Wow! It’s quite common for younger investors to steer towards Schwab or Fidelity due to the high minimums on Vanguard’s index funds – $3,000.
On Wednesday, Vanguard finally had the bright idea to lower the minimum on their Target Date funds from $3,000 to $1,000. See article.
This move should definitely make it easier for younger investors who don’t have a lot of funds to invest starting out. Target Date funds are perfect for someone who is just starting out because you can invest with just needing to understand the bond/stock ratio of the fund and it will automatically re-balance for you.
This still isn’t nearly as good as the others, but you can save up $1,000 in an online savings account and then direct the funds into your Roth IRA, which would surely take less time than saving up $3,000 in an online savings account and then directing the funds into your Roth IRA.
Fidelity, for example, has either a $2,500 minimum to open a Roth IRA or $200/month. See minimums at Fidelity.
Charles Schwab has a similar setup – for both a taxable account and a Roth IRA, the minimum is $1,000 or $100/month. See minimums at Charles Schwab.
I think that Vanguard just made a great move towards bringing in more younger customers who will eventually bring more assets into their accounts.