The appeal of Vanguard funds
John Bogle, Vanguard's founder, introduced the first index fund in 1975. Since then, Vanguard has become a top investment company worldwide, handling trillions of dollars. Their stellar reputation stems from a commitment to passive investing. With growth, Vanguard prioritized cutting costs to benefit clients over maximizing profits. Consequently, their index funds offer some of the lowest prices available.
Vanguard's ETFs are now accessible in Italy. Wondering how to invest in their funds?
How Italian investors can invest in Vanguard funds
As an Italian investor, you cannot go directly to Vanguard's Italian website and buy one of their funds. Instead, you have to choose one of two ways:
- Do it yourself via a broker. This is the cheapest way but also the one that involves more work on your part.
- Use an investment app. The app will take care of all the details for you, so you don't have to worry about anything.
Option 1: Do it yourself
To make it concrete, we will explain step by step how to buy the Vanguard FTSE All-World Accumulation ETF. Most commonly circulated on the internet under its ticker VWCE. This is one of the best ETFs on the market. We will use Fineco as an intermediary, which is one of the most convenient brokers for Italian investors.
What is VWCE?
VWCE is an index fund that tracks the FTSE all-world index. As the name suggests, this index is global: it consists of over 4,000 companies from more than 40 countries. It contains both large and medium-sized companies from both 'developed' (US, Germany, UK, Japan...) and 'emerging' (Brazil, China, Chile...) markets.
The fund's returns have been very good in recent years. If you had invested €10,000 in VWCE in 2003, you would have over €50,000 today. This equates to an average annual return of 8.65%:
VWCE has become one of the most popular ETFs in Europe for several reasons:
- Great diversification in a single fund. There are not many ETFs more diversified than VWCE. As a matter of fact, many people have chosen to invest their entire assets only in VWCE, choosing it as the only fund in their portfolio. We will explain later why this investment, however, does not satisfy every investor.
- It's Vanguard. As mentioned earlier, Vanguard has a great reputation for offering high-quality index funds at a low price.
- Price. ETFs have a cost based on their annual ongoing expenses, also called the total expense ratio or TER. This is a percentage of your investments that you pay to Vanguard for managing the fund. VWCE's total expense ratio is 0.22%, making it one of the cheapest equity funds on the European market.
- It is part of the main selection of many brokers. You usually pay an additional commission when you buy an ETF through a broker. After all, the broker wants to be remunerated for giving you access to the financial markets. However, many brokers offer reduced (in some cases zero) commissions on a selection of ETFs, and as VWCE is one of the most popular ETFs around, it is often part of this category.
Choosing a broker
Investors trade ETFs on stock exchanges, just like ordinary shares. Unfortunately, you cannot simply go to Euronext to buy your shares. Instead, you have to go through an intermediary called a broker.
Your bank probably offers brokerage services, but don't use them! They are very expensive. You should, instead, opt for a specialised broker.
If you do not want commissions to erode your returns, do not use your bank as a broker. Instead, choose a specialised broker. In Italy, we have access to a variety of local brokers including:
- Fineco
- Directa
Foreign brokers like DEGIRO are often cheaper. They're popular for their wide selection of ETFs with zero transaction fees. Are there downsides to using a foreign broker instead of an Italian one? Yes, the main drawback relates to taxes.
Italy has specific taxes investors must pay. Most foreign brokers don't handle Italian taxes. They follow the declarative regime. If you invest through them, you may need to report income in your tax return. To grasp Italy's tax system, we wrote a guide to help you understand the taxes you'll have to cover as an investor.
Before you choose a broker, understand how they handle Italian taxes. We suggest you look at Fineco, an Italian broker with many ETF options.
Let's start by opening a Fineco account
Opening a Fineco account online is quick. Just meet two requirements: live in Italy and be 18+. No need for pay slips or guarantees. To begin, have your tax code and ID ready. The process is quite fast: provide data, do remote recognition, wait for activation codes via email.
Buy your VWCE shares on Fineco
Once your Fineco account is set, you can purchase VWCE units. Each ETF has a unique ISIN code. For VWCE, the code is IE00BK5BQT80. Use this code to find it.
You will find that there are three results, all with the same ISIN code. This is the same fund, but listed on different stock exchanges and in different currencies:
- XET: XETRA Exchange in Germany in Euro
- EURONEXTNL: Amsterdam Stock Exchange in Euro
- MIL: Italian Stock Exchange in Milan in Euro
We recommend buying the fund on the Italian stock exchange for the sake of simplicity. If you decide you would like to buy the fund on EURONEXTNL or on the Xetra exchange, you will need to apply for additional permissions.
Once you have selected the right exchange and currency, you will see the screen below from which you can buy VWCE shares.
First, you have to calculate how many shares you can buy. Imagine that we are investing € 1,000. At the time of the screenshot, VWCE is trading at a price of €115.67. This means that we can only buy 8 shares, i.e. € 1,000 divided by €115.67 and rounded down. We are therefore left with €74.64 cash in our account.
Can I invest all my money?
Unfortunately, Fineco doesn't have fractional shares. You must buy whole units. Some European brokers do offer fractional shares.
Secondly, you have to choose the right type of order. The two types you are most likely to use are:
- Market order. With a market order, the goal is to execute the order as quickly as possible while paying whatever the market is asking for.
- Limit order. A limit order is slightly more advanced because you can dictate that you do not want to pay a certain price for your shares. You only get your shares when someone agrees to sell their shares at the price you choose. The advantage of a limit order is that you will never pay more than you want. The downside is that it can take a long time to execute your order, especially if the ETF price is rising. In fact, your order will expire and be cancelled if it is not fulfilled within a certain time period.
If it is your first time buying a fund, we recommend keeping things simple and going with a market order.
That's it, you have purchased a Vanguard ETF. Congrats!
Option 2: use an app like Curvo
That was a lot! Thanks for sticking with us. Buying Vanguard ETFs through a broker involves many considerations. Details matter in investing. Portfolio definition, broker choice, fees, rebalancing... it's complex. We've experienced it first-hand. Choosing a single fund isn't enough for a solid strategy. Some opt for just VWCE, but a well-balanced fund mix aligns better with long-term goals and risk tolerance. We explain this further in our article why 'VWCE and chill' isn't for everyone. We would like to introducing an alternative for Italians and that's Curvo!
Curvo simplifies index fund investing for all. Investing smartly for the future matters. We aim to better prepare the next generation financially.
How does Curvo work?
Every investor is different. So, as a first step, you are asked a few questions to get to know you, your financial goals and your risk appetite. Then a suitable portfolio is built for you:
- You receive a globally diversified portfolio of index funds, provided by Vanguard, iShares (by BlackRock) and Amundi.
- Each portfolio is managed by NNEK, a Dutch investment company authorised by the Dutch regulator (AFM).
- Your portfolio will exclude companies that we consider destructive to our planet.
- All purchases and sales are managed for you.
- Your portfolio is kept balanced and aligned to you at all times.
- Your investments are safe as NNEK is regulated by the Dutch regulator (AFM).
- You can set up automatic monthly contributions and really put your investments on autopilot.
- You pay a fixed annual fee starting at 0.6% that includes all costs. No hidden fees.
- All this through a simple mobile app!
Find out how it works if you wish to learn more.
Through Curvo, all your money is invested
Unlike most brokers, your investments through Curvo and NNEK work with fractional shares. This means that all your money is put to work. There will never be any money deposited in your account doing nothing.
Summary
Hopefully, it has become clear that there are two ways in which you can invest in Vanguard funds in Italy:
- You can do it yourself by using a broker, or
- Use an app like Curvo
The first way is the cheapest, but it also requires you to put in extra effort and take extra precautions in the decision-making process. And that's just fine. After all, that's how we started!
You might prefer growing your savings without diving into investing details. Maybe you lack time or motivation for managing investments. Consider using Curvo for easy Vanguard fund investing.
Questions you may have
How do I buy the Vanguard LifeStrategy in Italy?
Vanguard LifeStrategy Funds mix stocks and bonds. They suit different risk levels and goals. Investors get a diversified portfolio tailored to their preferences. To give you an idea of their returns, you can see the historical performance of Vanguard LifeStrategy on Backtest (80% stocks & 20% bonds split).
You can buy various Vanguard LifeStrategy ETFs from most brokers. We suggest you search on Vanguard's website to find the ISINs and then check if they're available with your broker.
