Vanguard 101 – Automatic Investments

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Welcome to Vanguard 101: Automatic Investments. If you’re just getting started, make sure to check out my Vanguard 101: Account Setup tutorial followed by the Vanguard 101: How to Invest course. Already established your account? Read on!

If you followed my Vanguard 101: How to Invest course, you learned how to manually purchase a Vanguard Mutual Fund or ETF. Well, what if I told you that the whole process could be automated! Pretty awesome, right? This article is a step-by-step guide on how to automate your Vanguard investments.

Important Note: Automatic Investments are only available for Vanguard Mutual Funds. Unfortunately, you don’t have this privilege when investing in Vanguard ETFs.

Let’s get started.

Step 1:

Log on to Vanguard.

In the My Accounts section, click on “Account Maintenance”.

Step 2:

From this page, select “Automatic Investment”.


 

Retirement Accounts

If you’ve completed the Vanguard 101: Account Setup tutorial and opened a Roth IRA or Traditional IRA, keep reading. For those who opened an Individual Brokerage Account, click here.

Step 3:

Select the account you wish to set up automatic investments for. For this example, you will choose your Roth IRA or Traditional IRA.

Step 4:

Now you’ve arrived at the most important page. Here you will detail your automatic investment preferences depending on your specific situation. I will highlight all of the options on this page (designated by the red rectangles) and explain what these options mean.

Move Money From:

You have two choices here: You can either move money (1) from your bank account or (2) from your settlement fund.

Bank Account: This option will withdraw the funds straight from your bank account (Recommended).

Settlement Fund: A settlement fund is where Vanguard holds your money when you transfer from a bank account. If I transferred $100,000 over to Vanguard, the funds would sit in a “settlement fund” until I invested them.

Contribution Method:

Again you have two choices: (1) Maximize your annual IRA contribution or (2) Enter a specific contribution amount.

Maximize your IRA contribution: Vanguard will automatically calculate how much you need to invest in order to maximize your IRA contribution for the year. The annual contribution limit is $5,500 ($6,500 if age 50 or older). I recommend this option.

Enter a specific contribution amount: If you can’t afford to maximize your IRA contributions, this is the preferred option. However, if possible, it’s always better to maximize your contributions.

From this Bank:

Choose the Bank account that you wish to automate your investments from.

Frequency:

Within the frequency drop-down menu, there are five options: (1) Every week, (2) Every two weeks, (3) Twice each month, (4) Every month, and (5) Every year.

The two most common options are “Every two weeks” and “Every month” because they align well with paycheck cycles. Choose the option that works best for you.

Beginning On:

Choose the date you wish to begin your automatic investments. The 1st and 15th of the month are common because they align with paycheck cycles. Choose a date that works best for you.

Allocate Your Investment:

There are two options here: (1) By percentage and (2) Equally.

By percentage: This option allows you to allocate a certain percentage of your automatic investment to specific mutual funds. For example, I could allocate 70% of my contribution to VTSAX and 30% to VBTLX.

Equally: This option equally distributes your automatic investment among the funds you have selected. If I select VTSAX and VBTLX, each mutual fund will receive 50% of my contribution.

Almost Done!

Once you’ve carefully selected your automatic investment options, click “Continue”.

Step 5:

This page will summarize your details. Confirm that everything is correct and click “Submit”. Nice job! Now your Vanguard investments are on autopilot. The funds will be withdrawn at your designated “Beginning On” date and continue at the frequency you’ve elected. You can stop Vanguard automatic investments at any time.

Keep Track!

Keeping track of your investments is important. Personal Capital is a FREE website that aggregates all of your financial information to help you track your net worth. I highly recommend using Personal Capital. Their website is easy to use, there is a mobile app, and it’s completely free! If you’d like to sign up, please use THIS LINK (You’ll get $20, FREE!).


 

Individual Brokerage Accounts

If you’ve completed the Vanguard 101: Account Setup tutorial and opened an Individual Brokerage Account, keep reading. For those who opened an IRA Account, click here.

Step 3:

Select the account you wish to set up automatic investments for. For this example, you will choose your Individual Brokerage Account.

Step 4:

Now you’ve arrived at the most important page. Here you will detail your automatic investment preferences depending on your specific situation. I will highlight all of the options on this page (designated by the red rectangles) and explain what these options mean.

Move Money From:

You have two choices here: You can either move money (1) from your bank account or (2) from your settlement fund.

Bank Account: This option will withdraw the funds straight from your bank account (Recommended).

Settlement Fund: A settlement fund is where Vanguard holds your money when you transfer from a bank account. If I transferred $100,000 over to Vanguard, the funds would sit in a “settlement fund” until I invested them.

From this Bank:

Choose the Bank account that you wish to automate your investments from.

Frequency:

Within the frequency drop-down menu, there are five options: (1) Every week, (2) Every two weeks, (3) Twice each month, (4) Every month, and (5) Every year.

The two most common options are “Every two weeks” and “Every month” because they align well with paycheck cycles. Choose the option that works best for you.

Beginning On:

Choose the date you wish to begin your automatic investments. The 1st and 15th of the month are common because they align with paycheck cycles. Choose a date that works best for you.

Until:

There are two options here: (1) I stop this plan and (2) Specific date.

I stop this plan: Automatic Investments will continue until you manually disable them (Recommended).

Specific date: You can designate a specific date to stop your automatic investments.

Total Amount to Invest:

Input the amount you wish to contribute with the frequency you selected. Unlike IRAs, Individual Brokerage Accounts do not have contribution limits so you can enter any number you want.

Allocate Your Investment:

There are three options here: (1) By dollar amount, (2) By percentage, and (3) Equally.

By dollar amount: This option allows you to select a specific dollar amount to invest in your selected funds. In the screenshot above, I elected to invest $1,000 in VTSAX every month.

By percentage: This option allows you to allocate a certain percentage of your automatic investment to specific mutual funds. For example, I could allocate 70% of my contribution to VTSAX and 30% to VBTLX.

Equally: This option equally distributes your automatic investment among the funds you have selected. If I select VTSAX and VBTLX, each mutual fund will receive 50% of my contribution.

Almost Done!

Once you’ve carefully selected your automatic investment options, click “Continue”.

Step 5:

This page will summarize your details. Confirm that everything is correct and click “Submit”. Nice job! Now your Vanguard investments are on autopilot. The funds will be withdrawn at your designated “Beginning On” date and continue at the frequency you’ve elected. You can stop Vanguard automatic investments at any time.

Keep Track!

Keeping track of your investments is important. Personal Capital is a FREE website that aggregates all of your financial information to help you track your net worth. I highly recommend using Personal Capital. Their website is easy to use, there is a mobile app, and it’s completely free! If you’d like to sign up, please use THIS LINK (You’ll get $20, FREE!).


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