scottrade vs vanguard, which way should i go

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raf1919
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scottrade vs vanguard, which way should i go

Post by raf1919 » Thu Jan 12, 2012 10:25 pm

So i have a Roth at scottrade with 10500 in it. I have been buying individual stocks, but with lack of time I think i'm better off just putting it in a index. Moving forward i don't plan on adding much to it as i plan on putting more towards 401k and a traditional 401k as I expect to be in lower tax bracket when i retire than now. So unless I have left funds my roth will be last after 401k and traditional IRA. Plus i don't trust the gov't and I worry that they will find a way to get their hands into Roths in 40yrs but thats whole another debate.

anyways here is my question. Should i just buy the index funds at scottrade and pay $17 commission. I was planning on buying two index funds. Or transfer to vanguard but than pay the 20 dollar annual fee for a balance below 50k and hopefully scottrade wont charge me any fees. I figured it would take a long time to get up to 50k. Or just hold at scottrade till i hit 50k than transfer?

ErekS
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Re: scottrade vs vanguard, which way should i go

Post by ErekS » Thu Jan 12, 2012 10:31 pm

As far as I know, you only get the 20 dollar fee if you want paper statements. If you sign up for paperless statements then there is no fee.

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raf1919
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Re: scottrade vs vanguard, which way should i go

Post by raf1919 » Thu Jan 12, 2012 10:35 pm

ErekS wrote:As far as I know, you only get the 20 dollar fee if you want paper statements. If you sign up for paperless statements then there is no fee.
well thats good to know. i was getting my info here http://www.brokerage-review.com/stock-b ... eview.aspx

well if thats the case than vanguard i think would be better place to be.

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Re: scottrade vs vanguard, which way should i go

Post by stan1 » Thu Jan 12, 2012 10:35 pm

Hold on, its different for mutual funds at Vanguard and ETFs at VBS.

Buy mutual funds at Vanguard. No annual fees if you get electronic delivery.

I think the $20 fee you are referring to is at VBS, correct? $20 if your balance is under $50K (i.e. you aren't Voyager)
You do get no commission trades on Vanguard ETFs but have to pay the low balance fee.

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Re: scottrade vs vanguard, which way should i go

Post by ErekS » Thu Jan 12, 2012 10:54 pm

stan1 wrote:Hold on, its different for mutual funds at Vanguard and ETFs at VBS.

Buy mutual funds at Vanguard. No annual fees if you get electronic delivery.

I think the $20 fee you are referring to is at VBS, correct? $20 if your balance is under $50K (i.e. you aren't Voyager)
You do get no commission trades on Vanguard ETFs but have to pay the low balance fee.
Ah, that's certainly what the website he's linking is talking about, but it definitely sounds like he just wants index funds for now and he certainly doesn't need ETFs for that, especially if he's planning on not investing more into them.

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raf1919
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Re: scottrade vs vanguard, which way should i go

Post by raf1919 » Thu Jan 12, 2012 10:59 pm

right it would just be for index funds for now.

So I buy Index funds no Fees. but if i buy ETFs than i pay 20 fee until i hit 50k?

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Re: scottrade vs vanguard, which way should i go

Post by raf1919 » Thu Jan 12, 2012 11:12 pm

stan1 wrote:Hold on, its different for mutual funds at Vanguard and ETFs at VBS.

Buy mutual funds at Vanguard. No annual fees if you get electronic delivery.

I think the $20 fee you are referring to is at VBS, correct? $20 if your balance is under $50K (i.e. you aren't Voyager)
You do get no commission trades on Vanguard ETFs but have to pay the low balance fee.
I found this on their site https://personal.vanguard.com/us/whatwe ... ommissions

A $20 account service fee is charged annually. The fee is waived for Voyager, Voyager Select, and Flagship clients.

i can't find anywhere waiving if switch to electronic.

Also anyone know if scottrade will charge fees?

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Re: scottrade vs vanguard, which way should i go

Post by ErekS » Thu Jan 12, 2012 11:30 pm

raf1919 wrote: i can't find anywhere waiving if switch to electronic.
https://personal.vanguard.com/us/whatwe ... Link=facet

This is the page on mutual fund costs. It says "No Account Service Fees" with a note at the bottom which says the 20 dollar fee is waived if you choose electronic statements etc.

The link you provided was still for Vanguard Brokerage Service which is for trading ETFs and stocks etc. If you want to trade ETFs then that would be 20 dollars a year until 50k.

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Re: scottrade vs vanguard, which way should i go

Post by pointyhairedboss » Fri Jan 13, 2012 12:25 am

Vanguard sounds like the better choice given the choices you have outlined.

If you do select Scottrade for investing in Vanguard index products, consider investing in Vanguard ETFs rather than Vanguard funds. Scottrade charges $7 per etf trade and $17 per non ntf fund trade. $17 per trade sounds awfully pricey. Rebalancing 4 funds a year, perhaps two IRA contributions/fund purchases => 6 trade => $102. Yikes!

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Re: scottrade vs vanguard, which way should i go

Post by Kevin M » Fri Jan 13, 2012 5:24 am

Open a Roth IRA mutual fund account (not brokerage) at Vanguard and transfer your Roth IRA there. Get electronic statements and pay no annual fee, and pay no fees for buying or selling most mutual funds. Even if scottrade charges a nominal transfer fee (maybe $50), you'll make it up in trading costs savings. Just call them and ask them if they charge a fee.

Contribute enough to your 401k to get the full employer match, if any.

Next, unless your 401k has really good, low-cost index funds, open a traditional IRA mutual fund account at Vanguard, and contribute up the the max each year ($5K, or $6K if you are 50 years of age or older), assuming you are eligible for the tax deduction.

Then, back to your 401k for additional contributions up to the annual limit.

Oh, and pay off any high-interest rate debt, if you have any, after getting the employer match on 401k contributions.

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Re: scottrade vs vanguard, which way should i go

Post by nisiprius » Fri Jan 13, 2012 8:49 am

If you feel that "trading," whatever that term means to you, is likely to be a consistent part of your personal investment style going forward, then you might be happier staying at Scottrade.

If you feel that the core of your portfolio is likely to be Vanguard mutual funds going forward, and you feel like simplifying and consolidating, then I don't think you'll have any complaints moving to Vanguard and using Vanguard Brokerage Services (VBS) for occasional purchases of other securities.

can't speak directly to VBS vs. Scottrade. I've used VBS, Fidelity, and Schwab for occasional one-off purchases of individual stocks and TIPS, and it's fine. Ranking by Kiplinger's and Consumer Reports have tended to rank VBS in positions like #4 out of 14 online brokerages. It's not the very first place you'd go to if you weren't planning to hold any Vanguard mutual funds or ETFs at all.

Complaints about VBS here fall into two categories. a) Isolated irritations and minor screw-ups which do occur occasionally--in my personal experience, I've encountered them at Vanguard, at Schwab, at Fidelity, and at TIAA-CREF--but I'm not convinced there's any pattern by company. The typical complaint amounts "it turned out OK, but it took forever, and until it was resolved nobody seemed to be able to give me the straight dope on what was happening." b) Some fairly consistent complaints that relate to how quickly you can use the proceeds from a sale of A to buy B. livesoft started an interesting thread about how quickly dividends from a distribution are available; inconclusive, read the thread yourself.

livesoft also believes there's a specific issue if A = something held in a VBS account and B = a Vanguard mutual fund. There is a "seam" between Vanguard mutual funds and VBS: you cannot actually buy or hold Vanguard mutual funds within your VBS account. Therefore, sales in VBS actually need to settle before you can use them to buy a Vanguard mutual fund, whereas elsewhere they'll let you buy the Vanguard fund as soon as the sale of A is complete.
Last edited by nisiprius on Fri Jan 13, 2012 2:14 pm, edited 2 times in total.
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Re: scottrade vs vanguard, which way should i go

Post by ObliviousInvestor » Fri Jan 13, 2012 8:54 am

Having had accounts at both places, if you want to invest via Vanguard index funds, I can't think of a single advantage to having the account at Scottrade rather than Vanguard.
Mike Piper, author/blogger

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Re: scottrade vs vanguard, which way should i go

Post by anthau » Fri Jan 13, 2012 11:03 am

You may still be better off at Vanguard, but in dismissing Scottrade, we should at least get our facts straight: There's no reason for you to pay a transaction fee at Scottrade. They offer U.S. stock index funds both in commission-free ETF form (Focus™ Morningstar US Market Index ETF [FMU]; Focus™ Morningstar Large Cap Index ETF [FLG]) and mutual fund form (Columbia Large Cap Index Fund [NINDX], among others); they also offer Dreyfus Bond Market Index Fund (DBMIX). The big weakness for Scottrade is in the international space, where you have to pay over the Bogleheady 0.5% ER.
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Re: scottrade vs vanguard, which way should i go

Post by retiredjg » Fri Jan 13, 2012 11:51 am

Welcome to the forum!
scottrade vs vanguard, which way should i go
For this time in your life, I think the answer depends on what you want to hold in the Roth IRA. If you decide to just hold one mutual fund or ETF in this account, just pay the fee to buy it once and let it sit there for years until your answer is more apparent. I don't see the point in holding more than 1 fund - the fees are prohibitive. However, if you don't mind using ETFs, Scottrade does have some no transaction fee ETFs. You could choose just 1 and let it sit.

On the other hand, if there is no fee or only a small fee to close that Roth IRA, you could move it anywhere you want, including moving it to Vanguard. If you buy VG mutual funds at VG, there are no fees if you use electronic paperwork.

You didn't ask this but...you indicate you want to use a traditional 401k and traditional IRA for your retirement savings. Are you eligible for deductible traditional IRA? You may not be. If you can't deduct the contribution, a traditional IRA is not a good choice - Roth IRA would be a better choice (assuming you can't contribute more to the 401k).

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Re: scottrade vs vanguard, which way should i go

Post by pointyhairedboss » Fri Jan 13, 2012 12:11 pm

There's no reason for you to pay a transaction fee at Scottrade. They offer U.S. stock index funds both in commission-free ETF form (Focus™ Morningstar US Market Index ETF [FMU]; Focus™ Morningstar Large Cap Index ETF [FLG])
I am not sure it would be wise to invest in Scottrade's new ETFs. Focus Morningstar US Market ETF (FMU) has only 12.5 million in assets. How many buyers and seller will be available to trade with you when you need to make a trade? I would wait until they become more established.

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Re: scottrade vs vanguard, which way should i go

Post by livesoft » Fri Jan 13, 2012 12:14 pm

Really folks. There is no reason to use Scottrade when so many better alternatives are available. In the old days there may have been a reason for the existence of Scottrade, but let me be harsh: They should've gone out of business quite a while ago. Everything they offer can be found cheaper and usually right next door or online.
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Livesoft a bit harsh

Post by Northster » Fri Jan 13, 2012 12:46 pm

I don't know what better alternatives Livesoft has in mind. Consumer Reports recently ranked discount brokerages with the top ones being USAA, Scottrade, Vanguard, Schwab, TDAmer, and ETrade in that order. I will admit Scottrade caters a bit to the day-trading crowd but still offers good service even for Bogleheads, esp if you want a wide range of products including CDs, bonds, etc.

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Re: scottrade vs vanguard, which way should i go

Post by livesoft » Fri Jan 13, 2012 2:01 pm

OK, you have goaded me into writing a review of brokerage reviews. I'll start a new thread once I read the Consumer Reports review.
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Re: scottrade vs vanguard, which way should i go

Post by pointyhairedboss » Fri Jan 13, 2012 8:19 pm

Brokerage reviews are grossly inaccurate and unhelpful. I have yet to read one article that demonstrated any inkling of cluefull-ness . They are literally signal less noise. Your better blowing your nose on them - at least then the paper they are printed on would provide some value.

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Re: scottrade vs vanguard, which way should i go

Post by anthau » Fri Jan 13, 2012 8:46 pm

I will tell you why I'm with Scottrade. Is it anti-Boglehead? Perhaps, but I doubt it, and I take solace in that Bill Bernstein recommends only keeping one's money at a mutually or privately held company (which eliminates most options, save Fidelity, Scottrade, TIAA-CREF, and Vanguard).

A few years ago, I decided to kick the actively managed habit and index 100% (BRSVX broke my heart [and taught me a lesson]). I prefer IJS to VISVX for small-value exposure for reasons well-explored elsewhere on these boards. At the time, there was no free trading anywhere for IJS, though now there is. I had the choice of either bringing my BRSVX proceeds to Vanguard, or consolidating all my holdings elsewhere. It was cheaper, then as now, to buy IJS for $7 at Scottrade than to incur the $20 VBS fee. +1 for Scottrade.

Now that IJS is available commission-free at Fido and TD, and since a small-valuey pseudo index fund is available now at Schwab, why don't I transfer? As noted above, Schwab and TD are publicly traded, so I disfavor them. This leaves me comparing Fido to Scott, and I prefer Scott because certain asset classes are available at Scottrade in the mutual fund format that I could only get in ETF form at Fido.

Getting specific, my target allocation is as follows:

20% each in:
Focus Morningstar US Market ETF (FMU);
iShares S&P SmallCap 600 Value Index (IJS), using Focus Morningstar Small Cap ETF (FOS) for smaller commission-free accumulation;
A combination of Vanguard Total Bond Market ETF (BND) and Dreyfus Bond Market Index Inv (DBMIX); and
Vanguard MSCI EAFE ETF (VEA), using Dreyfus Intl Stock Index (DIISX) for smaller commission-free accumulation.

5% each in:
American Century Infl-Adj Bond Inv (ACITX);
Focus Morningstar Real Estate ETF (FRL);
Northern Emerging Markets Equity Index (NOEMX); and
RidgeWorth Seix High Yield I (SAMHX).

It is oft expressed on this board that those with small portfolios should content themselves with Vanguard Balanced Index Fund, or a mix of Total Stock and Total Bond, since we with small portfolios really don't need the diversification of 5% funds. That's a fine opinion for someone with Flagship status to express, but I wanted to get experience with slicing and dicing now, so I can make my mistakes while my portfolio is small. Maybe this mistake includes paying a whopping ~0.2% in ER and $7 to trade IJS and VEA. But I doubt it.
Best, | | Anth

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Re: scottrade vs vanguard, which way should i go

Post by ObliviousInvestor » Sat Jan 14, 2012 12:49 am

pointyhairedboss wrote:Brokerage reviews are grossly inaccurate and unhelpful.
Generally agreed. For reference, there's often a large conflict of interest behind them due to affiliate programs. For instance, if you're reading an online review for any of the following brokerage firms:
TradeKing
Zecco
Scottrade
TradeMonster
OptionsHouse
OptionsExpress
ETrade

...then it's likely that the blogger (or publisher of the website, if not a blog) is a paid a commission when somebody opens an account.

Ditto for bank reviews, credit card reviews, and reviews of LendingClub.
Mike Piper, author/blogger

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Re: scottrade vs vanguard, which way should i go

Post by bh » Sat Jan 14, 2012 1:31 pm

anth - - - what is the thought process behind preferring a privately owned organization?

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Re: scottrade vs vanguard, which way should i go

Post by anthau » Sat Jan 14, 2012 3:13 pm

"To make it simple: The ownership structure of any financial services company ultimately determines just how well it serves its shareholders in the long run." William J. Bernstein, The Investor's Manifesto, pp.138-39 (2010).

"In today's hypervigilant markets, the fund company's attention is focused laser-like on the next quarter's corporate earnings. Remember, we are talking here about the profits of the fund companies themselves, not the investment returns to the companies' mutual fund shareholders, who are their customers.
"Sooner rather than later, the publicly traded fund companies' profits must be paid by its customers: you, the milch cows of the industry." Id. at 140.

"The key point about these [privately held] companies is that their shares do not trade publicly, and thus they do not have to publicly report their earnings every quarter. While these for-profit entities are certainly not immune to agency conflict, they tend to have a longer-term focus that benefits their customers...." Id.

Granted, Bernstein's talking specifically about mutual fund companies, but I don't see why the analysis is any different for any other financial services company.
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Re: scottrade vs vanguard, which way should i go

Post by SpringMan » Sat Jan 14, 2012 5:08 pm

T. Rowe Price is a publicly traded mutual fund company. Their expense ratios do run higher than Vanguard but I have never heard anything negative about them. I don't believe they were involved with any of the scandals that other fund companies like Putnam, Janus or PBHG were involved in. Full disclosure, I have no money invested with Price, just a free account for using their Morningstar tools.
Best Wishes, SpringMan

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Re: scottrade vs vanguard, which way should i go

Post by stan1 » Sat Jan 14, 2012 5:31 pm

The most glaring example:

The following ETFs track the same index (MSCI Emerging Markets)
VWO (Vanguard Emerging Markets): ER = 0.22%
EEM (iShares Emerging Markets): ER = 0.67%

Vanguard is client-owned.
Blackrock (iShares parent) is publicly traded.

EEM has total net assets of $33.8B.
This cash cow generates $152M each year (33.8B x 0.45%) to pay for executive bonuses, Gulfstreams, yachts, Christmas parties, etc. Blackrock has no incentive to lower cost, other than competing with Vanguard but they seem to be doing OK.

Beats me why anyone owns EEM.

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Re: scottrade vs vanguard, which way should i go

Post by bh » Sat Jan 14, 2012 5:52 pm

ok..........thx for the insight regarding public vs private ownership

that said; i don't have an issue with using a publicly traded brokerage as long as the costs are reasonable ...............the quarterly reporting process for such may be a bit of reassurance to some

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Re: scottrade vs vanguard, which way should i go

Post by Kevin M » Sat Jan 14, 2012 6:35 pm

stan1 wrote: Beats me why anyone owns EEM.
As a tax loss harvesting partner with VWO (I know some folks argue that this could be construed as a wash sale, but I won't worry about that unless the IRS comes out with some rulings that support it).

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