How to open a Vanguard Brokerage Account – Vanguard Stock and Share ISA
Opening a Vanguard brokerage account is a relatively straightforward process. Within a few minutes, you can start investing in stocks and shares.
However, investing in the stock market anywhere in the world can be extremely overwhelming for beginners. It is not different in the UK.
A lot of beginners in stock market investing struggle to understand how to start and where to start.
In this article, I will take you through how to open an investment account on Vanguard UK.
Before I take you through how to open the investment ISA account on the Vanguard website, I think it is very important to first explain,
- The mindset and psychology of stock market investing
- Stock and Shares ISA (also called Investment ISA)
- Why vanguard is the best place to start your stock market investing
- Investment Type
Mind-set and psychology of stock market investing
When you are a beginner in investing, it is important to start with the right strategy and mindset.
Think long term
Approaching investing with a long term mindset is one of the ways to succeed in stock and shares investing. There is no doubt that the market is always on the way up.
There will be a time when the market will be down or take a pause. In some cases, the economy will go into a recession which will decrease the value of your investment.
If you are investing for the long term there is no need to panic during a recession or when the market is taking a pause.
There is a difference between trading and investing. It’s important to have the right mindset and strategy. If you are doing it for the long haul then you are investing. For people that are trying to beat the market, they are trading.
Stock and Share ISA (also known as Investment ISA)
For someone who is considering starting to invest in the stock market in the UK. The best type of account to open is the stock and shares ISA account. Here is the reason why.
Stock and share ISA is a tax-efficient account that will help you to save money on tax. You will not pay tax on any income your investment generates in Stocks and Shares ISA.
It is worth mentioning that there is a personal savings allowance in the UK which means that you won’t start paying tax on income from savings and investment until you have a profit that is more than £1000.
Even if you choose to invest in a General Account that is not ISA you will only pay tax on profit or income over £1000.
For me, investing in Stocks and Shares ISA is a no-brainer.
Why vanguard is the best place to start your stock market investing
The reason why Vanguard is the best place to start is that they have a very good reputation and they are well respected in the stock market arena.
They have their limitations; the funds available are not as many as you will see on some other platforms. Honestly, this is an advantage rather than a disadvantage because of the simplicity of not getting confused with making a choice.
Vanguard mainly has its funds on their platform and their fees are very low when you compare it to their peers.
Majority of their funds are low-cost. Vanguard I believe is the favorite for passive investors.
As well, the Vanguard platform is user-friendly which makes it easy to navigate through their platform.
One of the things you need to be aware of in stock market investing is fees.
When you are just starting you are likely not to pay any attention to fees. As your investment grow you will be losing money if you get this aspect of investing wrong.
- Platform fees
Most brokers will charge you for managing your investment for you. It is important to not use a broker who charges high fees.
All brokers charge for this which I don’t think there is a problem with. The problem lies in paying more than you need to.
- Dealing fee
Some of the funds or shares you buy will require you to pay a fee when you buy a share or fund. For people who buy individual shares, it makes sense to make a bulk purchase of shares because if you are buying bit by bit you might be paying too much on dealing fees.
Let’s say, for example, a broker charges £8 per trade fee for trading individual shares. This means the £8 will be paid regardless of how many shares you are buying.
If you buy 10 shares in a single dealing you will pay £8. Instead, if you buy your 10 shares in two different trades i.e two trades at different times you will pay more for the dealing fees. So you will end up paying £16 as opposed to £8 if you buy in one trading.
This is the reason why it makes sense to invest in a fund that you can just put in regular payment to your investment account.
See examples of fees can be seen on the Vanguard website here.
Index fund and ETF
I seriously think you should not be buying individual stock when you are just starting out in Stock Market investing.
An index fund or ETF is the best place to start as a beginner. Please don’t be confused or overwhelmed at this point if you don’t know what Index Fund or ETF are.
Index fund and ETF have something in common. Without getting you more confused. Index fund in a simple term is a collection of stocks of different companies put together in one pot called a fund.
In a simple term, instead of buying a share of Amazon, BT, Mcdonald or any other company shares, you can just buy an index fund or ETF that have various company shares in them.
Why buy an Index Fund or ETF instead of individual shares?
Another simple explanation of this is below,
Let’s say you buy an Apple stock and something happens to Apple as a company and they go out of business. This means that you will lose some or all of your investment.
Instead, if you have Apple stock and other companies stock in a fund, if Apple goes out of business, this will only be part of your investment. You will not have to worry, it will be the responsibility of people who are managing the fund to take the apple stock out and find another company to include as part of the fund.
Investing in a fund means that the risk of losing all your investment is low compared to an individual stock.
When buying a refund you need to note the following:
This is very important because it has to do with if you are buying a fund that is ACTIVELY managed or PASSIVELY managed by fund managers. Usually, the fees on the active fund will be higher than that of the passive fund.
The reason for the high fee in the active fund is because the fund manager will be trying to outperform the market. My preference is usually to go for the passive fund because it’s better for a long-term investor.
There are 3 major asset classes. EQUITY which is mostly stocks, FIXED INCOME usually Bond and MULTI-ASSET which can be a mixture of stocks and bonds.
Something else you will need to decide on is whether you want the gain on your investment to be reinvested automatically or not. This is where you will need to decide if you are buying ACCUMULATION or DISTRIBUTING/INCOME fund.
Index Fund and ETF Example
Below are examples of Index Fund and ETF.
An example of an index fund is below. You can easily see that it has index fund as part of the text and this help you to know what you are buying. The ‘accumulation at the end means that you want the gain from your investment to be automatically reinvested.
FTSE Global All Cap Index Fund Accumulation
ETF (Exchange-Traded Fund)
In the example below, you can see ETF at the end of the fund name. You will know straight away that this is an ETF.
When you are buying ETF, make sure it has the UCITS as seen below. This is important because the Undertakings for the Collective Investment in Transferable Securities (UCITS) is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of mutual funds. UCITS is like a sign of authenticity.
FTSE 100 UCITS ETF
How to Open Vanguard Stock and Shares Account
The simplicity of the Vanguard website is one of the reasons why I like Vanguard. To open Stocks and Shares ISA on the Vanguard website, follow the following steps.
Step 1– On the homepage as seen in the image below, at the top right, click on ‘OPEN AN ACCOUNT’
Step 2 – Click on ‘START MY APPLICATION’ as shown in the image below. As you navigate through the application process, it is important that you read all the information on each page so you can have the right information and not just following the steps blindly.
The information on the page relates to the requirement which is mainly about UK residents. To apply you need to be a UK resident and having a National Insurance number will confirm that. As well you need to have a bank account. These are just to confirm your identity and for the regular payment to your account later on, after opening the account.
Step 3 – It is possible to transfer an existing ISA account from a different provider to Vanguard. But, for a new account, you just need to click on ‘OPEN AN ACCOUNT’ as shown in the image below.
Step 4 – Before you click on ‘I have read the above documents and would like to proceed with my investment.’ and ‘PROCEED’. You need to read the ‘Important Information’ on this page. There are documents you can actually open on the page and read. Below is the image of what is on the page.
Step 5 – This is the most interesting part. This is where you need to choose the funds you want to invest your money on. As I have already explained above ‘Why buy an index fund or ETF instead of individual shares?’ You need to choose funds based on the asset class, share class and fees. At this point, you will be the one to decide.
Step 6 – After choosing the fund you want to invest in, you will need to follow other instructions to complete the application.
It is worth mentioning these.
Minimum amount to open Vanguard Account
You can open your Vanguard investment account with a minimum lump sum investment of £500 or a minimum regular monthly investment of £100 or a combination of the two.
You can invest up to £20,000 in your Stocks and Shares ISA account in any financial year (April 1 and runs until March 31). However, the £20,000 is for all your ISA accounts combined if you have any other ISA accounts.
Opening a vanguard brokerage account is quite easy. The biggest challenge that you can come across is choosing vanguard as your broker. But with some of the arguments, I have made above, choosing Vanguard as an investment beginner should be considered. Your shares and stock investments are in safe hands.