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How to Buy Vanguard Funds – A Step-by-Step Guide

Maybe you’ve been hearing more and more about Vanguard, or maybe you want to start investing but you just don’t know where or how or what. Ultimately, you want to know how to buy vanguard funds. The following is a step-by-step guide to start investing on Vanguard’s platform, and building your wealth to retirement.

This post was written by our staff writer, Lindsey Smith.

How to buy stocks on vanguardHow to Buy Vanguard Funds – A Step-by-Step Guide

The first thing you need to know are the different types of products you can purchase to invest your money in. 

  • Mutual funds are a group of stocks inside one fund. You’re putting X amount of dollars into a fund and it is invested equally into each of the stocks inside it.
  • Index funds are a special type of mutual fund that tracks the total market index, like the S&P 500. You’re investing a small amount of your money into each of the companies inside the index fund. So rather than investing in Apple, you’re investing in Apple, plus 499 other top performing companies in the U.S. This makes for a more diversified investment.
  • ETFs, or exchange-traded funds are also index or mutual funds that you invest in, but you purchase shares that you can buy, sell, and trade like stocks. You can buy a share of an ETF just like you can buy a share of Apple, and you can buy or sell whenever the market is open. This makes them much more flexible than mutual funds. 

Related: How Do Index Funds Make Money?

What is Vanguard and Why Do So Many People Use It?

Vanguard is an investment platform that anyone can open an account with and use to invest.

Most people use it and it’s one of the safest and easiest platforms around. They are known for having the lowest expense ratios in the industry, making them a great choice for the average investor because you’ll pay the least amount of fees. They can do this because they are not owned by shareholders, but by the people who invest on their platform. This means, if you invest with them you also own a small part of the company. 

Why is this great for you?

It means that anything they offer and any changes they make are done with you in mind and not their shareholders. They will generally only make decisions that benefit you because when you win, they win.

Related: What is an Expense Ratio? (You’ll want to know, believe me!!)

Vanguard is also known for having:

  • commission-free trades,
  • high quality funds (with low expense ratios), and
  • great customer service.

They’re the largest issuer of mutual funds in the world and the second-largest issuer of ETFs. For the purposes of this article, we will focus on ETFs since they have a lower minimum investment threshold, and they’re really easy to buy. 

Passive Income Examples - investingHow to Buy Vanguard Funds – Intro

Once you fund your Vanguard account, you can buy anything you want – individual stocks, bonds, ETFs, mutual funds or index funds. The steps in this article are the same no matter which product you buy.

ETFs are great for building long term wealth, because of the low expense ratios and diversification of companies inside the fund.

If you were to purchase stock in one company, that company could either do good or bad, that’s a risk you take with your money. When you buy an ETF, for example an index fund that tracks the S&P 500 – you’re investing in 500 of the top performing companies in the U.S. It’s a much safer investment for your hard earned money. 

Roth IRA or Traditional IRA?

If you make less than $139,000 per year, and you haven’t already opened a Roth IRA retirement fund, that’s the best place you can start your investing career. If you make more than that, you’ll sign up for a traditional IRA account. 

We’ll be showing you how to open a Roth IRA and start investing with ETFs, but the same steps apply for any account you open and any investment product you buy.

Related: The Truth About the Roth 401k and the Traditional 401k

How Do I Open a Vanguard Account?

Use the following steps to open a Vanguard account and start investing.

  1. Go to the Vanguard website.
  2. Click on personal investors.
  3. Scroll to the bottom of the screen and click open an account.
  4. From there you can either open a new account or move an account or assets you have somewhere else to Vanguard. If you’ve never opened an account, you’ll click to open a new account.
  5. It will then ask you how you’ll fund your account. Basically it wants to know where you’ll be getting the money to put the initial deposit into your account. You can choose to use an electronic bank transfer or another Vanguard account, rollover from an employer plan (e.g. 401(k) plan), or to transfer investments from another financial firm. Click electronic bank transfer or another Vanguard account (unless the others apply to your situation).
  6. It will then ask you if you already have a login. You’ll choose No, I’m new here. Click continue.
  7. Now it will ask if you’re registered on Vanguard. If you haven’t set up an account before, click no. (If you have, click yes and then login).
  8. Next it will outline the process of opening an account. Choosing the account type, filling out the application, and initiating a transfer from your bank. Confirmation comes in 1-2 days. It also gives you a list of things you need to set up your account. The routing number and your account number at your bank. Your current employer’s name and address (this is required by law)
  9. Click continue.
  10. It will now ask you why you’re investing. For this example, opening a Roth IRA and buying an ETF, we’ll choose retirement. Then it asks for the account type we’d like to open, and we’ll choose a Roth IRA.
  11. Next it asks what your goal is for this money. It doesn’t really matter what you put in here, but we’ll choose growth. It also asks for a secondary objective so we chose income. Finally it asks your source of funds, and you can pick whatever applies to your situation. We chose general savings.
  12. The next page is where you’ll fill out all of your personal information. Fill it out and click continue.
  13. Next you’ll fill out questions about your employment status. Answer them all and click continue.
  14. The final screen is where you’ll input all your banking information. Fill it out and click continue.
  15. From here, you’ll wait 1-2 business days while Vanguard initiates a request from your bank account.

Related: What to do with $100k Right Now (When Everything Else Is Overpriced!!)

You’re done with the initial questions, but NOT done with investing!

Once all of these steps are complete and your account is funded, it looks like you’re all done. However, just because the money is in your account it does NOT mean that it’s invested. This is a huge mistake that a lot of people make.

The money is actually just sitting there in your settlement account or money market account making no money, waiting to be invested in something. So now you need to take that money from your account and use it to buy investments.

Related: What Will It Cost to Live When You Retire?? (Inflation is a Killer!!)

How Do I Buy Vanguard Funds?

It’s time to actually learn how to buy vanguard funds.

Once again, go to the Vanguard website and click personal investors.

  1. Along the top of the page you’ll see My Accounts. In the dropdown menu from there, click buy and sell.
  2. Vanguard VFIAX fundHere you have 3 options. You can invest with Vanguard mutual funds, trade ETFs or stocks, or transfer money to or from your Vanguard settlement fund. Since we are buying Vanguard ETFs, we’ll select trade ETFs or stocks.
  3. On this screen you’ll see your account type – for this example Roth IRA Brokerage account. Select your transaction type – buy and sell.
  4. Next it asks for the symbol. This is where you’ll put in the symbol of the stock you want to buy. For example, VOO – Vanguard’s own S&P 500 index fund ETF (or, one of Derek’s favorites, VFIAX, an S&P 500 index fund!). Then you’ll click get a quote. Don’t worry if you don’t know the symbol for what you want to buy – there’s a handy link below the box that allows you to look them up.
  5. It will show you the price of what one share of that ETF is trading for at that time. The next box will ask you how many shares you want to buy. Enter the number you’re purchasing, for example, 10.
  6. Now it will ask you for the order type. Most times you’ll just go with market, but you can also choose limit, stop, or stop limit. These are just different ways you can buy, for example if a stock is trading at $20, and you’ll buy it when it is trading for $17, you’d choose limit order, and it will only purchase the stock once it’s trading for $17. For our example though, market is the most straightforward option – where you purchase for market price. Click continue.
  7. Now you’re taken to a Review and Submit page. Review your information, and click submit. This purchases your shares.

Now you’ve taken your money from your settlement account and into actual investments. Following our example above, you would own 10 shares of VOO that will continue to grow in your retirement account until you’re ready to retire, at which time you can pull that money out tax-free.

Related: The Absolute Easiest Way to Make a Million Dollars

how to buy vanguard fundsWhich Vanguard Funds are Good for Beginners?

If you’re interested in learning how to buy Vanguard funds, then you’re probably interested in learning more about all the funds that are offered as well.

There is a reason we focused on ETFs, and that’s because they’re a top notch investment and easy to purchase, especially for beginners or the average investor.

They combine the diversification of mutual or index funds with lower investment minimums and real-time pricing. You can buy and sell whenever you want while the market is open, which makes them more flexible than mutual funds.

There are 75 ETFs on Vanguard’s website.

They are separated into different categories:

  • U.S. Bond ETFs
  • U.S. Stock ETFs – these are divided into large-cap, mid-cap, and small-cap
  • International Bond ETFs
  • International Stock ETFs
  • Sector & Specialty ETFs

So basically whatever sector of the market or specialty you want to invest in, there’s an ETF for it. For most investors, a great choice is a U.S. Stock ETF. Vanguard has quite a few really great ones that all have low expense ratios and that perform extremely well.

The first one we’d recommend is VOO

This fund invests in stocks in the S&P 500 Index, which represents 500 of the best performing U.S. companies. Its goal is to closely track the index’s return, and thus offer a similar return. It offers high potential for investment growth, and is appropriate for long term goals where your money’s growth is essential. 

The expense ratio for VOO is 0.03%, and this is extremely low compared to most others. In the long term this will save you so much money in fees, which is why it’s so important to look at this number. 

smart investment optionsThe second one is VOOG

This is their S&P 500 growth index fund. It’s similar to VOO but catered to growth. It carries a little more risk because it has fewer companies inside the fund, and the expense ratio is 0.10% – three times VOO. But still very low compared to other expense ratios that follow the same index. 

Finally, have a look at VTI

This is Vanguard’s Total Stock Market ETF. This one includes a huge number of stocks, around 6x as many as VOO or VOOG, making it much more diversified and thus safer. This one tracks the performance of the CRSP U.S. Total Market Index, so it includes large-cap, mid-cap, and small-cap companies. 

Related: How to Buy S&P 500 and Instantly Diversify Your Investments!

How to Buy Vanguard Funds – Are you ready??

Investing on Vanguard’s user-owned platform is something that anyone can learn.

Purchasing Vanguard ETFs is something that has made the average investor a millionaire time and time again, and it’s a strategy that can work for you, too.

It’s as easy as opening your account, funding it, and then purchasing the ETF, stock, bond, index or mutual fund that you want to invest in. 

Are you ready to learn how to buy Vanguard funds? What are you waiting for??

Grow Rich Investing Make Money Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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