Vanguard or Fidelity: Investing your money deserves smartness and intelligence. It is important you do thorough research before making a decision. When investing in the stock market, it’s important to have a mix of different investments. This is so you don’t put all your eggs in one basket.
Furthermore, please note. Building a diversified portfolio can be a challenge. However, mutual funds can make it easier. But you need to make sure you choose the right mutual funds. Choose that that charge affordable fees. Also, choose those that have a good mix of different investments.
Two of the biggest names in the mutual fund business are Vanguard and Fidelity. In this article, we shall compare these two. This is to evaluate which is better. But before then, what is a mutual fund?
What is a Mutual Fund?
A mutual fund is a type of financial vehicle. It is made up of a pool of money collected from many investors. These monies are invested in securities like stocks, bonds, etc.
Mutual funds are operated by professional money managers. These managers allocate the fund’s assets. Also, they attempt to produce capital gains or income for the fund’s investors.
Mutual funds allow you to pool your money with the money of many other investors. Furthermore, this big pot of money is then invested in a mix of different assets. Mutual funds minimize your risk. It does this because you’re investing in so different things. This is different from just buying shares in one company.
Vanguard vs Fidelity – What You Should Know
When comparing Vanguard vs Fidelity, please note this. Both Vanguard and Fidelity manage trillions of dollars in assets. These are in their proprietary mutual funds. However, there are differences between each fund managers offerings.
Also, when you’re comparing mutual funds, please note. The right choice depends upon your specific investment goals.
Also, other factors includes the amount that you have to invest. Some others are:
The Products offered.
Actively vs passively managed funds.
Account and deposit minimums.
When comparing Vanguard vs Fidelity, please note this. Both Vanguard and Fidelity offer brokerage services. Also, they allow you to open a large number of account types, including:
Self-employed 401(k) / Individual 401(k)
529 College Savings Plans
Vanguard Fees vs Fidelity Fees
When comparing Vanguard vs Fidelity, please note this. There are different kinds of fees you may have to pay when you invest with Vanguard or Fidelity. This can include fees for having accounts open.
Also, fees for commissions to buy mutual funds. Furthermore, another fee is investment fees. This is to fund managers.
Below are some of the costs and fees for Vanguard:
Vanguard Costs and Fees
It charges $20 annual fee for many types of brokerage accounts. For instance, it charges for non-retirement accounts. Also, it charges for Roth, traditional and SEP IRAs. Furthermore, it charges for UGMAs, UTMAs, and education savings accounts.
These fees are charged if the total value of your Vanguard assets is less than $10,000. However, this fee can easily be waived if you sign up to have all of your communications delivered electronically. Also, 403(b) plan participants are charged $5 per month per participant
Also, if you’re a Voyager, Voyager Select, Flagship. And if you are a Flagship Select client. Also if you have an account registered under an EIN. Furthermore, there is a $20 annual fee for each Vanguard mutual fund in each Simple IRA account. This fee can be waived if you’re a Voyager. Also, if you are a Voyager Select and Flagship. Or you are a Flagship Select client.
Fidelity Costs and Fees
When comparing Vanguard vs Fidelity, please note this. Unlike Vanguard, Fidelity is very affordable for investors. Fidelity does not charge any account fees for retail brokerage accounts, including IRAs. Fidelity also has zero expense ratio mutual funds offered directly to investors. This is an industry first.
Fidelity not only charges no commissions for investing in Fidelity funds. Also, it allows you to use its trading platform to invest in hundreds of other funds. This comes with no transaction fees. Some Fidelity mutual funds do charge management fees and expenses.
However, Fidelity indicates its stock and bond index mutual funds have lower expense ratios. This is because you don’t have to worry about account minimums. Also, you have the option to buy zero expense ratio mutual funds.
Vanguard vs Fidelity – Which Has Higher Returns?
When comparing Vanguard vs Fidelity, please note this. Vanguard has around 190 U.S. mutual funds. Also, it has 220 additional mutual funds. This is in markets outside of the United States. However, Fidelity manages 504 different mutual funds.
Vanguard had 23 recommended mutual funds. This is on the Money 50 list of recommended mutual funds in 2018. Also, 10 Vanguard ETFs were designated by Morningstar as gold-rated. Furthermore, another 26 funds received a silver rating in 2018. This is the highest number of gold and silver-rated funds for any investment firm.
On the other hand, 18 Fidelity funds received 22 U.S. Lipper Fund Awards in 2018. Individual mutual funds can win Lipper Fund Awards. This is if they consistently out-perform peers in risk adjusted returns.
When comparing Vanguard vs Fidelity, please note this. It’s important to carefully consider the merits and demerits of Vanguard and Fidelity.
Some of the Merits of Fidelity include:
There is zero-expense ratio mutual funds.
Also, there is no account fees.
Furthermore, it has no minimum deposit requirements.
Also, you can buy many mutual funds with zero investment minimums.
There are wide selection of 504 different mutual funds. They include many actively managed funds.
Some of the Merits of Vanguard include:
There is a strong educational tools and robust fund screening.
It allows investors to waive account fees.
Also, it is the world’s largest no-load mutual fund company.
Furthermore, there is wide selection of inexpensive passively managed funds.
When comparing Vanguard vs Fidelity, please note this. Some of the demerits of Fidelity include:
Fidelity has higher margin rates than Vanguard.
There are fewer passively managed funds than Vanguard.
Also, it has fewer funds than Vanguard that received gold and silver Morningstar ratings in 2018.
Some of the demerits of Vanguard include:
There are potential annual account service fees
Also, many proprietary mutual funds require you to invest at least $1,000
Furthermore, fewer fund options than Fidelity.
In a Nutshell
In summary. When comparing Vanguard vs Fidelity, please note this. Fidelity is generally the best choice for active traders. It is for those who plan to make more trades on a daily or weekly basis.
However, Vanguard tends to be a better choice for passive, long-term investors. These are those who plan to hold investments over a longer period of time.
Since each investment management firm has good and bad sides, note this. You’ll need to carefully evaluate the costs and benefits of each. This is in order to decide which one is right for you.