I have decided upon Vanguard for my Roth IRA Brokerage. My decision was based upon the following:
1) I want to invest solely in mutual funds, specifically index mutual funds.
2) I want a large selection of no-transaction fee, no-load mutual funds with very low expense ratios.
3) I want minimal fees, especially tricky or hidden ones, from the brokerage.
4) I want it online, with a good web interface.
These points narrowed it down to:
a) Fidelity, a mutual fund behemoth which has a nice selection of in-house funds with expense ratios as low as 0.10%. However, the minimums for those funds are $10,000 each. It also has a great web interface, as I use it for my 401k account.
b) Vanguard, which was a leader in the index fund movement and has an enormous selction, with very low expense ratios. I have no idea what the web interface is like, however.
c) Scottrade, a smaller company which currently has no transaction fees for ANY of it’s mutual funds. However, I have heard through the grapevine that it may start charging soon, as they are currently losing money on each transaction doing this. (Update: They now charge for no-load mutual fund transactions)
Since I already have my 401k at Fidelity and am already invested in many of their mutual funds, and I want to keep my Roth IRA somewhere stable for the long run, I leaned toward Vanguard. After some more research, I saw that many of Fidelity’s index funds have $10,000 minimums, even for retirement accounts. Unfortunately, the max for 2004 IRA contributions is $3k, 2005 is $4k. Thus, Vanguard wins out.
Vanguard has an IRA custodial fee of $10 a year for each fund account having a balance of less than $2,500 to $5,000. I plan to have at least $5,000 total, so I may be exempt from that. Many of it’s funds also have a quarterly $2.50 account maintenance fee for account with less than $5,000 to $10,000. Regarding the account maintenance fee, they say it “is paid directly to the fund and therefore is not considered a load”. So I guess some the $10/year comes back to me, as it pays into the fund. Still, I would be subject to this for at least a year. Not ideal, but it’s better than less my cash sit and shrink from inflation, not to mention $10 is less than one stock trade at most places. So I’m off to Vanguard to open an IRA…