Vanguard Group, the mutual fund giant, recently announced that it would follow the ongoing industry trend and allow its customers to trade options and stocks for free.
Zero commission trading on Vanguard
The Vanguard Group has entered the zero-commission party late but plans to go full swing to ensure that it remains at the top of the game. The no-free structure was implemented on Thursday for all account sizer. With this implementation, Vanguard will get rid of its charges per trade, which usually ranges from $2 to $7. The company will continue to charge $1 from options traders. However, they will not pay other commissions on the platform.
Previously, Vanguard allowed its customers to trade exchange-traded funds (ETFs) without paying a commission. However, as Robinhood has made zero-commission trading popular and several of its peers have started offering similar services, Vanguard is forced to follow suit. Vanguard needs to protect its business from TD Ameritrade, E*Trade, Charles Schwab and Fidelity.
How is Vanguard tackling competition?
The group is trying to make asset buying and investing cheaper for its users. With zero-commission offers, it will be able to save its business from discount brokerages and new-age apps like Robinhood. Vanguard had a similar offering for users holding more than $1 million in their brokerage accounts, where it offered 25 to 100 free trades every month. Now, all restrictions have been removed from all accounts, regardless of their size.
Vanguard Retail Investor Group MD Karin Risi commented on the new strategy and said,
“For 45 years, we’ve been dedicated to lowering the cost of the index and active funds, ETFs, advice, and brokerage services to help investors achieve better outcomes. The expansion of our commission-free platform marks the latest demonstration of this unwavering commitment to our clients.”
The new change in strategy in this business arises because of Robinhood, which is now as big as E*Trade and TD Ameritrade. The millennial-favored app has gained $10 million users within just six years of launching and continues to become a force to be reckoned with.