Investing in a portfolio of carefully selected assets is a popular path to retirement. You can choose among stocks, bonds, exchange-traded funds and other assets when assembling your portfolio; however, you have to create a brokerage account before you can access any of these investments. You can choose from many platforms, but few of them compete with Fidelity and Vanguard.
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For decades, these financial stalwarts have helped customers build wealth. Both brokerage firms offer a variety of low-cost funds that allow you to invest in diversified portfolios of stocks and bonds. While Fidelity and Vanguard are both strong choices, each has nuances investors should keep in mind. Here’s a closer look at how Fidelity and Vanguard brokerages compare:
— Size and investment philosophy.
— Account and investment options.
— Performance and cost.
— Management options.
— Functionality and tools.
— Overall appeal.
Size and Investment Philosophy
In terms of reputation and scale, Fidelity and Vanguard have long been recognized as leading investment firms in the U.S.
Founded in 1946 by Edward C. Johnson II, Fidelity Management and Research Co. fostered a reputation for nurturing growth stocks, making investments in companies such as Xerox Holdings Corp. (ticker: XRX) and Polaroid in the 1950s. Fidelity currently serves some 50 million customers and manages employee benefit programs for more than 30,000 businesses.
Founded in 1975 by John Bogle, Vanguard prioritizes diversification and introduced the first public index mutual fund. Today, Vanguard serves more than 50 million customers and still champions long-term investing in low-cost funds.
Account and Investment Options
Fidelity and Vanguard offer a wide range of investment options while keeping fees low. You won’t have to pay commission fees on stock trades with either brokerage, and both offer exchange-traded funds, or ETFs, and mutual funds with some of the lowest expense ratios in the industry.
You can start trading stocks and ETFs on these platforms with no minimum investment. However, options trades cost around 65 cents per contract. Fidelity and Vanguard also allow you to trade bonds, certificates of deposit and money market funds if you want to minimize risk and focus on cash flow.
Either brokerage platform is a strong choice for retirement savings. They each offer individual retirement accounts, 401(k) plans, simplified employee pension IRAs and other types of retirement accounts. While both Vanguard and Fidelity offer a range of options, the best choice may come down to your investing style and goals.
Vanguard caters more to long-term investors, emphasizing diversification and retirement planning. Fidelity offers more advanced tools for those who want to monitor stock prices, trade options or invest in cryptocurrencies through Fidelity Crypto. While Vanguard doesn’t support direct crypto trading, it offers access to third-party crypto funds.
Performance and Cost
Vanguard and Fidelity both offer ETFs and mutual funds that let you track popular benchmarks like the S&P 500 and Nasdaq at a low cost.
For instance, the Vanguard S&P 500 ETF (VOO) tracks the S&P 500 and charges 0.03% in annual expenses. Meanwhile, the Fidelity 500 Index Fund (FXAIX) follows the same index and has a 0.015% expense ratio.
These funds have nearly identical portfolios and returns. Fidelity’s fund is slightly cheaper, but you’re in a good position if you’re choosing between a 0.03% expense ratio and a 0.015% expense ratio. Investors often find themselves making these types of choices when comparing Vanguard ETFs to Fidelity ETFs.
Both companies offer a wide range of mutual funds and ETFs to match various risk levels and long-term objectives. With some research, most investors can find a mutual fund or ETF that fits their needs.
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Management Options
Vanguard and Fidelity investors can opt for active management, passive strategies or robo advisor services. Here’s how these management styles differ and what you can expect if you choose Vanguard or Fidelity.
Active Management
The idea of beating the market has long captivated investors, and actively managed funds aim to make that goal a reality. Although Fidelity and Vanguard have low-cost ETFs that track major indices, these brokerage firms also offer actively managed funds.
Actively managed funds carry higher expense ratios since they require hands-on management. Portfolio managers have to stay on top of market trends and reallocate their positions accordingly. These funds may also undergo more frequent portfolio rebalancing, while most passive funds only rebalance their assets every quarter.
Vanguard’s well-known actively managed funds include Vanguard Wellington (VWELX) and Vanguard Wellesley Income Fund (VWINX), while Fidelity’s active lineup includes Fidelity Magellan (FMAGX) and Fidelity Blue Chip Growth Fund (FBGRX).
Passive Management
Passively managed funds typically have lower expense ratios since they require less active oversight. Instead of trying to outperform the market, a passive fund’s holdings are adjusted to reflect changes in its underlying benchmark.
Passively managed funds’ hands-off investment strategies won’t cause you to miss out on great returns. Benchmark indices like the S&P 500 and the Nasdaq have historically outperformed most actively managed funds over the long term. Vanguard and Fidelity each offer index funds designed to mirror these benchmarks. These funds often have nearly identical portfolio structures and returns, as illustrated by the similarity between VOO and FXAIX.
Robo Advisors
With a robo advisor, you don’t need to constantly monitor your portfolio. Instead, the robo advisor handles the investing for you, using algorithms to adjust your portfolio automatically based on your criteria.
Vanguard Digital Advisor, which requires a minimum investment of $100, offers several preset investment options. It’s free for the first 90 days, after which you’ll pay a net advisory fee of typically around 0.15%.
Fidelity Go doesn’t charge advisory fees if your balance is below $25,000. Once your balance goes above that amount, a 0.35% advisory fee applies. Customers paying the fee also get unlimited one-on-one coaching calls. Fidelity does not require a minimum investment to open an account and will begin investing once your balance reaches $10.
Functionality and Tools
Vanguard and Fidelity both provide educational resources and trading tools, but Vanguard’s trading tools are generally more basic, focusing on long-term investment strategies rather than frequent trading. It offers tools for screening and researching stocks, bonds and funds, along with numerous calculators to help you project everything from retirement income to college savings.
Meanwhile, Fidelity has advanced charting, screening and real-time data features that appeal to more active traders. The firm is also known for its in-depth research, including market and sector analysis.
Overall Appeal
Vanguard and Fidelity are both strong choices for investors, offering a variety of quality investments and a range of tools for different trading styles.
Vanguard may be the best fit for long-term, buy-and-hold investors. This platform may feel less exciting to active traders, but it’s designed to help investors stay disciplined.
Fidelity can work well for investors who want to hold stocks for the long run while having the flexibility and tools to make trades. Options traders may be more drawn to Fidelity for its dynamic dashboard and overall experience.
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Vanguard vs. Fidelity: Which Is Best for You? originally appeared on usnews.com
Update 03/24/26: This story was published at an earlier date and has been updated with new information.
