New Investor - Vanguard vs Fidelity

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CalebHenley
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New Investor - Vanguard vs Fidelity

Post by CalebHenley » Thu Jun 30, 2016 1:53 pm

Emergency funds: 6 months expenses
Debt: 135k mortgage at 4%, no other debt
Tax Filing Status: MFJ
Tax Rate: 15% Fed - State TX N/A
State of Residence: TX
Age: 26
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 20% of stocks



Current retirement assets



His 403b = $6000 (employer pays $220 a month regardless of my input, no match)
5% -Small Cap Equity (GSCZX) GER-1.3%
5% -International Equity (GIEZX) 1.35%
20% -Extended-Duration Bond (GEDZX) .84%
45% -Equity Index (GEQZX) .42%
15% -Value Equity (GVEZX) .86%
10% -Growth Equity (GGEZX) 1.03%


His Roth IRA
Currently have $3000 to invest and will be contributing $200 each month



Questions:
1. My main question is who to go with for my Roth IRA. I am debating between Vanguard and Fidelity. Obviously Vanguard is very popular here, but I currently don't have enough for admiral anything and with Fidelity's new lower expense ratio funds, it seems as if the advantage vanguard had there is now gone. Is that accurate? (http://www.investmentnews.com/article/2 ... funds-etfs) Does Vanguard's track record make up for the lower rates and better service/ease of use at Fidelity?

2. I understand that the expense ratio's of my funds in the 403b are high. Everything is through Guidestone Financial. Should I simply stick with the lowest cost funds?


Thank you for your help and I apologize in advance for my naive understanding of this all. I was a Dave Ramsey fan for a while, mainly his get out of debt and emergency fund advice. However, I realized I had so much to learn investment-wise and ended up here. I have read the Boglehead's guide to investing, and am now trying to make the best decisions on where to start the process. Thanks!

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Elsebet
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Re: New Investor - Vanguard vs Fidelity

Post by Elsebet » Thu Jun 30, 2016 2:29 pm

Welcome. My favorite posts are from young people with a financial plan. :) Keep up that discipline and finances will be the least of your worries throughout your life.

1. Fidelity vs. Vanguard is a non-issue in my opinion, they both carry cheap index funds to comprise a simple portfolio. I'd say Fidelity is a little more progressed technology wise but that's not from personal experience, only from what I hear on these boards. A Fidelity account was opened for me at my last job when I started receiving restricted stock and options so I just stayed there even after learning about Bogleheads.

2. Are those all the options you have? If not, can you list the others with the expense ratios?

Scott311
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Re: New Investor - Vanguard vs Fidelity

Post by Scott311 » Thu Jun 30, 2016 2:38 pm

1. Both are great providers in my opinion... I hold a Vanguard Roth IRA and also have a 457 with Fidelity. Something to consider though, the small difference in expense ratios at your point in life when you are just starting to invest, does not matter. You will have enough funds to buy admiral shares long before the small difference between the fund ER's starts to do real damage. I don't see any reason not to go with Vanguard but really neither is a bad choice.

2. I would park all your 403b funds into (Equity Index (GEQZX) .42%) for now. Set your desired asset allocation in your newly opened IRA and work towards maxing that out. In due time you will be more comfortable with investing and have a better idea of what you want to do with the 403b.

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bengal22
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Re: New Investor - Vanguard vs Fidelity

Post by bengal22 » Thu Jun 30, 2016 2:43 pm

Both are equally good.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

PandaBear
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Re: New Investor - Vanguard vs Fidelity

Post by PandaBear » Thu Jun 30, 2016 2:48 pm

In my opinion it depends on what you're planning to do. If you want a single fund portfolio then I would use Fidelity, their Four-In-One Fund (FFNOX) is one of the best aggressive allocation funds out there in that it is truly aggressive allocation (although it holds a bit more in bonds than I would like). That said, if you want to create your own spread, then I would go with Vanguard.

The reason I would use Vanguard is because they have a larger selection of index funds than Fidelity so if at some point you decide to tilt towards small cap value, large cap value, etc. I thought I would never steer away from the 3 fund portfolio, but I did end up tilting towards the small cap value windmill eventually, which I would not have been able to do as efficiently with Fidelity.

In sum, both are great. I love Fidelity's customer service and the fact that they have physical locations you can go to, but I also love the many options Vanguard has to offer.

radiowave
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Re: New Investor - Vanguard vs Fidelity

Post by radiowave » Thu Jun 30, 2016 3:02 pm

If you are also interested in cash management in a taxable account fidelity would be a better choice.
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jjface
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Re: New Investor - Vanguard vs Fidelity

Post by jjface » Thu Jun 30, 2016 3:13 pm

PandaBear wrote:The reason I would use Vanguard is because they have a larger selection of index funds than Fidelity so if at some point you decide to tilt towards small cap value, large cap value, etc. I thought I would never steer away from the 3 fund portfolio, but I did end up tilting towards the small cap value windmill eventually, which I would not have been able to do as efficiently with Fidelity.
Though Vanguard do have a larger selection - fidelity have just added 3 more and no doubt will fill that small cap value index hole eventually. They do now have a large cap value index fund. Also fidelity has a range of commission free ishares etfs that are very good eg IJS Small cap value etf is better than the vanguard equivalents in my opinion or at the least comparable. But yes if you want to stick to mutual funds then Vanguard have the edge with their funds.

I prefer Fidelity's website and customer service. If you need answers then you have to pick up the phone during business hours for vanguard. Fidelity has other options like chat, faster secure messaging, longer opening hours etc.

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ruralavalon
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Re: New Investor - Vanguard vs Fidelity

Post by ruralavalon » Thu Jun 30, 2016 4:05 pm

Welcome to the forum :) .

It's good to see that you are debt free other than the mortgage note. It's always good to see someone starting young.

1) The expense ratios are now essentially the same, no significant difference. On the Fidelity Premium and Vanguard Admiral Shares of the total stock market index funds the expense ratio difference is only 0.005%. For investor shares the expense ratio difference is only 0.01%. That just doesn't matter.

My personal preference is Vanguard because of its much larger selection of low expense ratio mutual funds. I prefer the Vanguard website. Other people think that Fidelity's customer service is better. I think that Vanguard's customer service is good, I have never had an account at Fidelity so can't comment on their customer service. Both are good choices for low ER index funds.


2) In the 403b (67% of current portfolio, $6k, adds $2.6k/yr) just use --
GuideStone Funds Equity Index Fund Investor Class (a S&P 500 Index Fund) (GEQZX) ER 0.42%

In the Roth IRA at Vanguard (33% of current portfolio, $3k, adds $2.4k/yr) use --
Vanguard Balanced Index Fund Investor Shares (60% stocks, 40% bonds) (VBINX) ER 0.22%

The IRA is 33% of the total portfolio, and the balanced index fund is 40% bonds, so 40% x .33 = 13% of the total portfolio is in bonds.

This gives you an asset allocation of 87% stocks and 13% bonds, very close to your desired asset allocation.

Fidelity does not offer a balanced index fund to use.
Last edited by ruralavalon on Thu Jun 30, 2016 5:25 pm, edited 1 time in total.
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whodidntante
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Re: New Investor - Vanguard vs Fidelity

Post by whodidntante » Thu Jun 30, 2016 5:25 pm

Fidelity index funds are less expensive. :twisted:

Lovely Rita
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Re: New Investor - Vanguard vs Fidelity

Post by Lovely Rita » Thu Jun 30, 2016 9:48 pm

Once upon a time, I thought it had to be one or the other.
Not true.
I have accounts with both Fidelity and Vanguard.
End of "analysis paralysis".

stlutz
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Re: New Investor - Vanguard vs Fidelity

Post by stlutz » Thu Jun 30, 2016 9:53 pm

Suppose one or the the other was .05% cheaper.

For your $3000 investment, that amounts to $1.50 per year.

You can invest super-cheaply at both places. What are your other desires from either of these choices?

Lobster
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Re: New Investor - Vanguard vs Fidelity

Post by Lobster » Thu Jun 30, 2016 10:50 pm

I have accounts at Fidelity and Vanguard. I believe in Vanguard's company structure and mission. I have moved all of my assets to vanguard other than my current 401k. I have no problem with Fidelity other than the inherent conflict of interest they have serving my needs and their own. This is the same for all companies other than Vanguard, and I would be comfortable using Fidelity if for some reason Vanguard wasn't an option.
Submit to the relentless rules of humble arithmetic and avoid the tyranny of compounding costs.

Lafder
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Re: New Investor - Vanguard vs Fidelity

Post by Lafder » Thu Jun 30, 2016 10:51 pm

What are his 403b options, or did you list them all ?

"His 403b = $6000 (employer pays $220 a month regardless of my input, no match)
5% -Small Cap Equity (GSCZX) GER-1.3%
5% -International Equity (GIEZX) 1.35%
20% -Extended-Duration Bond (GEDZX) .84%
45% -Equity Index (GEQZX) .42%
15% -Value Equity (GVEZX) .86%
10% -Growth Equity (GGEZX) 1.03% "

Of these choices I would go 100% of the Equity Index for now at ER 0.42

Equity =stocks and in general Index funds are better than advisor chosen holdings.

In general I refuse to pay over 1% ER unless there are zero other options, as some folks have in cruddy employer offerings.

I like some International, but not at ER over 1. I would rather hold International in the Roth space at a much lower ER.

Once the 403b balance grows it will make more sense to hold some bonds there. But I might wait til the balance grows more. The GEDZX Extended duration bond at ER 0.84 is the only bond fund listed. Is it the only one?

List ALL options if there are others, and I think we can help you choose a simpler portfolio.

VG or Fidelity have great low cost options. You can always change between them at a future date. I have holdings at both.

lafder

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Thrifty Femme
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Re: New Investor - Vanguard vs Fidelity

Post by Thrifty Femme » Fri Jul 01, 2016 6:16 pm

Vanguard ETFs have the same expense ratio as admiral index funds and don't have a minimum purchase price.

drkathryn
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Re: New Investor - Vanguard vs Fidelity

Post by drkathryn » Fri Jul 01, 2016 6:37 pm

bengal22 wrote:Both are equally good.
Agree, although Vanguard has better funds, on average and lower expense rates. Fidelity has some good specific funds and are more able to offer advice. With Fidelity one has to look closer for hidden fees

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