in touch via phone, email or secure message through their service.
We tested the phone lines and it was a frustrating experience. We were left in a queue for 7 minutes before being hung up on.
[.custom-color]Yes, it’s good for beginners.[.custom-color]
Vanguard’s emphasis on long-term, passive investment strategies aligns well with the needs of novice investors, helping them build portfolios with lower risk and simplified management, making it an ideal starting point for those new to investing.
It has an Investing Education section but this is very sparse and we found the content to be sales-y rather than truly informative.
[.custom-color]Vanguard is widely regarded as a reputable and reliable investment company, known for its stability and strong track record in the investment industry.[.custom-color]
Regulated by financial authorities like the UK’s Financial Conduct Authority (FCA), Vanguard adheres to stringent standards, ensuring robust client protection and compliance with financial regulations. It is also part of the Financial Services Compensation Scheme (FSCS) which, in the event that a regulated firm fails or is unable to meet its financial obligations, will provide up to £85,000 compensation for investors.
Yes. You can’t help but respect what Vanguard has achieved over the years. The people at Vanguard know their business inside out and offer a reasonable return at a more than reasonable price.