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I first heard about the Vanguard Stocks & Shares ISA in a book called “I Will Teach You To Be Rich” by Ramit Sethi. It is a fabulous book for anyone that it feeling rather clueless about money, but wants to create systems that grow wealth.
In this book, he talks about tax-efficient lazy investing. A set it up and leave it alone kind of system. As a beginner to the world of investing, this sounded good to me so I did some more investigating and this article is a culmination of what I discovered.
Now if you are more of a video person, then you can just jump straight in and watch my video on this topic instead. Look at me giving you all these choices:
I just want to make it clear that this is not a recommendation or financial advice. It is a summary of my experiences and a personal review. Do your own research and speak to a financial advisor if appropriate.
What is Vanguard?
Vanguard is an asset management company that was founded in 1975 by John Bogle. The aim was to provide investors with access to low-cost index-tracking funds. John Bogle believed in this system as a way to manage risk and grow wealth over time.
Let’s explain a few of these terms. An index is a group of companies that been group together for some reason. The S&P 500 is a good example. This index is made up of the top 500 companies on the New York stock exchange. An index-tracking fund, therefore is a way to invest in all of the companies in a specific index. The supposed benefit of this is that you are spreading your risk and keeping costs low.
These types of funds are passively managed. Rather than having a team of humans that decides what the money in the fund is invested in, it just automatically invests in the funds in that index. This means that they cost far less to run.
John Bogle believed in these sort of funds and created Vanguard as a way to bring lox-cost index-tracking funds to the everyday investor.
What do they offer?
Vanguard have a range of different account types that you can choose to invest through:
Stocks & Shares ISA (S&S ISA) – this is a tax-free wrapper for your investments. You are allowed to save or invest £20,000 per year into ISAs. There are four types of which a stocks and shares ISA is one. If you are new to investing, then a stocks and shares ISA is normally a good place to start.
General Investment Account (GIA) – operates in the same way as the S&S ISA but without the tax-free status. Unlike the S&S ISA, you can have as many GIAs as you like with as many different providers as you fancy.
Self-invested Personal Pension (SIPP) – this is a pension option that can be good for those that are self-employed, but also for anyone that wants to invest in pension in addition to their employer’s scheme.
Junior ISA (JISA) – this is a tax-free investment account for those under 18. They have a limit of £9,000 per tax year and any money paid in can’t be accessed again until they turn 18 years old. But other than that they work in the same way as an adult account.
What are the fees and minimum deposits for a Vanguard Stocks & Shares ISA?
Vanguard are known for having low fees and this is for many people the draw of having a stocks and shares ISA with them. Their fee structure is simple.
- 0.15% account management fee up to £250,000, then 0% above that.
- Maximum account fee of £375.
- Fee applies across all accounts, so if you have a SIPP and a S&S ISA the maximum you pay is £375 for them all.
- Fund fee average of 0.20%
For minimum deposits, it is either a lump sum of at least £500 or £100 per month.
What can you invest in?
Through a Vanguard Stocks & Shares ISA, you can only invest in Vanguards own funds. Therefore, you don’t get the same range of investments that you might through other ISA providers. That said, you still have a choice of 75 funds to invest in.
These include their popular Lifestrategy and Target Retirement funds. These are blended funds made up of a mix of assets and can be good for those looking for an easy way to start. The Lifestrategy funds come in a choice of options that are split between equities and bonds. The idea is that as you increase the share of bonds in the funds, the less risky the fund is.
The Target Retirement funds allow you to pick a retirement date and it will automatically change your portfolio over time. It will aim to reduce the risk the closer you get to your retirement date. If you are investing in these funds through your S&S ISA, then you will be able to access this money at any time.
How to open a Vanguard Stocks & Shares ISA?
It is a really simple process and one that I walk you through in the YouTube video. If you prefer your video content to last less than a minute though, then I also have a TikTok about it.
The website to visit is vanguardinvestor.co.uk. I personally think that the sign up process is super easy and shouldn’t take more than 10 minutes to do. The more time consuming elements is deciding which funds to invest your money.
Even if you make a decision on these funds now, you can always change them later. Over the years that I have been using Vanguard, I have invested in several of their funds and it is simple to change these around.
Who might a Vanguard Stocks & Shares ISA be good for?
Well a S&S ISA is good for anyone that wants tax-free investing. Remember that you are only allowed one of these each tax year to pay into, so choose wisely. Vanguard themselves offer low-cost investing options and can be great for newbies. The hands-off approach to investing makes them a strong contender for anyone that wants to invest regularly, but not get too involved in the details.
As always, they might not be right for your personal situation and it is investing so that means that your money can do down as well as up. If you need further information about this, then contact a financial adviser.