When it comes to FIRE (Financial Independence Retire Early) most people think the secret to becoming a millionaire is just investing in the index fund, VTSAX .
This advice keeps it simple but is it the best advice for new investors?
Now, we agree that VTSAX is a good fund, but we also believe that Vanguard and VTSAX are not for everyone.
If you’ve followed us for a while you would know that we speak about Vanguard and praise them for their funds like VTSAX and VTI.
But when it comes to Vanguard themselves, you really won’t hear us sing their praises.
That’s because we have mixed feelings about their customer service, their platform, and their business model.
Vanguard Customer Service
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Vanguard’s customer service is tiered.
The level of service that you receive is based on the amount of money you have invested with Vanguard.
If you have a lot of money (over $500,000) you will get high touch service. If you have $50,000 or less, you will get their base level of customer service.
This can mean long hold times and hard to reach representatives.
Vanguard Trading Platform and Website User Experience
Vanguard’s website is not set up with the beginner investor in mind.
The user experience could be improved significantly! Attempting to carry out simple tasks on the website will leave you frustrated.
Investing is already intimidating. The last thing you need is the website you want to book your trades through to be another obstacle for you to invest your money.
The harder it is to get started investing, the more likely you are to hold off on investing you money in the market and missing out on the benefits of compound interest.
Why Do People Recommend Vanguard?
Now knowing these two things, you might be saying to yourself, “ if the customer service isn’t great and the platform is difficult to navigate, why do so many people swear by Vanguard?
The answer is mainly for 2 reasons:
- Jack Bogle
- The FIRE movement
Jack Bogle the founder of Vanguard, felt that the average investor could do better in the stock market by mimicking indexes rather than paying mutual fund managers to try and beat the market.
He knew that beating the market was extremely difficult and that type of promise along with the fees the money managers were getting for it, only hurt the customer in the long run.
To prove his point, he created the first index fund for retail investors.
Fun fact: Jack Bogle wasn’t the first to come up with this idea, he was just the one that applied it to the retail investor. It was Edward Renshaw and Paul Feldstein who came up with index funds. Shout out to my old finance professor Marty Gruber for that tidbit!
Anyway, Bogle was the first to popularize the idea and based Vanguard’s business model on it.
It was a success, and showed that an investment company could be both highly profitable and do right by the customer at the same time.
Financial Independence Retire Early
Fast Forward to today you now have a whole group of people that love Vanguard index funds because of their low fees and great performance.
These are people who subscribe to the FIRE Movement.
They use vanguard index funds for long term investing with the goal of becoming financially independent and retire early.
We love the FIRE Movement, but we don’t know why they have such an allegiance to Vanguard.
There are a ton of brokers that offer low cost index funds that perform well.
These brokerage firms are doing their best to take business away from Vanguard.
For example, Charles schwab makes their platform beginner friendly and similar funds.
Fidelity has created alternative funds to VTSAX that have no fees whatsoever and perform well!
VTSAX Without Vanguard
Now you might be saying well twins, that’s great, but I still want to own VTSAX, so how can I do that if I don’t buy it through Vanguard?
Well what if we told you that you could go to a broker like Fidelity or Charles schwab and easily buy VTSAX through them?
You will most likely have to pay a trading fee, but you wouldn’t have to open another account, and you could get good customer service.
If you don’t want to pay the fee to buy vanguard funds on another broker’s sites, you can also look into what funds the other brokers offer that are similar as the vanguard fund you are interested in.
The point is that the investing landscape is shifting and Vanguard isn’t your only option.
When you take fees and fund types out of the equation, a firm should have other qualities that you like in order to get your business.
Especially as a beginner, you already have a lot to learn when it comes to investing, so the last thing you need is to feel intimidated by a platform or a lack of customer service.
We believe investing should be simple from beginning to end.
As long as you have right tools and the right information, nothing should stop you from using investing to build wealth.
If you need help getting started with investing, we would love to invite you to check out our course.
Our course is called Simplified investing and in it we show you how to:
- Determine how much you can afford to invest
- How to choose stock investments
- Build an investment portfolio that’s easy to monitor and maintain
- Detailed instruction, support, and resources to have the ability to make investment decisions, automate your investing, and start building wealth for you and those you love
Nicole is a partner at Wealth Twins LLC. She holds a B.A from Columbia University and an M.B.A in Financial Instruments from New York University. She has worked in Investment Banking and Financial Services for 15 years and retired early in her 30s because of Financial Independence. She is an entrepreneur, investor, and passionate about teaching others how to reach Financial Independence.