I am trying to open a ROTH IRA for my emergency funds (will write a separate post to defend myself on this ). Right now, I have my employer sponsored accounts – 401k, employee stock purchase plan in Fidelity and personal investment account in Vanguard. When I initially opened the Vanguard account 5 years ago, I opened it just because everyone praised their low cost funds. I don’t have any major complaints with either one of them, but thought I will do a head-to-head comparison before opening my ROTH. I have compared them both of a set of 8 comparison points -
- Expense Ratio
- Minimum Balance
- Exchange Traded Funds
- Research Tools
- Customer Service
- Misc. Benefits
Point #1 : Expense ratio
I compared the expense ratio for some of the major (and popular) funds. Vanguard has two classes of funds – Investor class and Admiral Class. Admiral class has a lower expense ratio but it has much higher minimum balance requirement, $10000 instead of $3000 in most cases.
|Fund||Vanguard (Investor)||Vanguard (Admiral)||Fidelity
|Total International Stock Index||0.32%||0.20%||0.10%|
|Total Stock Market||0.18%||0.07%||0.10%|
|Total Bond Market||0.22%||0.12%||0.32%|
|Target Retirement Fund 2045||0.19%||-||0.82%|
|Inflation Protected Bond Fund||0.25%||0.12%||0.45%|
|Large Cap Index||0.26%||0.12%||1.04%|
|Small Cap Index||0.28%||0.14%||1.25%|
|Mid Cap Index||0.27%||0.14%||0.65%|
|High Yield Dividend Index||0.35%||-||-|
Vanguard beats Fidelity hands down when it comes to index fund expense ratio. Fidelity has some “enhanced” funds, so I chose the fund that I thought were the closest match.
Who wins? Vanguard
Point #2 : Minimum Contribution/balance
Most Vanguard funds have a $3000 minimum investment to start. The only exception is their STAR (VGSTX) fund, which can be opened with just $1000 minimum balance. Fidelity on the hand says the minimum balance is $2500, but some of the popular funds (Spartan Index funds) require $10000 minimum investment. Their Fidelity Freedom funds mostly require only $2500 to start.
Who wins? It is a tie. If I have to pick, it will be Vanguard. Vanguard has a lot of funds available for $3000 than Fidelity. But if you do have $10000, some of Fidelity’s core funds provide lower expense ratio than Vanguard.
Point #3 : Fees & Commission
Both Vanguard and Fidelity offer free trading on their own mutual funds (and ETFs). If you do want to trade funds other than their own proprietary ones and/or stocks, here are the fee schedule.
Vanguard : If you have less than $50,000 balance, Vanguard charges $20 account service fees annually. But it can be easily waived by signing up for e-delivery.
|Assets invested in Vanguard funds and Vanguard ETFs®||Vanguard ETFs1||Stocks and non-Vanguard ETFs|
Fidelity charges $7.95 flat fee for each online equity trade, including stocks and ETFs.
Who wins? Both of them have similar fees. But if my account balance is less than $50000 and I trade a LOT, Fidelity’s flat fee structure wins here.
Point #4 : Exchange Traded Funds (ETF)
Vanguard offers a wider selection of ETFs with lower expense ratio. Fidelity doesn’t have its own ETFs but offers iShares® ETF without any commission.
|Fees & Minimum|
|# of Exchanges Traded Funds available
|Minimum for initial investment||$3000||$10000|
|Trading fee||$7 for first 25, then $20||$7.95|
|Expense ratio for the funds that track|
|Total stock Market||0.07%||0.21%|
|Total International Stock Market||0.28% (new from today!)||NA|
|Total Bond Market||0.12%||0.24%|
Who wins? Vanguard. Wider selection and lower expense ratio, helps with asset allocation for an ETF based portfolio, which is not very easy with Fidelity. Among Vanguard’s ETF offerings, there are international funds; bond funds; sector funds; style funds; and large-, mid-, and small-cap funds.
Point #5 : Website/Navigation
I have been using both Vanguard and Fidelity’s websites for the last 4 years and found them to be easy to navigate and intuitive. Vanguard is a bit more cleaner as it offers minimal information. But if you are someone who likes a lot of information about the stock you are trading or if you want to look up funds that are similar to what you are interested in, etc., Fidelity fares better.
Who wins? Vanguard for simplicity, Fidelity for more information.
Point #6 : Research
Fidelity rules here. Fidelity’s website not only includes quotes and basic information, Morning Star rating & Lipper information for mutual funds, but also includes a variety of reports and recommendations from independent stock analyst firms. So if your way of evaluating a stock is different from others, you can pick and choose the style from different research firms starting from EVA dimensions to Zacks Research. Read more about the research firms here. Fidelity also provides Research Firm Scorecards to evaluate the performance of research firms over time.
Who wins? Fidelity. If all you want is a quote and basic rating information, Vanguard is easier to navigate.
Point #7 : Customer Service
I have used the chat, phone and email systems of Fidelity and used the phone help with Vanguard. I am happy with both their customer service depts. I have never had to wait for more than a few minutes. But I have to comment on Fidelity’s representative’s knowledge and willingness to help. Vanguard reps are helpful, but they are not as knowledgeable when compared to Fidelity representatives. Fidelity’s customer service worked on New Years Eve!!! And he didn’t shout at me for calling him on the night of Dec 31st :) (of course it also casts light on what type of “partying” I did!)
Who wins? Fidelity for going the extra mile. Vanguard for adequate support.
Point #8 : Miscellaneous Benefits
Well this is not a standard category to evaluate a brokerage firm, but I do like some benefits provided by Fidelity, so thought I should mention them.
- Brick & Mortar offices : If you are someone who doesn’t like doing everything online and requires a little face to face hand holding, Fidelity wins hands down. They have a lot of offices and you can go in there to ask for help, complete paper work or set up an account.
- Free seminars : Fidelity offers a variety of seminars including retirement roadmap, charitable giving and saving for college. The presenters are usually knowledgeable and helpful.
- Tax Software Discount : Both Vanguard and Fidelity offers a discount on TurboTax – 25% discount. Actually anyone can get Fidelity’s 25% discount, Vanguard requires you to login.
- Fidelity Credit Card : This is one of the best cash back rewards card that doesn’t have revolving categories. A flat 2% deposited to your fidelity account – an American Express card with no annual fee and no cap on rewards. There is a Visa Signature version that offers 1.5% cash back up to $15000 annually, 2% cash back after that.
If all you want is a place to invest your money in low cost index funds, go Vanguard all the way! If you want a more hands on approach, do more frequent trading or want to invest in managed funds, give Fidelity a look. Also, if you hate everything online and want personal face to face help, Fidelity might be the place for you.
How about you? Which one do you prefer? Fidelity or Vanguard? Had any problems with either one of them? Are you a low cost index person or a more actively managed person?
Jacob @ My Personal Finance Journey, one of my favorite blogs, prefers vanguard over fidelity, read about it here- Vanguard vs Fidelity which funds are better?