The Quick Answer: It Depends on the Fund
If you’re wondering whether Charles Schwab charges to buy Vanguard funds the short answer is it depends on which Vanguard fund you’re interested in. Some Vanguard funds can be purchased commission-free at Schwab while others may incur transaction fees up to $74.95 per purchase.
I’ve been investing with both companies for years, and lemme tell you – understanding these fees can save you hundreds or even thousands over time!
Understanding Schwab’s Mutual Fund Fees Structure
Before diving into specific details about Vanguard funds it’s important to understand how Schwab categorizes mutual funds and their associated fees
No-Transaction-Fee (NTF) Funds vs. Transaction-Fee Funds
Schwab divides mutual funds into two main categories:
-
Schwab Mutual Fund OneSource® – These funds have $0 commission for online trades Broker-assisted trades incur a $25 service charge
-
All other mutual funds – These funds can cost up to $74.95 per purchase for online trades. Broker-assisted trades incur the online price plus a $25 service charge.
The key question is: which category do Vanguard funds fall into?
Are Vanguard Funds Available Through Schwab OneSource?
Unfortunately, most Vanguard funds are NOT available through Schwab’s OneSource program, which means you’ll likely pay transaction fees when buying most Vanguard funds at Schwab.
Why? Well, Vanguard and Schwab are competitors in the low-cost investment space. While Schwab does offer some Vanguard funds, they typically don’t include them in their no-transaction-fee program since they’d prefer you buy their own Schwab funds instead.
Actual Costs for Buying Vanguard Funds at Schwab
Based on Schwab’s pricing information, here’s what you can expect to pay when buying Vanguard funds:
| Trading Method | Transaction Fee Funds (Most Vanguard Funds) | No-Transaction-Fee Funds (Select Vanguard Funds) |
|---|---|---|
| Online | Up to $74.95 per purchase | $0 |
| Broker-Assisted | Online price + $25 service charge | $0 + $25 service charge |
How to Check if a Specific Vanguard Fund Has Transaction Fees
To determine whether a specific Vanguard fund will incur transaction fees at Schwab:
- Log in to your Schwab account
- Search for the Vanguard fund using its ticker symbol or name
- Look for “Transaction Fee” or “No Transaction Fee” designation
- Check the fee amount before placing your order
Alternatives to Avoid Fees When Buying Vanguard Funds
If you want to avoid transaction fees when buying Vanguard funds, consider these options:
1. Buy Schwab’s Equivalent ETFs or Mutual Funds
Schwab offers its own line of low-cost index funds and ETFs that are similar to Vanguard’s popular offerings. These funds have:
- $0 online commission for ETFs
- $0 commission for Schwab mutual funds through OneSource
- Expense ratios that are competitive with (and sometimes lower than) Vanguard’s
2. Buy Vanguard ETFs Instead of Mutual Funds
At Schwab, you can buy Vanguard ETFs with $0 online commission, compared to potential transaction fees for Vanguard mutual funds. This is because Schwab offers commission-free trading for all U.S. exchange-listed ETFs, including Vanguard’s.
3. Open an Account Directly With Vanguard
If you specifically want Vanguard mutual funds, consider opening an account directly with Vanguard, where you can purchase their funds without transaction fees.
Additional Costs to Consider
Beyond transaction fees, remember to consider these costs when buying any funds at Schwab:
1. Expense Ratios
All mutual funds and ETFs have expense ratios – annual fees charged as a percentage of your investment. These fees are charged regardless of where you purchase the fund.
2. Short-Term Redemption Fees
Schwab charges a $49.95 short-term redemption fee on funds purchased through their Mutual Fund OneSource service and held for 90 days or less.
3. Account Fees and Minimums
Good news! Schwab has:
- $0 account opening fees
- $0 account maintenance fees
- $0 account minimums
Real-World Example: Buying VFIAX at Schwab
Let’s say you want to buy Vanguard’s S&P 500 Index Fund Admiral Shares (VFIAX):
- At Schwab, this would likely incur a transaction fee of up to $74.95
- Instead, you could:
- Buy Schwab’s equivalent (SWPPX) with $0 commission
- Buy Vanguard’s ETF version (VOO) with $0 commission at Schwab
- Open a Vanguard account and buy VFIAX directly with no transaction fee
My Personal Take on Schwab vs. Vanguard
I’ve used both platforms, and honestly, they’re both great. Schwab has better customer service in my experience, and their checking account features are amazing. But if you’re specifically wanting Vanguard funds, it might make sense to just go straight to the source.
That said, don’t overlook Schwab’s own funds – they’re often just as good as Vanguard’s with similar or even lower expense ratios in some cases.
The Bottom Line: Is It Worth Paying Fees for Vanguard Funds at Schwab?
In most cases, it’s NOT worth paying transaction fees to buy Vanguard mutual funds at Schwab when you have these alternatives:
- Schwab’s own funds (similar quality, $0 commission)
- Vanguard ETFs at Schwab ($0 commission)
- Direct investment through Vanguard (no transaction fees)
However, if you already have a substantial portfolio at Schwab and want to add just one or two specific Vanguard funds that don’t have good Schwab equivalents, it might be worth paying the transaction fee for simplicity’s sake.
FAQ About Buying Vanguard Funds at Schwab
Do I pay a fee every time I add money to my Vanguard fund at Schwab?
Yes, if it’s a transaction-fee fund, you’ll pay the fee (up to $74.95) each time you make a purchase.
Are there fees to sell Vanguard funds at Schwab?
Typically no – Schwab generally doesn’t charge to sell mutual funds, but always check the specific fund details.
What about automatic investments?
Transaction fees still apply to automatic investments into Vanguard funds that aren’t part of the OneSource program.
Can I transfer my existing Vanguard funds to Schwab without selling?
Yes, you can transfer existing Vanguard mutual funds to Schwab without selling them or triggering taxes. However, future purchases may incur transaction fees.
Conclusion: Know Your Options
To summarize, Schwab does charge to buy most Vanguard mutual funds – up to $74.95 per purchase. However, you can avoid these fees by:
- Buying Vanguard ETFs at Schwab ($0 commission)
- Choosing Schwab’s equivalent funds ($0 commission)
- Opening an account directly with Vanguard
The best choice depends on your individual needs, existing accounts, and investment preferences. Either way, now you’re armed with all the knowledge you need to make a smart decision about your investments!
Remember, a single $74.95 fee might not seem like much, but if you’re making regular contributions to build wealth over time, those fees can seriously eat into your returns. Be smart about where and how you invest!
