Vanguard Investment Services - Are You Vanguarding?

After dealing over the years with two brokerage firms, not to mention the brokerage services division of two banks, it became apparent to me that I enjoyed being a direct investor. I like doing the research and finding the right balance of mutual funds to furnish my portfolio. I enjoy reading a fund's prospectus, its Morningstar ratings, turnover, expense ratio, and annual returns. It's not for everyone. Some people are downright scared to deal with their own money, and brokerage service firms love you for that. Companies like American Express (now Ameriprise), Schwab, AXA and various banking institutions would like to handle your money for you because after all, they're the professionals, right? All you have to do is let them know your risk tolerance and time horizon and your financial advisor will do the rest. Well, yes and no. With investing, you have to take into account "returns erosion". After the expenses of managing a fund, consider also any front or back end sales charges, not to mention turnover and the tax bite from short and long term capital gains as well as dividends. Factor in all of this and the returns of a stellar fund can seem downright disappointing. For the average investor, why have a middle man take out an even bigger chunk of your returns?

This is not to badmouth the aforementioned firms. They serve a very specific and beneficial purpose. However, for myself, I wasn't keen on instructing an advisor to do something I'm sure I could do myself. After some research, I kept coming back to Vanguard, a financial service firm that offers a variety of financial products such as ETFs, mutual funds, securities, annuities and retirement vehicles. I opened an account soon after I investigated their website and read about them in various money magazines. Seven years and counting, and I've never been happier.

Vanguard offers its own family of mutual funds ranging from money market, bond, domestic, international and specialty funds for every different asset class. For the lazier investor, Vanguard offers a mix of excellent index funds as well as "life-cycle" funds. Life Cycle funds are "pre-mixed" with a number of stocks whose level of risk correlates to the year of one's retirement. A "Target Retirement 2005" fund is therefore more conservative than that of a "Target Retirement 2045". Of course, stocks and other securities are also offered through their brokerage services for a fee, but for the direct, long term investor, you can't beat a family of funds that have NO load and boast some of the lowest expenses out there. You would think it's too good to be true, but the Vanguard funds are successful precisely because of their low profile name. They don't advertise on TV or proffer glossy prospectuses - just solid funds; and I'll take that any day over some of the bell and whistle firms.

One of the great things about Vanguard is that I'm able to manage and access my account anytime online. Webpage design and user interface are crucial when dealing with any website. Vanguard excels at navigability and ease of use by employing minimal color; a bold splash of maroon and olive here and there, offset by pale yellows, beiges and robin's-egg blues. It's pleasing to the eye, makes the links easily detectable and simple to read. There are six main tabs located at the top of the homepage. Click on a tab and a horizontal row of sub tabs appear that guide you further into what you'd like to do. And the things you can do with Vanguard online are vast. You can open an account, exchange money between funds, purchase shares electronically, set up an automatic monthly investment, just to name a few.

Of course the availability of so much choice has its downside. No matter how intuitive a site may be, sometimes the user may get lost or confused with the maze of pages. Other times, being online isn't enough and you need the services of a real life human being. Whatever the case, Vanguard's customer service support is nothing but consistent. The few times I've called, I found each representative to be courteous, professional, knowledgeable and helpful. They guide you through anything, mail you anything you may need, and if necessary refer and transfer you to someone else if they don't know how to specifically assist you.

AN ASIDE
There's always the dry stuff, so here it is: if you're opening an account for the first time, you have the option to apply online. After you input all necessary information, you can print out the application in pdf format, attach any other documents needed (such as a voided check), and sign and mail it to Vanguard for processing. After about a week, Vanguard will then mail you a confirmation that your account has been established, after which you can go online, create a username and password and proceed to manage your account directly from their site.

I've never availed myself of Vanguard's brokerage services only because I never had reason to buy outside of their family of funds. The service is offered for a fee and I hear they're pretty reasonable compared to other brokerage firms.

Whether you want to lay back, invest in a mix of index and bond funds and not worry too much about where your money's parked, or you want to control every aspect of your portfolio, Vanguard is the place to accommodate your needs. For me personally, the ability to save a little in fees and sales charges, while managing everything directly online, is the control freak's dream come true.

The fun starts at www.vanguard.com.