Van­guard won’t charge com­mis­sions for on­line trad­ing

Chicago Tribune (Sunday) - - INVESTING - By Alex Veiga

LOS AN­GE­LES — Van­guard says it will no longer charge com­mis­sions on on­line trad­ing of stocks and op­tions.

The move, which the com­pany an­nounced Thurs­day, is ef­fec­tive im­me­di­ately for Van­guard Bro­ker­age clients.

The in­dus­try gi­ant has been of­fer­ing com­mis­sion­free trad­ing of Van­guard ex­change-traded funds, or ETFs, since 2010. It elim­i­nated com­mis­sions on nearly all other ETFs in the in­dus­try in Au­gust 2018.

“It re­ally is about con­tin­u­ing the all-in, low cost for our in­vestors, whether that’s mu­tual funds, ETFs, in­vest­ment ad­vice or stocks and op­tions,” said Karin Risi, man­ag­ing di­rec­tor of Van­guard’s Re­tail In­vestor Group.

The Val­ley Forge, Penn­syl­va­nia-based com­pany es­ti­mates that its ex­pense ra­tio re­duc­tions of funds and ETFs gen­er­ated more than $750 mil­lion in cu­mu­la­tive sav­ings for its clients over the last four years. The com­pany’s as­set-weighted av­er­age ex­pense ra­tio is 0.11% for mu­tual funds and 0.07% for ETFs, as of the end of 2018.

Van­guard’s lat­est ex­pan­sion of zero-com­mis­sion trad­ing is part of a broader in­dus­try trend in re­cent years that has led to lower costs for in­vestors in ev­ery­thing from trad­ing to fi­nan­cial ad­vice to the an­nual ex­pense for in­vest­ing in funds.

In Oc­to­ber, Fi­delity in­vest­ments, the largest on­line bro­ker­age, said it was drop­ping com­mis­sions for on­line trades of U.S. stocks, ETFs and op­tions. Charles Sch­wab, TD Amer­i­trade and ETrade Fi­nan­cial have also moved to lower or elim­i­nate trad­ing fees.

The trend is a bid by in­vest­ment bro­ker­ages to at­tract cus­tomers at a time when many have grown more vo­cal about the cost of in­vest­ing.

Bro­kers make most of their money via in­ter­est in­come on their clients’ de­posits, but fees and com­mis­sions ac­count for a sig­nif­i­cant share of their earn­ings also.

Re­search has shown that in­vest­ments with lower costs tend to be more suc­cess­ful in the long run, in part be­cause higher-cost ri­vals have to per­form that much bet­ter just to get to the same af­ter-fee per­for­mance.

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