After waiving internal expenses on its money market funds, Vanguard announced this week it’s also waiving commissions for Vanguard Brokerage account holders who trade Vanguard ETFs.
Commission-free trading has become the latest battle-ground in the ETF marketplace, and after Charles Schwab and Fidelity upped the ante with their own commission-free programs, Vanguard stepped in.
Of course, Vanguard didn’t do this without some marketing help. You may recall the kerfuffle a couple of months ago around the offer of “100 free trades” to certain high-net worth Vanguard Brokerage clients. At the time, I said that, according to a source, Vanguard was testing the waters to determine whether this would increase both trading and adoption of its ETFs, or ETFs in general.
Bingo! Turns out rich folks like a deal just like everyone else. So, Vanguard has, in essence, labeled its ETFs with a big, fat “FREE TRADES.”
This is a great deal for those with Vanguard Brokerage accounts and a great deal for Vanguard. They will continue to gather assets at a rapid clip, and once an investor gets a taste of “free” trades, they will almost certainly be loathe to abandon ship.
Meanwhile, one thing that has not been reported is that this freebie should not be seen as a license to day-trade. Vanguard told me that if someone makes more than 25 trades in a given ETF over a one-year period they reserve the right to block the investor from trading in that ETF again for 60 days. Will there be an automatic shutdown? No. But again, Vanguard is “reserving the right” to block additional trades if you hit the 25-plus mark.
Jack Bogle, Vanguard founder and ETF critic, must be apoplectic at the thought of “his” Vanguard offering free trading with what he’s termed “priceless shotguns,” which “can be used for self defense, or … murder,” even if they are Vanguard’s shotguns.
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