Vanguard vs. Fidelity vs. Schwab

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It’s no secret that Vanguard, Fidelity and Charles Schwab are three of the most popular and well-known brokerage firms. These financial institutions are also some of the largest, offering a wide range of products and services, from banking and investment products to financial advisors and financial planning services. However, there are some important differences, from fees to financial services to research resources, each of which could impact your customer experience. If you want help investing, you can use SmartAsset’s free financial advisor matching tool.

Overview of Vanguard vs. Fidelity vs. Schwab

Vanguard, Fidelity and Schwab are three of the biggest players in the brokerage space, offering a wide range of investment and banking products. In fact, you can open just about any type of account any of these institutions. But they stack up slightly differently when it comes to fees and their specific suite of services.

 

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Vanguard made a name for itself by creating and offering low-fee investment products such as mutual funds and exchange-traded funds (ETFs). It still does this, and even non-Vanguard clients can buy Vanguard funds via a brokerage account. The firm has grown to now offer non-proprietary investment products and funds. However, it’s not as great of a product when it comes to trading individual equities.

 

Fidelity is perhaps best known for its personal investment products, namely brokerage accounts that allow users to trade stocks. Clients can invest in a wide range of stocks, bonds and other investment products using a Fidelity brokerage account. Fidelity also makes an effort to provide investment resources to its clients and doesn’t charge much in the way of fees, though more and more brokerages and broker-dealers are moving towards fee-free investment models.

 

Charles Schwab, known as Schwab for short, is probably the most holistic of the three. While not as well known for its funds than Vanguard, Schwab still has a number of passively and actively managed funds that you can invest your money into. You also have the option to trade individual equities. It also offers free robo-advisor services, and those who want to work with a real advisor will have that option as well.

Vanguard vs. Fidelity vs. Schwab: Fees

Most brokerage platforms have gotten rid of transaction fees over the past couple years, and Vanguard, Fidelity and Schwab are no exception. Brokerage account holders at each of the three institutions won’t have to pay any commissions or trading fees for trading stocks. Trading mutual funds is mostly free at all three institutions, particularly for in-house mutual funds. Certain non-proprietary mutual funds may incur transaction costs of up to $49.95 at each institution.

The one place where you’ll incur consistent transaction costs is when it comes to options trading. However, transaction costs for options at each institution are comparably quite low. Both Fidelity and Schwab charge 65 cents per option, while Vanguard charges $1. Keep in mind that these are contract fees, not commissions.

 

While some, more specific transactions may incur additional fees, the experience using each of these three institutions is quite low cost and can be entirely free if you only invest in individual equities and in-house funds, among other investments. Other investments may cost you. For example, you’ll need to pay $35 per transaction if investing in mortgage-backed securities with Vanguard.

 

It’s worth noting that these fee schedules don’t include the charges you’ll incur for owning shares of certain funds. Fidelity has a wide variety of funds that have no expense ratio, and both Vanguard and Schwab have average expense ratios that are a lot lower than the industry standard.

Vanguard vs. Fidelity vs. Schwab: Services and Features

When it comes to investments and brokerage accounts, Vanguard, Fidelity and Schwab each offer a relatively similar suite of services. As mentioned before, each institution allows clients to trade individual equities fee-free. Each offers a wide range of accounts as well, including 401(k)s, 529 plans, custodial accounts, a variety of individual retirement accounts (IRAs), joint accounts and more.

 

Each of the three institutions have $0 investment minimums for most accounts. However, Vanguard does have minimums for investing in some of its mutual funds, typically ranging from $1,000 to $3,000. However, certain funds have even higher minimums.

 

As noted before, Vanguard is lately known for its fund offerings, allowing investors to passively manage their money instead of constantly monitoring a portfolio of individual stocks. While you have the option to trade similarly to how you would with any other brokerage account, Vanguard’s services are particularly geared towards those who want to invest in mutual, exchange-traded and index funds.

 

Fidelity stands out with two of its offerings. First, it’s much easier to trade with no fee and minimums with Fidelity. You’ll of course have access to commission and fee-free trading, but you’ll also have access to loads of fee-free funds from which to choose. This makes passive investing even simpler. On top of that, Fidelity offers one-of-a-kind investment education resources for clients to use, free of charge.

 

While Fidelity and Vanguard both have their own versions of a robo-advisor service, Schwab’s stands out a bit above the rest. Schwab Intelligent Portfolios takes into account your preferences by having you take a short quiz, and then invests your assets in low-cost funds based on your answers. This service is optional, so even if you don’t decide to use it, you’ll still have access to Schwab’s range of brokerage services. Like Fidelity, Schwab has a solid suite of financial and investment resources.

 

Fidelity’s robo-advisor service is called Fidelity Go. It provides a relatively light advisor service and carries no minimum balance requirement. If you have between $10,000 and $50,000 in your account, you’ll pay a $3 monthly fee. Accounts with more than $50,000 are charged an annual fee of 0.35% of assets under management.

 

Vanguard also has a robo-advisor service called Vanguard Personal Advisor Services. This service blends both automated and personalized investment services and charges a 0.3% management fee. It also has a minimum of $50,000, so you may be better off working with a financial advisor.

Vanguard vs. Fidelity vs. Schwab: Online and Mobile Experience

Vanguard, Fidelity and Schwab each offer both mobile experiences and desktop versions. You can even contact the companies directly online or over the phone.

 

Each company has solid functionality when you visit the desktop website, and you might even say that this is how they’re designed to be used. From the desktop website of each platform, you can buy and sell equities, funds and more. You can also access any robo-advisor services, transfer money, utilize educational resources and more.

 

The mobile apps of each of these institutions vary in popularity and usability. Schwab sits somewhere between Fidelity and Vanguard when it comes to how valuable its mobile apps are. While the Schwab app has a 4.8-star rating on the Apple store and a 3.5-star rating on the Google Play store, a common criticism is that Schwab overwhelms customers with information. This could be a positive for more seasoned traders, but new investors may feel overwhelmed. In either case, you’ll still be able to use all the platform’s services both on your phone and at your computer.

 

The Vanguard app isn’t nearly as highly rated. On the Google Play store it has just a 1.6-star rating. In fact, the company seems to have gotten so much flack about its mobile offering that it’s releasing a new version of the app that promises to have additional features. That said, the Apple version of the app has a 4.7-star rating.

 

Fidelity seems to have the best overall online and mobile experience for customers. While it has a similar reputation as Schwab of being a little hard to synthesize for newer investors, it still seems to be easier to navigate. Plus, with the company’s suite of education resources, new investors should have no problem figuring out how to best use the platform to invest their money. On the Apple store, the Fidelity app has a 4.8-star rating, and on the Google Play store, it has a 4.5-star rating.

Who Should Use Vanguard, Fidelity and Schwab?

As we’ve mentioned throughout this review, Vanguard, Fidelity and Schwab boast many of the same important features. Each allows you to invest in a variety of securities, from equities to funds, without paying fees and commissions. Each has low to non-existent expense ratios for funds. And each is a capable online trading and account management platform that you can take advantage of. However, there’s potentially a bit of learning about the platforms first. That said, each stands out for a different reason.

 

Vanguard stands out because of its impressive suite of exchange-traded, index and mutual fund offerings. Some of these have high minimums, but it makes the platform excellent for anyone with some money to invest. You can also trade individual stocks and bonds with Vanguard, but you’ll usually be better off taking advantage of the fund offerings that the company has curated to make a name for itself.

 

Fidelity stands out slightly above its two competitors, largely because there isn’t much that the company doesn’t do. The company boasts a robust trading platform that can be taken advantage of by experienced investors and beginners alike. You can use Fidelity’s comprehensive suite of investment tools and educational resources to fine tune your investment abilities.

 

Schwab holds up quite well against the competition too, especially when it comes to its robo-advisor service. You can take advantage of it, or you can invest on your own. Even those that choose the latter shouldn’t have too hard a time taking advantage of Schwab’s wide variety of offerings. However, the firm’s platform tends to focus on investors with more experience.

Bottom Line

Vanguard, Fidelity and Schwab are three of the most robust, well-known and popular brokerage firms in the country. They each cover the basics and much more. This makes them valuable and useful platforms for all investors, from beginners to advanced traders.

 

While each platform may differ at the margins when it comes to their offers and specialties, each allows clients to trade without fees and commissions and to do so both online and on their mobile devices. Vanguard, Fidelity and Schwab are three solid options for anyone looking to take their money and invest in for the future in the way they see fit.

Investing Tips

  • Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you decide to invest on your own, it pays to know what you’re doing. SmartAsset has you covered there as well. For example, check out our free investment calculator.

This article originally appeared on SmartAsset.com and was syndicated by MediaFeed.org.

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Confused about retirement accounts? Read this

 

Saving for retirement is an important financial task. And while there are plenty of options available, many Americans are still confused about how best to prepare for retirement.

In fact, only 34% of Americans said they were knowledgeable about independent retirement accounts, according to a recent study by the LIMRA Secure Retirement Institute. And only one in five Americans knew the 401(k) contribution limits, according to a survey by TD Ameritrade.

Educating yourself about retirement accounts like the employer-sponsored 401(k), as well as self-directed options like a traditional IRA or a Roth IRA, is a critical part of preparing for your golden years. Here’s how to decide which one is right for you.

 

dima_sidelnikov / istockphoto

 

The first step to saving for retirement should be putting enough money in an employer sponsored 401(k) plan, if you have access to one. Take advantage of any matching employer contributions.

“If you work for a corporation that provides a 401(k) be sure to max this out, as their matching policy is ultimately equivalent to free money,” said Jared Weitz, CEO and founder United Capital Source. “This is the retirement account that offers the highest contribution value each year.”

Keep in mind 401(k) programs have some drawbacks and limitations, including administrative costs, said Samantha Anderson, a wealth manager at Budros Ruhlin Roe. In the same TD Ameritrade study, only 27% of Americans know how much in fees they are paying on their account.

 

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The biggest question to consider when deciding between a Roth or Traditional IRA is if you think your tax rate will be higher or lower in the future.

“Traditional IRA contributions are tax-deductible in the year they’re made, and a Roth IRA takes taxes out now, so that in the future when you withdraw money during retirement it is not taxed,” said Weitz.

If you think your tax rate will be higher during retirement, a Roth IRA is a good choice. If you expect to have a lower tax rate in retirement, the traditional IRA is likely a better choice to take advantage of the upfront tax break.

If you’re ready to start saving, check out our guide to opening an IRA.

 

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Roth IRAs offer more flexible early withdrawal rules and fewer restrictions for retirees. It’s also much easier to pass on a Roth IRA as inheritance, said Weitz.

There are however income limitations for contributions to a Roth IRA. The gross income for a single taxpayer is capped at $137,000 with contribution reductions starting at $122,000. For married couples filing together, income is capped at $203,000 and reductions start at $193,000.

The income maximums makes this type of account best for younger earners who are typically lower earners and have a significant amount of time until retirement, said Anderson.

 

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The benefits of a traditional IRA include not having to pay taxes on the money until funds are pulled out of the account, said Stephen Fletcher, a CFA with BlueSky Wealth Advisors.

“A traditional IRA is ideal for someone who needs to lower their taxable income now, and who will be able to be strategic in the way that the IRA funds are withdrawn in retirement so that the taxes paid will be as low as possible,” said Fletcher.

Don’t think you’re saving enough for retirement? Here’s how to catch up.

This article originally appeared on Policygenius and was syndicated by MediaFeed.org.

 

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