Vanguard to offer non-Vanguard ETFs commission-free

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SSSS
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by SSSS » Thu Jul 05, 2018 9:14 pm

tooluser wrote:
Tue Jul 03, 2018 11:21 pm
whodidntante wrote:
Tue Jul 03, 2018 8:59 pm
0% ER funds next, let's see if Vanguard can bring a date to that party.
A desired endgame for the investor. But I wonder where they would make up the difference. I worry less with Vanguard but it’s still a concern.
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JamesSFO
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by JamesSFO » Fri Jul 06, 2018 5:16 am

Curious to see where this goes. Nice move by vanguard.

jocdoc
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by jocdoc » Fri Jul 06, 2018 6:18 am

This is a good first step.
I want vanguard to offer periodic investing of any ETFs


My wish list is Automatic rebalancing and tax loss harvesting in taxable accounts for a much lower fee thanthe other roboadvisors or a tax managed lifestrategy fund for taxable accounts..
jc

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by jhfenton » Fri Jul 06, 2018 6:54 am

stlutz wrote:
Thu Jul 05, 2018 7:46 pm
In other words, Vanguard isn't making up the money lost from trades from the places where other brokers do. So it seems to me that they have to be subsidizing it from somewhere. I'm just not clear where.
I assume that they believe it will lead to increased AUM, by attracting new customers to Vanguard brokerage where they will be more likely to use at least some Vanguard funds or ETFs and/or by destroying the pay-to-play commission-free ETF platform model at other brokers leading to more folks holding Vanguard ETFs there.
SSSS wrote:
Thu Jul 05, 2018 9:14 pm
tooluser wrote:
Tue Jul 03, 2018 11:21 pm
whodidntante wrote:
Tue Jul 03, 2018 8:59 pm
0% ER funds next, let's see if Vanguard can bring a date to that party.
A desired endgame for the investor. But I wonder where they would make up the difference. I worry less with Vanguard but it’s still a concern.
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You put advertisements in things that people actually read! :P

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by talzara » Fri Jul 06, 2018 10:27 am

stlutz wrote:
Thu Jul 05, 2018 7:46 pm
For the Robinhoods of the world who accept payment for order flow, there is. Vanguard doesn't accept such payments so they don't make any money executing the trade.

...

In other words, Vanguard isn't making up the money lost from trades from the places where other brokers do. So it seems to me that they have to be subsidizing it from somewhere. I'm just not clear where.
Investors still have to pay Vanguard a commission for non-ETF trades. The commissions on these trades should be enough to pay the costs of the entire brokerage operation.

Vanguard Brokerage Services should be able to execute its trades for free, since it routes 100% of its order flow to market-makers. They don't pay VBS anything, but VBS doesn't pay them anything either. Non-ETF trades should have a gross profit margin of 100%.

Robinhood can't do this since all trades are commission-free.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Jags4186 » Fri Jul 06, 2018 12:26 pm

Not sure if this has been discussed but in the fine print it says:

“When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.”

Does this mean Vanguard will only accept market orders for non Vanguard commission free ETFs? If so this may not be all that it’s cracked up to be.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by JamesSFO » Fri Jul 06, 2018 12:51 pm

Jags4186 wrote:
Fri Jul 06, 2018 12:26 pm
Not sure if this has been discussed but in the fine print it says:

“When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.”

Does this mean Vanguard will only accept market orders for non Vanguard commission free ETFs? If so this may not be all that it’s cracked up to be.
I think that's just a legalistic way to say that ETFs do not always trade at NAV.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by retiringwhen » Fri Jul 06, 2018 12:56 pm

Jags4186 wrote:
Fri Jul 06, 2018 12:26 pm
Not sure if this has been discussed but in the fine print it says:

“When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.”

Does this mean Vanguard will only accept market orders for non Vanguard commission free ETFs? If so this may not be all that it’s cracked up to be.
It simply means that the ETF marketplace (for anyone not just Vanguard) is NOT defined by pricing at NAV, instead it is priced at the prevailing bid ask/spread and accepted orders in an orderly marketplace. Most Vanguard ETF's sell at a small discount (10-25bps) to NAV on a regular basis, but the divergence can easily run as much as 1% in either direction in extreme situations (trading volume, market moves, etc.). Basically you are buying on the open market just as you would Proctor and Gamble with all the benefits and risks.

Personally, the need to have good execution skills for buying ETFs is one reason I prefer to not use them. I find having to make decisions like "buy today or tomorrow" hard enough, let alone this minute or that minute and at what what limit price. I gave up trading stocks 15 years ago and have no desire start again. That said, I still own one for a 10bps lower ER than the MF class. So, I suffer the pain willingly for 10bps, I guess the aversion is not that serious :?

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by ralph124cf » Fri Jul 06, 2018 4:44 pm

walletless wrote:
Mon Jul 02, 2018 2:42 pm
It'll be interesting to see if DFA funds will be in this list, especially since they're not inverse funds.. but DFA wants to only sell their funds through an advisor. That would be a disruptor if allowed!
I keep hearing about advisors being necessary to buy DFA funds. I can buy DFA thru the PCRA in my 410(k) at Schwab with no advisor, just a $15 fee per trade, any amount.

Ralph

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by jhfenton » Fri Jul 06, 2018 6:24 pm

ralph124cf wrote:
Fri Jul 06, 2018 4:44 pm
walletless wrote:
Mon Jul 02, 2018 2:42 pm
It'll be interesting to see if DFA funds will be in this list, especially since they're not inverse funds.. but DFA wants to only sell their funds through an advisor. That would be a disruptor if allowed!
I keep hearing about advisors being necessary to buy DFA funds. I can buy DFA thru the PCRA in my 410(k) at Schwab with no advisor, just a $15 fee per trade, any amount.

Ralph
They are available through some retirement plans as well, either as plan options or in your case through the brokerage window. Otherwise, they are only available through advisors. They are not sold directly to retail investors.

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Vanguard: The largest commission-free ETF lineup offered to investors

Post by long_term_investor » Sun Jul 08, 2018 11:48 pm

[Thread merged into here, see below. --admin LadyGeek]

I didn't see this shared before.

"Coming in August: The largest commission-free ETF lineup offered to investors" - https://investornews.vanguard/coming-in ... investors/
Our community of millions of investors think and feel differently about investing. We know it’s all about doing the right thing, giving you the best chance for investment success, and finding ways to lower your investing costs. That’s why, this August, the vast majority of ETFs (nearly 1,800) will be available to you commission-free—the largest lineup offered to investors.

You’ve been able to invest in Vanguard ETFs® (exchange-traded funds) commission-free through your Vanguard account for almost a decade. That’s because we know that the less you pay, the more you keep.
Related Kitces article - https://www.kitces.com/blog/vanguard-nt ... greements/

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Re: Vanguard: The largest commission-free ETF lineup offered to investors

Post by Nate79 » Mon Jul 09, 2018 12:00 am

Extensively discussed:
viewtopic.php?f=10&t=252991

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Re: Vanguard: The largest commission-free ETF lineup offered to investors

Post by long_term_investor » Mon Jul 09, 2018 12:17 am

Thanks for the pointer Nate!

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by LadyGeek » Mon Jul 09, 2018 3:24 pm

^^^ I merged long_term_investor's thread into here.
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by MinhN » Mon Jul 09, 2018 3:47 pm

Vanguard just made tax loss harvesting a lot easier. I've been meaning to TLH my international bond fund but Vanguard doesn't have an alternative. Now I can swap BNDX for something similar by another company for free. What an incredible move by Vanguard.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by pyld76 » Wed Jul 11, 2018 11:28 am

Angst wrote:
Wed Jul 04, 2018 11:11 am

I'd just tack on the overall lack of quality in Vanguard's IT. The margins left for cutting expenses vs. the competition have shrunk immensely, and there's not a lot of significant room left to move. But I believe strongly that over the last 5-10 yrs there has been a slowly opening window of opportunity for another low-cost index-focused competitor with a much higher quality user interface (think not just brokerage, but website reports & accounts information presentation in general), to take this thing Bogle started to a higher level. I've seen little to suggest that Vanguard is concerned about it though.

In order for someone else to jump into this space at a similar cost to VG is going to be nigh on impossible because the new entrant won't have anywhere near the scale that VG enjoys. VG isn't concerned with it because until you get to a couple of trillion bucks in AUM, your costs of running either the funds themselves or the underlying trading activities is going to be significantly higher.

Plus, VG isn't directly out to make money. Fidelity and Schwab don't offer the ERs they do out of the goodness of their hearts on index products. Or (likely) even to cover their costs. They do it because they have to stop leakage to VG. Do some of the other brokerages pick up some business because VG's IT is atrocious? Sure, because you can get a similarly priced product, but the "similarly priced" bit is only because VG exists. And yes, that trend would stop, if not reverse, if VG disappeared tomorrow.

I loathe VG's IT, because it's bailing wire and duct tape in many ways. I'm still not going to pay hundreds or thousands of bucks a year in extra fees for a better smartphone UI. VG seems to have decided that they aren't going to chase that (chasing a better UI) customer, and while I do wish they'd bring their IT out of the go-go 90s, I'm not certain they care too much about customers interested in "chrome" rather than cost. And I'm not sure this is a competitive disadvantage for them.

On the ETF changes? They just made their existing customer base really happy for TLH and getting asset classes that VG doesn't do or do well and anyone who decides they want an ETF portfolio has zero cost reasons to go elsewhere. That's a big deal.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by TIAX » Thu Jul 12, 2018 9:23 am

We should send online messages to/chat with all of our other brokerages with a link to the Vanguard commission-free announcement asking whether they'll match Vanguard or otherwise make their commission-free ETF options better. I'm hoping at the very least TD Ameritrade will bring back good ETFs due to this increased competition.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Angst » Thu Jul 12, 2018 9:48 am

pyld76 wrote:
Wed Jul 11, 2018 11:28 am
Angst wrote:
Wed Jul 04, 2018 11:11 am

I'd just tack on the overall lack of quality in Vanguard's IT. The margins left for cutting expenses vs. the competition have shrunk immensely, and there's not a lot of significant room left to move. But I believe strongly that over the last 5-10 yrs there has been a slowly opening window of opportunity for another low-cost index-focused competitor with a much higher quality user interface (think not just brokerage, but website reports & accounts information presentation in general), to take this thing Bogle started to a higher level. I've seen little to suggest that Vanguard is concerned about it though.
In order for someone else to jump into this space at a similar cost to VG is going to be nigh on impossible because the new entrant won't have anywhere near the scale that VG enjoys. VG isn't concerned with it because until you get to a couple of trillion bucks in AUM, your costs of running either the funds themselves or the underlying trading activities is going to be significantly higher.

Plus, VG isn't directly out to make money. Fidelity and Schwab don't offer the ERs they do out of the goodness of their hearts on index products. Or (likely) even to cover their costs. They do it because they have to stop leakage to VG. Do some of the other brokerages pick up some business because VG's IT is atrocious? Sure, because you can get a similarly priced product, but the "similarly priced" bit is only because VG exists. And yes, that trend would stop, if not reverse, if VG disappeared tomorrow.

I loathe VG's IT, because it's bailing wire and duct tape in many ways. I'm still not going to pay hundreds or thousands of bucks a year in extra fees for a better smartphone UI. VG seems to have decided that they aren't going to chase that (chasing a better UI) customer, and while I do wish they'd bring their IT out of the go-go 90s, I'm not certain they care too much about customers interested in "chrome" rather than cost. And I'm not sure this is a competitive disadvantage for them.

On the ETF changes? They just made their existing customer base really happy for TLH and getting asset classes that VG doesn't do or do well and anyone who decides they want an ETF portfolio has zero cost reasons to go elsewhere. That's a big deal.
No future tense really required here, there are already major firms in this space with significant AUM and low ERs. When it gets down to single digit and even fractional differences in basis points (BP) of ER, companies can even still cost more than Vanguard and not lose market share. Much of the overall point of my post was that I think a lot of customers, including myself, would gladly pay a BP or two extra for much higher quality IT and service. You don't have to spend a lot of time in the forum to see how fungible many of these mutual funds and ETFs already are from the perspective of many Bogleheads.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by WhyNotUs » Thu Jul 12, 2018 9:52 am

It would be an interesting analysis to see if this was good for investors. Perhaps there could be a way to track performance of changes that investors make.

The "paradox of choice" and previous research on three fund versus more complicated investment strategies makes me curious as this will actually result in financial and psychological benefit to investors?

https://en.wikipedia.org/wiki/The_Paradox_of_Choice
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by wolf359 » Thu Jul 12, 2018 10:26 am

am wrote:
Tue Jul 03, 2018 9:38 am
Are there any etfs that would be worthwhile to add or exchange for a vanguard 3 fund investor? Doesn’t seem like this will add much for the average boglehead?
Doesn't do anything for a Vanguard 3-fund investor.

It does help you if you tilt, because it improves your choice of ETFs for tilting.

I don't trade individual stocks, but I have bought non-Vanguard ETFs, specifically QQQ (Nasdaq 100 index) and MTUM (IShares Momentum Index). This move makes it more likely I'd conduct these trades in the Vanguard account. Buying ETFs is about the closest I'm going to get to speculation.

It doesn't change my costs -- I'm at brokerages that don't charge me for the ETFs I buy.

Holding a little QQQ or MTUM is a lot of fun. QQQ is a functional equivalent of holding all of the FAANG+M stocks. When I see the news items about how well those stocks are doing, I can tell myself I already own them.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by JamesSFO » Sat Jul 14, 2018 3:01 pm

Six minute video (or transcript too) from Vanguard about why they did this: https://investornews.vanguard/why-were- ... g-in-etfs/

What stood out to me:
But in this instance, the point is bolstered by research—both our own research and market research—which indicates that when investors are choosing a brokerage provider, they rank their ability to purchase ETFs at the lowest possible commission among their top priorities.

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Vanguard frequent trading restrictions for new ETFs

Post by hdas » Fri Jul 20, 2018 12:44 pm

[Thread merged into here, see below. --admin LadyGeek]

Hi all,
Does anybody know what the frequent trading restrictions are going to be in Vanguard once they add the 1800+ ETF's next month?

Thanks a lot! :greedy

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Re: Vanguard frequent trading restrictions for new ETFs

Post by Ever Ready » Fri Jul 20, 2018 1:30 pm

Hasn't been announced yet. Probably in August.

For Vanguard ETFs:
If you buy and sell the same Vanguard ETF in a Vanguard Brokerage Account more than 25 times in a 12-month period, you may be restricted from purchasing that Vanguard ETF through your Vanguard Brokerage Account for 60 days.

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Re: Vanguard frequent trading restrictions for new ETFs

Post by jhfenton » Fri Jul 20, 2018 1:42 pm

As Ever Ready said, that is an unanswered question.

I would guess that they either (1) mirror the restrictions for Vanguard ETFs or (2) have more restrictive rules.

That doesn't narrow down the range of possibilities much, I know.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by LadyGeek » Fri Jul 20, 2018 2:07 pm

I merged hdas's question into the on-going discussion.
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