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Vanguard Personal Investor Australia Review

Vanguard Personal Investor is the latest product introduced by Vanguard Australia. It is an ASX stock brokerage program with no commissions across all Vanguard ETFs and management funds. 


In this article, you’ll get a full breakdown of the Vanguard Personal Investor product, including how it relates to getting Vanguard ETFs via a different stockbroker and acquiring directly from Vanguard Retail or Wholesale Funds. You’ll know whether utilising the Vanguard Personal Investor in Australia is the best option for you. So, let’s get started.

What is Vanguard?

Vanguard is a financial manager and the most significant global mutual funds source. It is also Australia’s largest fund and Exchange Traded Fund (ETF) manager. Vanguard ETF Assets Under Management (AUM) increased to $19.5 billion in 2019, marking its best performance since its first ETF was launched on the Australian Securities Exchange (ASX).


Now let’s discuss Vanguard’s latest product, the Vanguard Personal Investor. To use this service, you must be above 18 years. Fortunately, there are no costs for creating an account or depositing and withdrawing money into the account.


Vanguard Personal Investor products have four primary components; Vanguard Cash Accounts, Vanguard Managed Funds, Vanguard ETFs, and other ASX.

Cash Account

When you join Vanguard Personal Investor, you’ll get a Vanguard Cash Account, basically the same as a standard cash account. However, unlike many Australian rivals, the Vanguard Cash Account pays interest, now at 0.50% per annum, which seems reasonable in writing. This, unfortunately, is deceiving, as we shall demonstrate.


To begin with, determining the actual interest rate is incredibly difficult. When you visit the homepage, you won’t obtain data on the interest rate, but you’ll discover the second part of Vanguard Personal Investor if you go down to the last page. Although it refers to the interest on your Vanguard Cash Account, it doesn’t provide the rate and instead directs you to another URL. However, clicking the link leads you to the primary Vanguard Personal Investor website without mentioning the interest rate. However, the Fees and Costs page discusses the competitive interest rate and provides a link to a document with the real interest rate.


Heck! You must be wondering why the only place on the site where you can see the interest rate is in the fees section. It could be a diversion because when you move to the bottom of the same page, you’ll see that the interest rate on the Vanguard Cash Account is mentioned again, which is still 0.50% p.a.


This does not mean the 0.50% return you get on your cash account. Vanguard charges a separate price for this service. They’ll take 0.5% of whatever interest you make in your cash account. If you deposited $1,000, you’d get a 0.5% or $5 return after a year, but Vanguard would take 0.5%. 


Additionally, Vanguard imposes an extra 0.20% p.a. fee on your account balance, including your cash account, which works out to around $2 ($2.00995) on $1,000 plus your $4.975 interest rate payment p.a. You only end up with a profit of slightly under $3 ($2.96505). In other words, the real interest rate you’re earning is somewhat under 0.3% p.a (0.296505%) and not 0.50% p.a.


Although it’s still preferable to the 0% interest rate given by other ASX brokers, they still lose the game for failing to be upfront about the genuine return.

Investmentment Options for Vanguard Personal Investor

  1. Investing in Vanguard ETFs 

Let’s go through the real investing possibilities via the Vanguard Personal Investor. Their feature of $0 brokerage costs when buying any Vanguard ETF listed on the ASX is a reasonably outstanding offering. You need a $500 minimum transaction amount to get any Vanguard ETF investment for free. But you must be aware of some vital information.


First, the 0.20% p.a. cost mentioned before applies to the whole amount of your Vanguard Personal Investor account. Thus, when you have $10,000 in Vanguard ETFs, you’ll pay $20 every year. Of course, other ASX brokers don’t charge a cost like this, so you’re effectively paying for “free brokerage” with this annual price. 


But, if your brokerage expenses for purchasing Vanguard ETFs exceed the yearly fee, you may be able to save money here. Furthermore, since the annual fee is capped at $600, if your total amount exceeds $300,000, the fee will become much lesser than your total amount, and you’ll save money.


Secondly, the 0.20% annual charge doesn’t cover the costs connected with each ETF. As a result, it will be the same as if you were buying Vanguard ETFs via any other broker. For instance, if you invest in VAS, you’ll still pay 0.10% each year as a management fee; and that’s all. 


Now you understand why the Vanguard Personal Investor excels, making it an excellent choice if you regularly purchase Vanguard ETFs. 

  1. Investing in Vanguard Managed Funds

First, let’s start by looking at other investing choices of the Vanguard Personal Investor. One of the incredible advantages of using this product is that you can engage in wholesale management funds, have better rates than their retail managed funds, and need a cash reserve of $500,000 to qualify.


On the other hand, the wholesale funds have more considerable costs than the ETF, and we’d never advocate for managed funds over ETFs. The only minor advantage is no minimum investment (besides the $5,000 initial cost). Managed funds offer some benefits if you wish to invest in small increments significantly lower than $500 (ETF lower transaction amount). However, it is not economically beneficial. 


Consider Vanguard Australian Shares, which has a service charge of 0.10% per year, compared to 0.16% per year for the wholesale managed fund. Any investments made in managed funds are still subject to the 0.20% p.a. fee.


  1. Investing in Non-Vanguard Stocks/ETFs

Acquiring non-Vanguard shares or ETFs on the ASX is the final investing option available when you employ Vanguard Personal Investor. Please, don’t utilise the Vanguard Personal Investor if you want to invest in shares or ETFs on the ASX that aren’t Vanguard ETFs.


To begin, they charge $19.95 in brokerage or 0.15% of the total value. In comparison, SelfWealth—currently the best deal in Australia—has a cost factor of $9.50 per trade, regardless of the size. Remember that you’ll pay 0.20% p.a, which incorporates non-Vanguard ETFs. Skip this service and go with a low-cost dealer such as Pearler when dealing in stocks or ETFs that aren’t Vanguard ETFs.

Final Verdict

It may seem that this post has been slamming the Vanguard Personal Investor, but the reality is that it can be beneficial, depending on your situation.


Imagine you invested in two Vanguard ETFs, each with $50,000, and you’d been buying more shares monthly. You would spend $228 on brokerage fees with SelfWealth annually, which is 0.456% p.a. of a $50,000 account. Compared to Vanguard Personal Investor, you’d pay no trading costs and instead 0.20% annual interest or $100 that year, far less than what you’d pay if you used SelfWealth.


Therefore, you should calculate the amount you consider spending annually on Vanguard ETF brokerage fees. If the figure is more than 0.20% p.a. of your entire Vanguard ETF worth, it’s right to utilise the Vanguard Personal Investor for Vanguard ETFs. On the other hand, if the amount of your Vanguard ETFs exceeds $300,000, it’s a no-brainer to utilise the program since you’ll be reaching the $600 annual fee maximum. And that’s amusing, given that it’s touted as a straightforward, easy-to-use option for novice investors. The main advantage is for seasoned investors with substantial account holdings.


Nevertheless, we believe it’s a good service, and we are even delighted they released it. If Vanguard genuinely wants to encourage higher program acceptance, they should reconsider a few of the costs and ensure that non-Vanguard share purchases are cost-effective.


Remember, the Australian ETF market has grown incredibly competitive, with several lower-cost Vanguard ETFs alternatives you can choose from. 



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