Fidelity vs. Vanguard


Fidelity Investments or Vanguard: online brokerage firm comparison: fees, commissions, benefits, good and bad. Which brokerage to choose.

Rating 4-star brokerage firm rating Vanguard brokerage company rating
Stocks $7.95 $20
Options (per contract) $0.75 $1
Mutual Funds $49.99 $35
Initial Funding Requirement $2,500 $1,000
Inactivity Fee $0 $0
IRA Annual Fee $0 $15 - $25
IRA Termination Fee $50 $0
Trading Experience & Technology brokerage ratings brokerage ratings
Mobile brokerage ratings brokerage ratings
Research Amenities brokerage ratings brokerage ratings
Portfolio & Analysis Reports brokerage ratings brokerage ratings
Customer Service and Education brokerage ratings brokerage ratings
Good
  • No inactivity, no account fees
  • Low trading commissons
  • 90 commission-free ETFs
  • Wide selection of investments
  • Free Dividend Reinvestment Plans (DRIPs)
  • Access to international markers 25 countries, 16 currencies
  • Great in-depth research amenities including third party sources
  • Banking products and services
  • Over 185 local branches around the country
  • Great customer services, good education resources
  • Low-cost Vanguard mutual funds
  • 67 commission-free Vanguard ETFs
  • Phone consultations and video-conferencing
Bad
  • 36+ trades per year are required to recieve an acces to Fidelity's advanced trading platform
  • High commissions for purchasing non-Fidelity mutual funds
  • $2,000 minimum mutual funds purchase price
  • Mutual funds low balance fee. $12 per year for each noncore Fidelity fund under $2,000
  • Very high stock and ETFs trading commissions after executing first 25 trades per year
  • High base options trading commissions
  • High minimums for fund investments ($1,000, $3,000, $10,000)
  • No in-branch appointments, guidance and advice offered
  • Extremely expensive brokerage for active traders
  • Poor customer service
  • Slow process of opening an account
  • Poor trading tools
  • Annual fees for IRA accounts

Compare Fidelity Investments vs. Vanguard Brokerages

Let us start with our comparison of Fidelity and Vanguard, the two well-established brokerage firms, by looking at their trading commissions

Fidelity and Vanguard are two well-respected investment firms that have been around for many years. Due to their long history, high reliance and stability, they have earned the recognition and trust of millions of customers across the country.

Brokerage firms are well known for their low-cost and high-performance family funds. Fidelity and Vanguard offer their family mutual funds free of charge. Brokers' pricing for all other funds is extremely high, especially Fidelity's cost. The firm is charging $76 for mutual funds. In contrast, TradeKing, one of the largest discount brokerages, charges only $9.95!

While Fidelity's pricing, sophistication of trading tools, education and extensive research amenities allow it to compete with today's top stock investment firms, Vanguard's cost, trading tools, and its poor research resources set it far behind all the leaders.

Vanguard does not have much to offer investors except for its mutual funds. It is definitely not a great brokerage firm for active traders. Unless you plan to invest your hard-earned money in Vanguard's mutual funds for a long period of time, or if you are a very wealthy investor (brokerage provides a lower rate plan for high-net-worth investors), Vanguard is not a great option for you.

With the advent of ETFs and their growing popularity, the importance of Fidelity and Vanguard has decreased. To put it simply, offering great sources to dozens of asset classes for one's portfolio diversification, ETFs do not only cost lower but are also easier to trade than mutual funds. That is why ETFs are becoming more popular and slowly replacing mutual funds' portion of traders' portfolios.

To match industry's standards and keep their positions high among investment companies, Vanguard and Fidelity offer limited number of commission-free ETFs. Fidelity provides 84 commission-free ETFs (70 iShares ETFs, 11 Fidelity sector ETFs 3 Fidelity Fixed Income ETFs), and Vanguard offers 53 commission-free Vanguard ETFs. Of course, some purchase and redemption fees may apply, depending on the fund and how long investors have held the investment. To comapre, TD Ameritrade offers 100 commission-free ETFs, and in 2015 Forbes ranked TD Ameritrade's selection of commission-free ETFs as the best for investors who are looking for the most liquid and lowest cost ETFs.

Fees and commissions are the highest expense on one's investment. When it comes to Fidelity and Vanguard, they both charge some fees that other major brokerages do not require.

Fidelity has a low balance fee. It charges $12 annually for each noncore Fidelity fund under $2,000. The firm also has an annual fee of $25 for SIMPLE IRAs (IRA closure fee is $50, excluding SIMPLE IRAs) and Fidelity Retirement Plan (Keogh) Accounts. There is a $10 fee per online wire transaction and $15 fee per wire transaction via form or representative. Fidelity discloses all fees and commissions in a 6-page PDF file accessible via the official Fidelity website.

Vanguard has high initial investments for its mutual funds. While a minimum investment for some funds can be as low as $1,000, it can be $3,000 and even $10,000 for some other funds. High minimum investment requirements can become a big drawback for you unless you are a deep pocket investor. There is a yearly fee of $20 for investors with holdings less than $10,000. However, the fee can be waived if investors are enrolled in electronic account management (a paperless account). The brokerage also has an insufficient fund fee of $20. Stop payment fee is $15. Unlike Fidelity, Vanguard does not charge a fee to wire money to a bank. Another great disappointment is that not all Vanguard fees are disclosed on the website. The company asks customers to call back for additional information.

There was a time when Fidelity and Vanguard were considered as great companies for IRA accounts, but unfortunately, not to the present standards. Their IRA account fees and higher investing cost disqualify them from being included in the list of best brokerages for IRA accounts in 2017.

Overall, Vanguard and Fidelity are highly recognized brokerage firms, which have provided solid brokerage services for a long time. However, the rapidly changing industry requires more than just a good customer service and long history from brokerage firms. To satisfy the needs of modern tech-savvy investors, discount brokers also need to offer competitive pricing, sophisticated trading platforms and extensive research tools. Also, while Fidelity is still a strong company among the best online stock brokers, Vanguard's power is more in its funds. There are better value brokerages for investors of any type nowadays.

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