Vanguard’s Low-Cost Robo Advisor: How to Save Money with it

If you are looking for a simple and affordable way to invest for retirement, you may want to consider Vanguard’s robo-advisor service, Vanguard Digital Advisor®. This service uses Vanguard’s expertise and exchange-traded funds (ETFs) to create a personalized portfolio that matches your goals and risk tolerance. In this article, we will explain how Vanguard Digital Advisor works, how much it costs, and what are the pros and cons of using it.

What is Vanguard Digital Advisor?

Vanguard Digital Advisor is an online investment service that provides automated and personalized advice for retirement planning. You can enroll in Vanguard Digital Advisor with a minimum of $3,000 in a Vanguard account, such as an IRA, a taxable brokerage account, or a 401(k) plan. You will answer some questions about your age, income, expenses, savings, and retirement goals, and Vanguard Digital Advisor will create a customized plan for you. It will also recommend a portfolio of low-cost and well-diversified Vanguard ETFs that suit your risk level and time horizon.

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How much does Vanguard Digital Advisor cost?

One of the main benefits of Vanguard Digital Advisor is its low fee structure. You will pay no advisory fees for the first 90 days of enrollment. After that, you will pay an annual gross advisory fee of 0.20%, which means that on a $10,000 investment portfolio, you will pay $20 in fees. This is lower than many other robo advisors, such as Betterment and Wealthfront, which charge 0.25% in management fees. In addition, you will also pay the expense ratios of the ETFs in your portfolio, which range from 0.03% to 0.15%, depending on your investment option.

What are the investment options of Vanguard Digital Advisor?

Vanguard Digital Advisor offers three investment options for you to choose from:

• All-index investment option: This option consists of four Vanguard ETFs that cover the U.S. and international stock and bond markets. This option has a 0.15% advisory fee and an average expense ratio of 0.05%.
• Active/index investment option: This option combines index ETFs with some of Vanguard’s actively managed mutual funds, which aim to beat the market performance. This option has a 0.20% advisory fee and an average expense ratio of 0.11%.
• ESG investment option: This option focuses on environmental, social, and governance (ESG) factors, and invests in ETFs that screen companies based on their ESG practices. This option has a 0.20% advisory fee and an average expense ratio of 0.15%.

What are the pros and cons of Vanguard Digital Advisor?

Vanguard Digital Advisor has several advantages and disadvantages that you should consider before enrolling. Here are some of them:

Pros:

• Access to Vanguard’s investing expertise and ETFs, which are known for their low costs and high quality.
• Low management fee relative to competitors, and no additional account fees or commissions.
• Potential tax reduction through tax-loss harvesting, which is a strategy that sells securities at a loss to offset capital gains taxes.
• Ongoing support and monitoring of your portfolio, and automatic rebalancing when needed.
• A clear and easy-to-use online dashboard that shows your retirement outlook and progress.

Cons:

• Limited portfolio options and customization, and no access to human advisors or other financial planning services.
• A high account minimum of $3,000, may be a barrier for some investors.
• No fractional shares, which means that you may have some cash left uninvested in your account.

Is Vanguard Digital Advisor right for you?

Vanguard Digital Advisor is a good option for investors who want a low-cost and hassle-free way to invest for retirement, and who trust Vanguard’s reputation and products. However, it may not be suitable for investors who want more control and flexibility over their portfolio, or who need more comprehensive and personalized financial advice. Ultimately, the decision depends on your preferences, goals, and budget. You can learn more about Vanguard Digital Advisor and enroll on their website.

How Does Vanguard’s Digital Advisor Work?

Vanguard’s digital advisor works by using four low-cost Vanguard ETFs (exchange-traded funds) to build portfolios tailored to each investor’s profile. These ETFs are:

• Vanguard Total Stock Market ETF (VTI): This fund tracks the performance of the entire U.S. stock market, covering large-, mid-, small-, and micro-cap stocks across various sectors and industries.
• Vanguard Total International Stock ETF (VXUS): This fund tracks the performance of the entire non-U.S. stock market, covering developed and emerging markets across various regions and countries.
• Vanguard Total Bond Market ETF (BND): This fund tracks the performance of the entire U.S. bond market, covering government, corporate, mortgage-backed, and other types of bonds across various maturities and credit qualities.
• Vanguard FTSE Emerging Markets ETF (VWO): This fund tracks the performance of large- and mid-cap stocks in emerging markets around the world.

By combining these four funds into one portfolio, Vanguard’s digital advisor aims to provide investors with exposure to both domestic and international markets, as well as different asset classes such as stocks, bonds, and cash equivalents. The portfolio is rebalanced quarterly or whenever there is a significant change in market conditions or investor preferences.

CONCLUSION

Vanguard’s digital advisor is a robo-advisor service that offers fully automated investment management using four low-cost Vanguard ETFs. It also provides personalized advice based on your goals, risk tolerance, and financial situation. It is a convenient and affordable way to invest your money and achieve your financial objectives. If you are interested in enrolling in Vanguard’s digital advisor, you can visit [vanguard.com/advice-compare] or call 800-310-9228 for more information. Thank you for reading this article

FREQUENTLY ASKED QUESTIONS:

How much does Vanguard Digital Advisor cost?

You’ll pay no advisory fees for the first 90 days. After that, you’ll pay approximately 0.15% in advisory fees for all-index investment options or 0.20% for an active/index mix, depending on your elections¹. In other words, for every $10,000 Digital Advisor manages you’ll pay approximately $15 each year for all-index investment advice (or approximately $20 in advisory fees for an active/index mix).

What’s the minimum amount I need to enroll in Vanguard Digital Advisor?

You need at least $3,000 to enroll in Vanguard Digital Advisor.

What types of accounts can Vanguard Digital Advisor manage?

Vanguard Digital Advisor can manage any type of brokerage account or settlement fund that holds Vanguard funds or ETFs.

Who’s eligible to enroll in Vanguard Digital Advisor?

Vanguard Digital Advisor is available to anyone who is at least 18 years old and has a valid Social Security number.

How do I get started with Vanguard Digital Advisor?

You can get started by visiting [vanguard.com/advice-compare] and filling out a short questionnaire about your financial situation and goals. You’ll also need to provide some basic information about your tax filing status, household income, investment and savings accounts, debts, household expenses, risk attitude, retirement profile, and retirement outlook. You can also call 800-310-9228 if you have any questions along the way.

What are the benefits of using Vanguard’s digital advisor?

Some of the benefits are low fees, low investment expense ratios, no additional account fees, access to Vanguard’s investing expertise, personalized advice based on your goals, and potential tax reduction through a tax-loss harvesting service.