Vanguard has rolled out the ability to make automatic, recurring purchases of Vanguard ETFs using fractional shares (dollar-based purchases, $1 minimum) inside their in-house brokerage account. Trade commissions are still zero. I know that some readers were waiting for this feature. I believe it should be available in all accounts – as of last week it showed as a “pre-release” feature in my account but now that message is gone.
To find it, look for the “Automatic Investments” button on the main page after login. If you are already logged into Vanguard, you could try clicking this link.
You then see the option to schedule recurring purchases of ETFs in addition to mutual funds.
If you click on that, you can choose from weekly, weekly, bi-weekly, and twice a month frequencies. You can set it to repeat indefinitely, or set a fixed end date.
Note the following timing details:
If your automatic investment is scheduled outside of business or market hours (for example on a weekend or holiday), brokerage purchases will be processed on a prior business day. Monthly investments scheduled for the 29th, 30th, or 31st day will occur on the last day of the month during shorter months.
Here are some potential benefits of this new feature:
- With fractional ETFs, you can invest with as little as $1. You don’t need to meet the $3,000 minimum initial purchase of some Vanguard mutual funds.
- Vanguard ETFs often have a lower expense ratio than their mutual fund counterparts.
- ETFs are a more portable form if you want to later switch brokerages.
- In general, ETFs are more tax-efficient than mutual funds, but Vanguard ETFs and mutual funds have the exact same tax-efficiency due to their structure as different share classes.
For example, now you can automatically buy $100 of VTI every week, even though one share of VTI is over $200. To match up with this, you might set up a separate, weekly automatic transfer of $100 from your bank account into your brokerage account. I don’t know that you can set it to directly pull from your bank account.