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Vanguard vs Fidelity – Which is better?

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 -

  1. Expense Ratio
  2. Fees/Commission
  3. Minimum Balance
  4. Exchange Traded Funds
  5. Website/Navigation
  6. Research Tools
  7. Customer Service
  8. 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%
REIT Index 0.26% 0.13% 0.90%
Emerging Market 0.40% 0.27% 1.14%
High Yield Dividend Index 0.35% - -
S&P 500 0.18% 0.07% 0.10%

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
  • Less than $50,000
    (Standard)
  • Free
  • $7 for the first 25 trades
  • $20 for subsequent trades
  • $50,000–$500,000
    (Voyager Services®)
  • Free
  • All trades: $7
  • $500,000–$ 1 million
    (Voyager Select Services®)
  • Free
  • All trades: $2
  • $1 million plus
    (Flagship Services™)
  • Free
  • Free for first 25 trades
  • $2 for subsequent trades

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.

Vanguard Fidelity
Fees & Minimum
# of Exchanges Traded Funds available
(commission free)
46 25
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%
S&P 500 0.06% 0.09%
Emerging Market 0.27% 0.69%

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.

Summary

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?

Related posts

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?

{ 22 comments… read them below or add one }

retirebyforty

My 401k is with Fidelity, but when I leave I’m probably going to roll it over to either Vanguard or a discount brokerage.
With a discount brokerage, I have more freedom to buy anything I want.

So if you have more than 50k, you trade for free at Vanguard? That sounds good to me actually.

Reply

Suba @ Wealth Informatics

Joe, I don’t think if we have more than 50k we can trade for free. It is still $7 for non-vanguard trading. Vanguard products are free though, even for accounts with <50k

Reply

JT McGee

I say both! Fidelity has a great deal with iShares for their free 26 ETFs and Vanguard picks it up with their free trades on their own ETFs.

Either way, I don’t think you’ll be too upset with either of them. Both giants, and both for good reason.

Reply

Suba

Agreed! We have both, but depending on what we are planning on buying, we change the base. Worked so far. For the ROTH we might go with Vanguard.

Reply

Everyday Tips

I have been very happy with Vanguard over the years.

I believe some Vanguard funds waive the low minimum deposit if you go with a monthly deposit. (At least mine did, but that was awhile ago…)

Reply

Suba @ Wealth Informatics

Kris, Fidelity does that, Vanguard doesn’t. Atleast not right now according to the representative I talked to on Friday.

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The Biz of Life

I go with Vanguard because of their “mutual” corporate structure (i.e., owned by the shareholders, not a private family, or public shareholders), and believe that over time this will result in an overall lower fee structure than the “for profit” companies.

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Suba

Generally for a lot of products Vanguard is the cheapest, but some ETFs is cheaper else (like Schwab or Fidelity). I don’t know if it will make sense to open an account just for that, but it is worth a look. But I agree, in most cases, Vanguard beats others hands down.

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Moneycone

I had an account with both Vanguard and Fidelty and wrote reviews on both. But decided to move everything to WellsTrade. Freedom from trading fees on any stock or mutual fund is hard to beat.

The account opening process was an ordeal though! My review itself took a couple of weeks to write!

Reply

Suba

WellsTrade has free trades?

Reply

Moneycone

Yes Suba, they do but with conditions. It wasn’t easy though! I wrote about this while back. Check out: http://www.moneycone.com/howto-trade-commission-free-with-wellstrade/

Reply

krantcents

I have both! I selected Vanguard for my personal account, Roth IRA and IRA. I have a 403B and a personal account with Fidelity. I like Vanguard a little better because of their lower cost Admiral accounts.

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Suba

I loved it when they changed my accounts to admiral accounts :) before the recent change, I was not eligible for the admiral accounts.

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Squirrelers

I use neither, but I really like your analysis and assessment. Well done as usual. You are the queen of thorough posts:)

Having said this, the factors you consider can probably be used as a template, or at least as a source of ideas, for simlar comparisons between totally different outfits.

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Dr Dean

Suba, great review. I think you nailed it by saying it depends on your trading volume and what type funds you buy, or trade.

They are both good companies.

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Invest It Wisely

It would be great if Vanguard made their mutual fund products available across Canada! Currently we are limited to ETF purchases which also entail exchange fees, which can be low at discount brokers but they still exist.

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Jacob @ My Personal Finance Journey

Great article! I performed a very similar analysis last year and came to the same conclusion that Vanguard was far superior. This especially applies to me since I am a heavy index fund user.

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Russ Savage

Great research. I am trying to decide where to put my rollover 401k and it sounds like everyone recommends Vanguard.

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JM Miller

Vanguard’s less than outstanding information and customer service can turn into hard cash losses. Recently, I got burned (~$15,000) by following instructions carelessly given me by my Personal Vanguard Advisor about transferring a retirement account to Vanguard. Vanguard’s position was that they do not give tax advice, meaning that if they make an error that has tax consequences they are not responsible. Do you know those voice recordings they ask permission to make when you talk with their advisors? Vanguard admitted that the recording of my conversation indicated questionable handling of my account, but refused to make it available to me, and flatly asserted that regardless of what had been said they had no legal responsibility.

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Pat Savu

I had to shop for a provider for my daughter’s Roth last year. I personally have accounts at Wellstrade, Schwab, and Fidelity. When my daughter and I reviewed the info, we chose Fidelity. I am not impressed with what I have seen of index funds in the last 20 years. Fidelity had a great selection of NTF funds, ETFs, and no-commission ishares ETFs. In my own experience Fideility has great customer service. My friend who has an account at Vanguard is always complaining about the mistakes Vanguard makes with his account and how poor customer service is when he has to repeatedly call them to get the mistakes fixed. Fidelity had excellant cash management tools. No ATM fees anywhere. My daughter now banks at Fidelity and has closed her Chase account. She gets all these banking services at low cost for keeping her Roth at Fidelity

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Stosh

I have rollover IRAs at both Fidelity and Vanguard. At the end of 2011 I checked both sites to compare my results at each firm. Both sites listed my returns over the last 1, 3, and 5 years. In all cases I got better returns from Vanguard. Also, the Fidelity fees were significantly higher than Vanguard’s. I am seriously considering moving the money I have with Fidelity to Vanguard,

Again, my experience is limited to rollover IRAs, so I can’t comment on any comparisons between the two companies for other types of investments.

Reply

Ed Moe

Very well written and good analysis. It really boils down to portfolio size. The more you have invested, the higher the quality and the more services you will receive. Both Vanguard and Fidelity are squeeky clean firms, but, you never know when somone in the financial industry is going to go rogue. For that reason, if you have a sizeable portfolio, it might make sense to split between Vanguard and Fidelity.

For those with a not so sizable portfolio such as a novice investor, they might be better served with an index approach in which case Vanguard would be the logical choice. A more sophisticated investor might be more interested in the web tools to perform analysys. In this case, Fidelity might be a better choice.

Regardless of portfolio size, there are two very solid pro’s for Fidelity. First, Fidelity has brick and motar locations which can make it very easy for an investor to sit down with a consultant if needed. Secondly, there are times when you simply need to talk with a rep. My experience using reps from both firms is that Fidelity has it over Vanguard hands down.

Reply

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