Fidelity Vs Vanguard: What's The Difference?

Fidelity Investments and Vanguard are two of the largest investment companies in the world. Both brokers have solid industry reputations and offer a large selection of low-cost mutual funds, ETFs, advice, and related services. However, there are several differences between the two companies in terms of their investment philosophy, account and investment options, performance and cost, and functionality and tools.

Investment philosophy

Fidelity Investments and Vanguard are two of the largest investment companies in the world, with Fidelity boasting over 51 million individual investors and Vanguard serving more than 50 million customers. Both firms have been recognised as leading investment companies in the US, but they differ in their investment philosophies.

Fidelity, founded in 1946, has a reputation for nurturing growth stocks, making investments in companies such as Xerox Holdings Corp. and Polaroid in the 1950s. It is a great option for investors seeking a more dynamic approach to building a portfolio. The company offers a broader range of securities, including cryptocurrencies, and provides investors with the option to invest in fractional shares.

On the other hand, Vanguard, founded in 1975 by iconic investor John Bogle, has prioritised diversification and is known for its low-cost funds. The company was a driving force behind the launch of the first public index mutual fund and has become a reliable player on Wall Street. Vanguard is a good choice for long-term or retirement investors, with a focus on buy-and-hold investing.

When it comes to fees, Vanguard has an average expense ratio of 0.09%, while Fidelity's fees are generally higher, with an average expense ratio of 0.015% to 0.84%. Vanguard charges a $25 annual fee for brokerage accounts under $5 million, while Fidelity has a $0 account service fee.

Both companies offer actively and passively managed funds. Vanguard's actively managed funds include the Vanguard Advice Select International Growth Fund (VAIGX), which focuses on non-US companies with high growth potential. Meanwhile, Fidelity offers active funds like the Fidelity International Growth Fund (FIGFX), which also focuses on foreign firms with high growth potential but carries a stronger focus on Japanese companies.

In terms of passive funds, Vanguard is an industry leader, offering hundreds of low-cost options, including broad stock market funds and environmental, social and governance (ESG) funds. Fidelity also provides a range of high-performing index funds that track US and international stock market indexes, as well as sustainable fund indexes.

Overall, while both companies offer robust investment options, their investment philosophies differ, with Fidelity catering to dynamic investors and Vanguard focusing on long-term, low-cost investment strategies.

Account and investment options

Both Vanguard and Fidelity provide a range of different account types for investors and business owners. Whether you're looking to save for retirement or build a nest egg for your child's college education, both investment firms will have solutions for your needs.

For those planning to save for their retirement, Vanguard is a market leader. Featuring Roth and traditional IRAs, 403(b) services, individual 401(k) plans, and plenty of bespoke retirement options for self-employed individuals and business owners, there's no shortage of choices with Vanguard. Investors can benefit from Vanguard's low-cost mutual funds, exchange-traded funds (ETFs), stocks, and more.

Fidelity also has plenty of retirement account options, plus other investment options that could appeal to investors, such as health savings accounts. Although Vanguard is focused on diversification and mutual funds, Fidelity offers a broader range of securities for investors to choose from. For instance, Fidelity provides individuals with the option to invest in cryptocurrencies, while Vanguard features no direct option for the incorporation of crypto.

Both Vanguard and Fidelity provide online trading services and educational tools that can help new traders learn the ropes and hone their skills. However, the type of tools offered can vary significantly. Vanguard's focus on buy-and-hold investing means that there's a lack of real-time data on specific funds and limited customization of learning tools. Platforms like Learn Library and Vanguard 365 are both strong resources for investors but are geared toward a long-term focus, which may be limiting to some.

Fidelity, on the other hand, has advanced tools for charting and screening and is an excellent resource for day traders. The firm's on-site "chart and compare" feature allows traders to assess up to 15 investments and indexes at once, and Fidelity Learn offers a wide range of educational insights for investors. Another strong option is Fidelity's Active Trader Pro charts and advanced order types, which can help investors with an appetite for trading to refine their strategies.

Performance and cost

Vanguard has long been an innovator in index funds, offering a wide range of funds with competitive expense ratios. In contrast, Fidelity has a strong selection of funds, but its fees are generally higher. Vanguard's average expense ratio is 0.09%, while Fidelity's can go as low as 0.015% depending on the chosen mutual fund.

Fidelity offers a $0 account service fee, while Vanguard charges an annual cost of $25. However, this fee can be waived by Vanguard customers who opt for e-delivery of statements and other paperwork.

Fidelity charges $0.65 per contract for options trades, while Vanguard charges $1 per contract for clients with less than $1 million in qualifying assets. Fidelity also charges $32.95 for broker-assisted stock trades, compared to Vanguard's $25.

Vanguard is a market leader in retirement investments, offering Roth and traditional IRAs, 403(b) services, individual 401(k) plans, and other retirement options. Vanguard's low-cost mutual funds, exchange-traded funds (ETFs), stocks, and more make it an attractive choice for retirement planning.

Fidelity also offers a wide range of retirement account options and other investment choices, such as health savings accounts. Additionally, Fidelity provides individuals the option to invest in cryptocurrencies, while Vanguard does not offer direct crypto investment options.

Fidelity offers a broader range of securities for investors to choose from, including cryptocurrencies, fractional shares, and precious metals. Vanguard, on the other hand, focuses on diversification and mutual funds, providing thousands of no-transaction-fee mutual funds.

Both Vanguard and Fidelity offer robo-advisor services with competitive advisory fees. Vanguard's Digital Advisor charges 0.25% in advisory fees, while Fidelity Go offers no advisory fees for account balances under $25,000 and a 0.35% fee for balances above this threshold.

Overall, both Vanguard and Fidelity keep costs relatively low, but Fidelity has a slight edge in certain areas, such as options trades, broker-assisted trades, and account fees. However, Vanguard's higher fees may be offset by its lower expense ratios and broader range of retirement investment options.

Functionality and tools

Both Vanguard and Fidelity offer online trading services and educational tools, but the type of tools offered by each company varies significantly. Vanguard's focus is on buy-and-hold investing, so there is a lack of real-time data on specific funds and limited customisation of learning tools. Its platforms, Learn Library and Vanguard 365, are geared towards long-term investing, which may be limiting for some. Fidelity, on the other hand, has advanced tools for charting and screening and is an excellent resource for day traders. Its "chart and compare" feature allows traders to assess up to 15 investments and indexes simultaneously, and its Fidelity Learn platform offers a wide range of educational insights for investors. Another strong option is Fidelity's Active Trader Pro charts and advanced order types, which can help investors with an appetite for trading to refine their strategies.

Fidelity's website offers far more tools and resources to support a broader range of investor types. Its web-based and Active Trader Pro platforms offer customizable charting with technical indicators, drawing tools, and historical data. Recent dashboard enhancements, new thematic baskets, custom indexing, and robust rebalancing features make Fidelity a solid choice for more sophisticated investors.

Fidelity's mobile app is easy to navigate and allows users to manage orders, check pending transactions, and place trades. Vanguard's mobile app, however, is a bit outdated and light on features. There is no charting, and quotes are delayed until a trade ticket is opened.

Cryptocurrency trading

Fidelity's interest in the cryptocurrency market is further demonstrated by its launch of the Fidelity Wise Origin Bitcoin fund (FBTC) in January 2024, a spot bitcoin exchange-traded product tracking bitcoin performance.

Fidelity's support for cryptocurrency trading and its broader range of investment options make it a more attractive choice for investors who are keen to incorporate cryptocurrencies into their portfolios.

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