no staying up till 2:00 a.m. trying to compare brokerages because the more time
you waste stuck in analysis paralysis the last time your money is invested and
actually working for you when it comes to long-term investing fidelity or
Vanguard are the ultimate I've had experience using both of these platforms
and I recently decided to go all-in with fidelity so if you're wondering whether
to go with fidelity versus Vanguard for your investments I have some thoughts to
share with you what is up everyone I'm Rhodes and welcome back to my channel
the number one place for financial education empowerment and inspiration a
couple of months ago I talked a little bit about fidelity versus Vanguard in
this video right here and that video is specifically about the best places to
open a Roth IRA and I wanted to go more in depth here especially because there's
been some exciting new changes ever since I made that video the first one
being that in the fall of 2019 fidelity announced Commission free trading of all
stocks bonds and options overall fidelity definitely favors the average
investor where anyone of any account size can enjoy zero dollar fees and
commissions whereas at Vanguard the more money you have the more favorable
treatment you get in terms of fees and commissions on the Vanguard website you
can see that anyone with $1,000,000 or more gets free stock trades and even
then that's limited to just the first 25 transactions after that it's not free so
if you're not quite at the 1 million dollar mark yet which let's be real is
the vast majority of us fidelity is much more friendly for the small-sized
investor whether you open an account at fidelity with one dollar or one million
dollars all your stock ETF and options trades are going to be 100 percent free
99 I do want to give Vanguard some credit though Vanguard has for a long
time been the og of passive investing in other words investing in low-cost index
funds or ETS Jack Bogle the founder of Vanguard was one of the first people to
speak out against the services industry and how it was
basically robbing people of their hard-earned money with high fees and all
these crazy things that they were charging we can all thank Vanguard and
Jack Bogle for setting the standard for all the companies in the industry and
keeping everyone honest so until fairly recently if you wanted
to buy a super low-cost mutual funds or ETFs Vanguard really was your go-to but
not anymore in an effort to catch up to Vanguard fidelity has drastically
improved it's mutual fund and ETF offerings as well so much that they even
came out with their zero funds which have 0% expense ratios so that means
with their fidelity zero funds you can buy mutual funds for free and not pay a
fee to have your money invested in that fund my video right here watch you do
exactly how to do that so make sure to check out my video on fidelity zero
funds right here other than fidelity zero funds pretty much any other fund
that you compare a side by side with Vanguard is gonna have lower fees let me
show you what I mean right here on the fidelity website so this is a page that
compares fidelity index funds to Vanguard index funds side-by-side and as
you can see it's pretty interesting they'll show you each fund with the
fidelity expense ratio and then the expense ratio for vanguards equivalent
version of the fund and you'll see here of course they probably intentionally
picked the funds that make them look good but still for example this is the
sp500 fund if you invested through fidelity it's an expense ratio of 0.01
5% vanguards same fund charges an expense ratio point zero four percent so
fidelity is a little bit better and what's even more interesting and
significant is that Vanguard a lot of their funds have a minimum investment
three thousand dollars so if you want to invest less than that then you won't be
able to invest with so again that's going back to the whole
idea of fidelity being much better for the smaller investor and Vanguard their
fee structures and minimums tend to favor bigger investors so as you can see
here all of fidelities index funds have a zero dollar minimum investment and
that literally means if you have one dollar to invest you can invest with one
dollar you can buy one dollar of this fund um so let's see other funds they've
got the total market index fund which is investing in not just the 500 large caps
that are in this fund here but investing in small cap mid cap companies as well
and they just go down the list all kinds of stock market funds Small Cap index
fund then there's international funds Global X US blah blah blah
emerging markets they even have a real estate index fund and of course Vanguard
has the equivalent as well and then going down to bonds if you wanted to
balance out your portfolio with something more stable than stocks then
you could do some bonds u.s. bonds municipal bonds short-term intermediate
and so on and so forth so basically you have all the funds you need right here
to build a complete portfolio so if you can do that either at fidelity or at
Vanguard why not go with the place where you can do it at the lowest cost so it
paint the lowest expense ratios something else I didn't mention account
fees fidelity does not charge any account fees you can open an account for
totally free Vanguard on the other hand charges a $20
annual maintenance fees there are ways to avoid that fee like signing up for
electronic delivery of documents and stuff like that but still I don't like
the idea of a brokerage firm charging you to keep your money with them to me
that's like if a hot girl is on a date with a guy and the guy who wants to
charge her $20 to be there he should be stoked to be on a date with a hot girl
and does it make any sense to charge her $20 to be there I know it's a silly
example but I'm trying to make a point here
brokerages they they have many other ways to make money
off of your business and I really don't think charging your fee just to have an
account with them really makes a lot of sense and just so you know this video
isn't sponsored I literally just did some digging
compared everything side by side between fidelity versus Vanguard and found that
fidelity does better for its users on fees Commission's everything especially
if you're starting off small another key difference between fidelity versus
Vanguard is that fidelity has more features for trading and active
investing if you're planning to buy and sell stocks pretty often or do other
kinds of active styles of investing such as magic formula investing or you're
more of a trader type then fidelity is gonna be good for you because they have
a separate trading application called active trader Pro which as you can see
you can download on your desktop and it looks really fancy it has real time
price quotes not lagged price quotes and all these charting features and all that
something else I've noticed about fidelity is that they do something
called price improvement this means that whenever you buy stocks fidelity will
try to get you the best price possible and they'll pass on any improvement in
price to you versus keeping it for themselves a lot of brokerages that that
claim to be cheap or free a lot of them won't pass those kinds of savings onto
you and they'll keep it for themselves as profit instead that's why trading
execution at the brokerage that you choose is so important I've seen this
firsthand here's a little screenshot of the price improvement history in my
fidelity account to be fair vanguards website also says that they do price
improvement and I used to have my 401k with Vanguard until I rolled it over to
fidelity and all it had in there was one mutual funds so my experience with the
nuts and bolts of vanguards trading execution is limited so they may do
price improvement I just haven't experienced it myself firsthand so once
again fidelity I think has very very robust features for whichever type of
inves seeing or trading you want to do on the
other hand Vanguard isn't as robust with people who want to do active trading it
really is for buy-and-hold investors they don't have a separate trading
application like fidelity does and there's really no where to see real-time
streaming price quotes and charts and obviously there's $7 stock trading
commission isn't exactly geared for anyone who plans on buying and selling
stocks frequently but if all you want to do is buy some really low-cost index
funds like vanguards popular VT sacks and you want to hold them until you
become a granny and just cash out when you're really old then Vanguard is gonna
be just fine for you and you know what the fact that Vanguard isn't good for
hands-on trading might actually be a good thing because the vast majority of
people myself included overestimate their ability to time the market so
obsessing over price charts and looking at all these streaming real time price
quotes and you're trying to get in and out of stocks at a profit it's generally
a losing proposition buy-and-hold really is the best strategy for a long-term
investing success so if all you want to do is index fund and chill then Vanguard
is a good option that's not to say fidelity isn't good for long term
investing because it absolutely is it offers all the benefits of Vanguard and
more all I'm saying is that the added temptation of knowing you can trade
stocks for $0 Commission whenever you want might not be the best thing for you
as for me I like keeping my options open so I have most of my stuff at fidelity I
have several different accounts there and I do a different investing strategy
in each so I have my HSA where I do my passive index fund investing I also have
my SEP IRA there where I do sort of a active style of investing called the
magic formula and I have my Roth IRA there and that's where I do some of my
individual stocks and value investing and a little bit of options trading so
I'm able to do three very different types of investing all on the fidelity
platform so that's why I like fidelity so much
moving right along to account types offered at each platform there's not a
whole lot to compare here because both fidelity and Vanguard offer all the
basic accounts rollover IRAs traditional IRAs IRAs SEP IRAs taxable brokerage
accounts etc etc however one account type that fidelity offers that that
Vanguard does not is the HSA or health savings account this is an account that
allows you to save and invest pre-tax money to use towards health related
expenses HSAs are the ultimate triple tax
loophole because you save on taxes when you contribute and you save on taxes
because you don't pay any capital gains tax or income taxes and you save on your
withdrawals I talked more about this awesome wealth building tool right here
in this video and there are some special requirements in order to qualify for an
HSA such as having a certain type of health insurance plan but if you can get
an HSA and invest inside of that you totally should
Vanguard unfortunately doesn't do HSAs so for that reason alone I prefer
fidelity not only this but Vanguard doesn't offer a whole lot in the way of
cash management so fidelity offers a cash account that is basically a
checking account and it comes with a debit card and mobile check deposit and
all that good stuff at some point I even had a fidelity credit card so literally
fidelity can be your one-stop shop for all your banking and investment needs so
do you want a one-stop shop like fidelity where you can do passive and
active investing strategies and do all your banking stuff or do you prefer to
separate your banking stuff from your investing stuff it's up to you finally I
want to touch on some qualitative differences between fidelity versus
Vanguard Vanguard has a unique ownership model where the company is owned by the
investors of vanguards funds rather than by outside shareholders so if you own a
Vanguard mutual fund you effectively own a little piece of Vanguard as a whole in
other words Vanguard is owned by the people and for all
time this is exactly why Vanguard was able to charge the lowest fees in the
industry since there's no outside owners to distribute profits to Vanguard funds
charge only enough to cover their costs and they pass on all the savings to its
fund holders fidelity on the other hand is structured like most other for-profit
companies where its customers are not necessarily its owners but I also don't
see this as a problem as long as fidelity continues to offer low fees and
in a lot of cases Fidelity's fees are lower than Vanguard so I really don't
see this as a problem anymore also just as a fun fact fidelity is run
by a female CEO Abigail Johnson so that's a huge plus in my book here are
my final recommendations to wrap it up if you're looking for a robust investing
platform that supports all kinds of strategies whether they're active or
passive fidelity is your answer and if you're starting out small with just a
couple thousand dollars or even just a couple hundred dollars
you'll want to go with fidelity to avoid any account fees investment minimums and
trading commissions if you're looking for a place that also offers checking
account features so you can keep all your financial stuff in one place then
go with fidelity if all you want to do is hold a few index funds for the long
term and you can get around the investment minimums the account fees
then go with Vanguard I think I'm a little biased towards fidelity but I've
done my best to provide a side-by-side comparison so that you can set up your
accounts ASAP and actually get started investing as always thanks so much for
watching please like this video if you liked it I post new videos every
Wednesday so I'll see you next week same time same place