where can i buy shares of the vanguard 500 index fund?

Question

i went to vanguard.com but buying the fund requires an initial investment of $3,000. i don't have that much money easily accessible right now. i was wondering if it is possible to buy shares of the same fund (VFINX) somewhere else that doesn't require such a large initial investment. also, will i have to worry about fees if i buy it from another brokerage?

Answer 1

You are correct. Vanguard 500 does have a very high minimum investment. That is so that they can maintain their low expense ratio. There are exhange traded index funds that are available to you that hold essentually the same stocks. With them however you will be charged a transaction cost. Through Scottrade it will be $7.00 I believe to buy or sell.

SPY has an expense ratio of 0.10%
IIV has an expense ratio of 0.09%
Vanguard 500 has an expense ratio of 0.18%

Let's talk a little about the pluses and minuses. The minus of course of investing with Vanguard is the high minimum of $3000 and the higher expense ratio. The plus is that there is no transaction cost. Another consideration is that with the Vanguard fund you can only buy and sell after the market has closed at the closing net asset value assuming you have entered your order prior to the close. With an exchange traded fund you can buy and sell immediately at the current market price. There is an advantage to doing so especially in very volitile markets. For example on Friday I purchased IWN an index fund when the market was had a steep sell off at midday. I purchased the fund at about $0.80 below its closing price for the day. One can not do that sort of thing with the Vanguard funds.

There is another consideration that you should ponder. An index fund based on the S&P 500 is only one portion of the stock market that is available to you by investing all of your money in say Vanguard or SPY or IIV. And that portion has not performed too well lately. There are other portions of the market that have performed much better. IWN for example represents small cap value stocks which have outperformed the S&P 500 by about 10% annually during the previous 5 years. 17% annual return vs 7% annual return. Of course that does not mean that it will continue to do so. But the point I am making is that for best overall returns, do not place all of your funds into just one section of the market. Diversify. The fact that your are considering the Vanguard fund shows that you have the right idea. Just expand your thinking a little.

I personally favor the exchange traded funds because they give more flexibility for me to obtain my objectives. I can buy and sell at any time in any amounts that I want. A $7.00 to $10.00 trading commission is not going bankrupt me especially when I can time my purchases to save a buck a share.

Here is a link to a great site that compares all exchange traded funds.

http://www.etfconnect.com/

Answer 2

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Answer 3

I don't know what the vanguard 500 index fund is...But if it's meant to reflect the S&P 500, you can buy the ETF(Electronically Traded Funds) SPY(spyder)...It's just like buying a stock, but it tracks the S&P 500.

Answer 4

I believe that Vanguard will allow you to open an account with them for much less than $ 3,000 IF you agree to make automatic monthly investments from your checking account. I can't remember what the monthly investment must be but I think it is $ 50. Call them ( or get their prospectus on the internet ). My daughter started with them that way because she did not have the $ 3000 either. Or check out other mutual fund families ( American Century, Rowe-Price, Fidelity, etc ). They all have an S & P index fund and different requirements to open an account.

Answer 5

You can buy VFINX through a lot of different brokerage firms (52 of them, to be exact), but I don't think you can get out of that minimum investment. You could talk to another stock broker and find out if the broker can work with you on that. The upside to Vanguard is that the management fees for the funds are known to be the lowest anywhere. That is why they require such a large investment - to keep their costs down by managing a smaller number of larger investments.

Answer 6

Don't buy ETFs (exchange traded funds). I guarantee the person who advised you to do so is either a trader or is ignorant of the market shifts. It will be our next mortgage crisis. Actually, it has already been a negative factor in our economy if you do further research.

Answer 7

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