Vanguard Vs Fidelity: Where Should You Invest?

Vanguard and Fidelity are two of the largest investment companies in the world. Both have a lot to offer investors, but there are some key differences between the two. This article will explore these differences and help you decide which platform is better for your investment needs.

Investment philosophy

Vanguard and Fidelity are two of the largest investment companies in the world. Both firms have plenty to offer, so it's worth comparing and contrasting them with your own personal goals and investment style.

Vanguard, launched in 1975, focuses on long-term holdings as an investment strategy. The company prioritises diversification and was a driving force behind the launch of the first public index mutual fund. Vanguard is a reliable player on Wall Street, focusing on long-term investing in low-cost funds. The company offers an impressive lineup of low-cost mutual funds and exchange-traded funds (ETFs) aimed at buy-and-hold investors. Vanguard is excellent for long-term and retirement investors, especially those who want access to professional advice and some of the lowest-cost funds in the industry.

Fidelity, founded in 1946, is a great option for a more dynamic approach to building a portfolio. The company fosters a reputation for nurturing growth stocks, making investments in companies such as Xerox Holdings Corp. and Polaroid in the 1950s. Fidelity offers a more robust platform with excellent research and asset screeners, terrific trade executions, and a well-rounded trading platform. The company also offers cryptocurrency options, allowing customers to trade directly in three digital coins: Bitcoin, Ethereum, and Litecoin. Fidelity is better for casual investors and traders who wish to access more tools, charting, and technical analysis.

In terms of fees, Vanguard has an average expense ratio of 0.07% to 0.09% and a $25 annual account cost. On the other hand, Fidelity offers a $0 account service fee, with an average expense ratio ranging from 0.015% to 0.04%.

Both Vanguard and Fidelity have their unique investment philosophies, catering to different types of investors. Vanguard is ideal for those seeking a hands-off, buy-and-hold strategy, long-term holdings, and low-cost funds. In contrast, Fidelity suits those who prefer a dynamic approach, access to a broader range of investment options, and more sophisticated tools and resources.

Account fees

Fidelity and Vanguard both have competitive fee structures, but there are some differences to be aware of.

Vanguard charges an annual account fee of $25, which can be waived if you have at least $5 million in qualifying Vanguard assets or opt for electronic delivery of statements. On the other hand, Fidelity does not charge any annual account fees.

For broker-assisted stock trades, Vanguard charges $25, while Fidelity charges $32.95. When it comes to mutual fund trades outside the no-transaction-fee family, Vanguard's fees range from $0 to $20 per trade, depending on your account balance, while Fidelity charges $49.95.

Regarding options trades, Vanguard charges $1 per contract for clients with less than $1 million in qualifying assets, and Fidelity charges $0.65 per contract.

It's worth noting that Vanguard has a $100 fee for account closure and transfer, while Fidelity does not charge an outgoing transfer fee.

When it comes to expense ratios, Vanguard's average ratio is 0.09%, while Fidelity's can go as low as 0.015%, depending on the chosen mutual fund. Vanguard's competitive expense ratios of 0.04% come with a minimum initial investment of $3,000 for its funds. In contrast, Fidelity offers a zero minimum investment for some of its funds, making it more accessible for investors who want to start with a smaller amount.

For investors seeking robo-advisor services, Vanguard's Digital Advisor has a minimum enrollment amount of $100, while Fidelity's Go service has no advisory fees for account balances under $25,000.

Overall, while both companies offer low-cost investment options, Fidelity has a slight edge when it comes to account fees, especially for those just starting with a smaller amount to invest.

Tradable securities

When it comes to tradable securities, both Vanguard and Fidelity offer the standard choices of stocks, ETFs, mutual funds, bonds, and options. However, Fidelity offers a broader range of investment options.

Fidelity allows investors to trade in cryptocurrencies, including Bitcoin, Ethereum, and Litecoin, as well as Forex, precious metals, and OTC trading. In contrast, Vanguard does not support cryptocurrency trading, futures, or options on futures.

Fidelity also offers fractional share trading in about 7,000 U.S. stocks and ETFs, while Vanguard only offers fractional share trading in its own ETFs and for dividend reinvestments.

Both Vanguard and Fidelity provide thousands of no-load, no-fee mutual funds. Vanguard has about 266 Vanguard funds and 9,000 third-party funds, while Fidelity offers thousands of no-transaction-fee mutual funds, including some with no fees.

Fidelity also has a more robust trading platform with advanced tools for charting and screening, making it a better option for day traders. Vanguard's platform, on the other hand, is geared towards long-term holdings and buy-and-hold investors, lacking real-time data and customization of learning tools.

Investment options

In terms of securities, Vanguard focuses on long-term, low-cost funds, including mutual funds, exchange-traded funds (ETFs), and stocks. On the other hand, Fidelity offers a broader range of securities, including cryptocurrencies, and provides investors with the option to trade in Bitcoin, Ethereum, and Litecoin. Fidelity also offers fractional share trading in about 7,000 U.S. stocks and ETFs, while Vanguard only allows fractional share trading in its own ETFs.

When it comes to fees, Vanguard is known for its low-cost funds, with an average expense ratio of 0.07% to 0.09%. However, Vanguard often requires a minimum investment of $3,000 per fund. In contrast, Fidelity offers even lower expense ratios, with an average of 0.04%, and has a $0 minimum investment for some of its funds. Fidelity also has a slight edge over Vanguard in terms of account fees, with no annual fee compared to Vanguard's $25 annual cost.

Both Vanguard and Fidelity have their strengths when it comes to investment options. Vanguard is a good choice for investors seeking long-term, low-cost funds, especially for retirement savings. On the other hand, Fidelity offers a wider range of securities, including cryptocurrencies, and provides more investment flexibility with its fractional share trading and lower account fees.

Customer support

When it comes to customer support, Fidelity has a slight edge over Vanguard. Fidelity offers 24/7 phone support, along with email and chat support. It also has over 200 branch locations across the country where customers can get assistance. Vanguard, on the other hand, offers phone support during limited hours, from 8 am to 8 pm, Monday through Friday, and email support. While both companies can answer queries promptly, Fidelity's round-the-clock availability and multiple support channels give it a slight advantage.

Fidelity's website also offers more tools and resources to support a broader range of investor types. Its online Learning Center provides articles, videos, webinars, and infographics covering various investing topics, making it a good resource for investors who want to educate themselves. Vanguard also provides educational content, including articles, videos, webcasts, and research papers, but it is not as extensive as Fidelity's.

In terms of security, both Vanguard and Fidelity are up to industry standards. They offer features such as fingerprint login, voice recognition technology for calls, and protection against account losses due to unauthorised or fraudulent activity. Both companies also provide SIPC insurance, which covers securities up to $500,000 and cash up to $250,000 in the event of brokerage failure. Additionally, they carry additional insurance policies that provide extra protection beyond the SIPC coverage limits.

Frequently asked questions