Vanguard vs. Fidelity

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Investor1319
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Vanguard vs. Fidelity

Post by Investor1319 » Thu Jun 04, 2020 4:21 pm

I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!

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Ice-9
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Re: Vanguard vs. Fidelity

Post by Ice-9 » Thu Jun 04, 2020 4:26 pm

I have a Roth IRA at Vanguard and my workplace retirement accounts at Fidelity.

Funds tracking the broad market indices recommended on this forum will be similar at Fidelity and Vanguard and anywhere else...

S&P 500 Index
Total Stock Market Index
Total International Index
Total Bond Market Index
etc.

At the moment, Fidelity does have slightly lower expense ratios for most index fund classes, but that's just noise.

Vanguard does offer some index funds that Fidelity doesn't, such as a small cap international index fund. So if that interests you, Vanguard may be advantageous.

If this interests you, Fidelity does offer the Zero funds, often discussed here, that track Fidelity-maintained indices that are "knock-offs" of more popular indices with zero expenses - a 0.00% expense ratio. I actually use these in my retirement account, but some people prefer to pay the extra couple basis points for the real index, which Fidelity also offers. These Zero funds are not recommended in taxable accounts, because they aren't portable if you ever switch to another company and would require incurring a taxable event.
Last edited by Ice-9 on Thu Jun 04, 2020 4:29 pm, edited 1 time in total.

petulant
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Re: Vanguard vs. Fidelity

Post by petulant » Thu Jun 04, 2020 4:29 pm

There are some circumstances where Vanguard vs. Fidelity really matters. But if these are the only relevant details, OP's decision is akin to deciding between Coke and Pepsi.

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FelixTheCat
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Re: Vanguard vs. Fidelity

Post by FelixTheCat » Thu Jun 04, 2020 4:32 pm

You can buy Vanguard ETFs at Fidelity. The only problem is not all Vanguard funds have an ETF.

There's no reason to switch your account to Fidelity unless you like consolidating all of your accounts at one place.
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Re: Vanguard vs. Fidelity

Post by Pomegranate » Thu Jun 04, 2020 4:35 pm

Never put all the eggs in one basket...
Split :sharebeer

scoreboard
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Re: Vanguard vs. Fidelity

Post by scoreboard » Thu Jun 04, 2020 4:40 pm

If your Husband is anything like me he probably likes to brag to his spouse which is why you think he is doing better at Fidelity.

Both places are equal I am sure.

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Re: Vanguard vs. Fidelity

Post by MMiroir » Thu Jun 04, 2020 4:44 pm

We decided on Fidelity because they have an office 5 minutes away, while Vanguard does not have any offices. The ability to meet someone in person, especially when setting up investment accounts for our kids, was helpful.

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Re: Vanguard vs. Fidelity

Post by Elysium » Thu Jun 04, 2020 4:55 pm

According to some data I have come across, the average investor at Vanguard earned over 1% extra annually compared to average Fidelity investor between 2000-2019. Obviously, some Fidelity investors may have earned more than some Vanguard investors depending on their AA. Statistically, Vanguard investors on average stood better chance at earning more due to overall lower costs. If you were to invest in lower cost index funds alone then both institutions will serve you well, Fidelity does have better customer service and slightly better technology, although I never had any bad customer service experience or poor technology related issues in over 20 years with Vanguard.
Last edited by Elysium on Thu Jun 04, 2020 5:05 pm, edited 4 times in total.

sport
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Re: Vanguard vs. Fidelity

Post by sport » Thu Jun 04, 2020 5:01 pm

If you opt for Fidelity, be sure you stick to the low cost offerings. They have many high cost products and will use them if you let them manage your account. Vanguard has no high cost products and no commissioned salespeople to sell you anything.

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Re: Vanguard vs. Fidelity

Post by Ferdinand2014 » Thu Jun 04, 2020 5:01 pm

Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
I have had Fidelity 25 plus years. Very happy. Great customer service, complete all in one financial services, excellent and many index fund options, online experience excellent, no minimums and super low cost on index funds and brick and mortar store if needed. They also have the most up to date security measures in my opinion. The only drawback I see with Fidelity (for some people) is they do have many active managed funds available both from Fidelity and outside brokerages available and if you didn't know the difference could result in a poor fund selection. I would never consider switching and have all of my investments with them - SEP, 529, IRA, CMA, Brokerage, Roth, etc.
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Re: Vanguard vs. Fidelity

Post by bloom2708 » Thu Jun 04, 2020 5:06 pm

I like the Coke vs. Pepsi analogy.

I would guess the return difference is very small. Perhaps the husband is just saving a bit more. Saving more always beats the return when accounts are getting rolling. Vanguard has an S&P 500 index if you want to get nearly the same. The total market has an additional ~3,000 small/mid cap stocks.

We have everything at Vanguard except my active 401k at Fidelity. That will roll to Vanguard when I retire. That seems a long way off.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

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Re: Vanguard vs. Fidelity

Post by home_body » Thu Jun 04, 2020 5:08 pm

Vanguard is still pretty much old-school. If you want to do anything in Vanguard request via phone, hurry-up and wait, snail-mail, paper forms, fill-out/send back snail-mail, hurry-up and wait for things to get processed. Heard Fidelity gets things done systematically/automatically online. I haven't had a Fidelity account for more than 10 years, correct me if i'm wrong.

-H

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wander
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Re: Vanguard vs. Fidelity

Post by wander » Thu Jun 04, 2020 5:11 pm

Both firms are fine. I like Vanguard but I also have Funds and ETFs at WellsFargo and TD Ameritrade. With a spreadsheet, I have control all of my asset.

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Re: Vanguard vs. Fidelity

Post by L82GAME » Thu Jun 04, 2020 5:12 pm

So many on this forum disparage Vanguard’s site. I find it to be uncluttered and straightforward. Recently my DW and I opened a Fidelity CMA linked to their 2% CC. Fido’s site is cluttered and confusing, the CC portal via Fido’s online access platform is clunky, and it took more than two weeks to link external bank accounts to the CMA. Meh.

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Re: Vanguard vs. Fidelity

Post by retired@50 » Thu Jun 04, 2020 5:22 pm

I have accounts at both, and I absolutely prefer Vanguard.

Mutual fund & ETF offerings at Vanguard are nearly ALL low-expense ratio funds. Very few actively managed funds, and many of those are still under .5% expense ratio

Fidelity offers far more actively managed funds and many of them have higher fees (above .5% or even 1%). It's easy to stumble into a more expensive fund at Fidelity. You really have to be on the lookout for the low-expense ratio funds.

As many here on Bogleheads know, costs matter.

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Re: Vanguard vs. Fidelity

Post by boogiehead » Thu Jun 04, 2020 5:23 pm

Vanguard has better product offerings in general especially bond funds, but the user interface for Fidelity is light years better than Vanguard. I can get all the relevant information I need from Fidelity on my main page and its a clean cut design. While in Vanguard I always have to click around to search for what I want to see and its "summary" page is horrendous (it looks like its from the 2000s).

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Re: Vanguard vs. Fidelity

Post by 1789 » Thu Jun 04, 2020 5:27 pm

Both are good. Vanguard has better balanced funds overall. Just be careful with Fidelity high expense ratio "active funds". They have a ton of them. Other than that, I like Fidelity better.
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Re: Vanguard vs. Fidelity

Post by BruinBones » Thu Jun 04, 2020 5:31 pm

sport wrote:
Thu Jun 04, 2020 5:01 pm
If you opt for Fidelity, be sure you stick to the low cost offerings. They have many high cost products and will use them if you let them manage your account. Vanguard has no high cost products and no commissioned salespeople to sell you anything.
There have been a few good suggestions given on this thread why you might want to consolidate with Fidelity (both are fine institutions).
If you do switch, I would heed the advice given above.
And I would first see if Fidelity will offer you a transfer bonus for switching to them.

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Re: Vanguard vs. Fidelity

Post by abuss368 » Thu Jun 04, 2020 6:33 pm

Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
You would be fine with either. Vanguard is the only "mutual" mutual fund company and that is a difference. That is, the funds own Vanguard and the shareholders own the funds.

Personally, moving to Vanguard was the best financial decision we have ever made.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Vanguard vs. Fidelity

Post by nanameg » Thu Jun 04, 2020 7:32 pm

petulant wrote:
Thu Jun 04, 2020 4:29 pm
There are some circumstances where Vanguard vs. Fidelity really matters. But if these are the only relevant details, OP's decision is akin to deciding between Coke and Pepsi.
What circumstances are you referring to?

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Taylor Larimore
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Re: Vanguard vs. Fidelity

Post by Taylor Larimore » Thu Jun 04, 2020 7:51 pm

Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
Investor 1319:

We have been happy Vanguard investors since 1986. I believe a mutual fund company, without stockholders draining profits, should provide the best returns and service.

I intend to stay-the-course.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom (to his employees): "My rulebook had two lines: “Do what's right” and “If you're not sure, ask your boss.”
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Vanguard vs. Fidelity

Post by jajlrajrf » Thu Jun 04, 2020 7:52 pm

Both Vanguard and Fidelity are fine. I give Fidelity a slight edge for two reasons:

(1) Their account security picks a better point on the security vs convenience scale IMO (using SymantecVIP app, vs having to buy a YubiKey or settle for SMS)
(2) Retail offices are convenient to use sometimes.

But really either of them will be fine.

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Re: Vanguard vs. Fidelity

Post by Vanguard Fan 1367 » Thu Jun 04, 2020 7:56 pm

I like Vanguard and Fidelity and use both. I appreciate the pioneering efforts of Jack Bogle in the low fee index funds.

I like Fidelity's cash management, their 2% Back Visa Card, and their HSA accounts. I have had some nice success with one of their Total Stock Market Index Funds.

I have also had much success with various Vanguard investments.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

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Re: Vanguard vs. Fideli

Post by ChrisBenn » Thu Jun 04, 2020 8:31 pm

abuss368 wrote:
Thu Jun 04, 2020 6:33 pm
Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
You would be fine with either. Vanguard is the only "mutual" mutual fund company and that is a difference. That is, the funds own Vanguard and the shareholders own the funds.

Personally, moving to Vanguard was the best financial decision we have ever made.
The mutual fund ownership bit has never seemed to actually present in any way meaningful. Sure, you "own" a share - but by buying it you sign away proxy voting rights to the fund -- so the whole mutual ownership thing feels like a bit if a sham from the investors point if view.

Note I still think vanguard is a fine company - I just have not seen how the mutual ownership benefit claim is actually meaningful.

For me it was the extras that drove value to fidelity;
- A CMA (which vanguard had, but randomly cancelled)
- 24/7 tier one support (instead of 9-5 M-F)
- Using vanguards iOS application voids their anti-fraud guarantee, putting yourself at some technical risk.
- HSA

The only reason I would recommend vanguard is if someone had to have access to one of their MF only funds, or their money market accounts (best in class).
Last edited by ChrisBenn on Thu Jun 04, 2020 8:33 pm, edited 1 time in total.

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Re: Vanguard vs. Fidelity

Post by FinanceGeek » Thu Jun 04, 2020 8:46 pm

You can utilize the strengths of both - Vanguard as best of breed asset manager, and Fidelity as best of breed asset custodian.
Last edited by FinanceGeek on Thu Jun 04, 2020 8:49 pm, edited 1 time in total.

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Re: Vanguard vs. Fidelity

Post by Doctor Rhythm » Thu Jun 04, 2020 8:48 pm

We have accounts at both (plus at Schwab). I don't think it really matters whether you consolidate to one or the other. As you correctly state, the total stock market and the S&P 500 track very closely, but the latter has done minimally better in the past few years. Of course, there's no way to know how that might change. If it's a hassle to have the portfolio separated, or if you dislike Vanguard, or just like the color green more than red, you could switch to Fidelity. I wouldn't bother.

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Re: Vanguard vs. Fidelity

Post by Elysium » Thu Jun 04, 2020 8:53 pm

bloom2708 wrote:
Thu Jun 04, 2020 5:06 pm
I would guess the return difference is very small.
It isn't small. Vanguard investors earned more, about 1% annually for the period I have data going back to 2000. This is for the average dollar counting all funds at both firms. Obviously, if someone is only investing in broad market index funds then there would be no difference going forward.

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Re: Vanguard vs. Fidelity

Post by bloom2708 » Thu Jun 04, 2020 8:55 pm

Elysium wrote:
Thu Jun 04, 2020 8:53 pm
bloom2708 wrote:
Thu Jun 04, 2020 5:06 pm
I would guess the return difference is very small.
It isn't small. Vanguard investors earned more, about 1% annually for the period I have data going back to 2000. This is for the average dollar counting all funds at both firms. Obviously, if someone is only investing in broad market index funds then there would be no difference going forward.
I was referring to Total US at Vanguard vs Total US at Fidelity or Total US at Vanguard vs S&P 500 at Fidelity.

I know S&P has had a slight advantage lately, but not always.

For overall low cost, I'd pick Vanguard. Well, we did.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

Elysium
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Re: Vanguard vs. Fidelity

Post by Elysium » Thu Jun 04, 2020 9:02 pm

bloom2708 wrote:
Thu Jun 04, 2020 8:55 pm
Elysium wrote:
Thu Jun 04, 2020 8:53 pm
bloom2708 wrote:
Thu Jun 04, 2020 5:06 pm
I would guess the return difference is very small.
It isn't small. Vanguard investors earned more, about 1% annually for the period I have data going back to 2000. This is for the average dollar counting all funds at both firms. Obviously, if someone is only investing in broad market index funds then there would be no difference going forward.
I was referring to Total US at Vanguard vs Total US at Fidelity or Total US at Vanguard vs S&P 500 at Fidelity.

I know S&P has had a slight advantage lately, but not always.

For overall low cost, I'd pick Vanguard. Well, we did.
Agree. When I first came across the figures that showed this huge disparity I was surprised somewhat, then it all made sense. The average investor at both firms invest in all kinds of funds, active and index, balanced, sector, bond funds, so on.. and there must be also more churn at Fidelity with so many specialty and active managed funds they have, which causes investors to trail the funds they invest in, besides the fact that on average the funds at Fidelity cost more than Vanguard. The end result is that for all the complaints people have about Vanguard customer service, low tech, and the praise for Fidelity for same, investors on average simply are earning better at Vanguard even if they knew nothing and picked funds randomly. This should count for something.

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Re: Vanguard vs. Fidelity

Post by justsomeguy2018 » Thu Jun 04, 2020 9:07 pm

Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
Your husband is probably doing better because SP500 is mostly (or all) large cap stocks and total stock market includes small and midcaps, which have underperformed large cap in recent years. You realize you can also do an SP500 fund at Vanguard, right?

I would stick with Vanguard, though Fidelity is great as well. I just see little to no benefit to making the switch in your circumstances.

For a brand new investor, Fidelity may be better because you don't need a minimum to buy their mutual funds, whereas Vanguard you need minimum $3,000 to invest in Admiral share funds (and I think it used to be minimum $10,000 a few years back). Some also think Fidelity has slightly better customer service.

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Re: Vanguard vs. Fidelity

Post by Silence Dogood » Thu Jun 04, 2020 9:20 pm

jajlrajrf wrote:
Thu Jun 04, 2020 7:52 pm

(1) Their account security picks a better point on the security vs convenience scale IMO (using SymantecVIP app, vs having to buy a YubiKey or settle for SMS)
I wish that Vanguard would start supporting app-based two-factor authentication.

One feature that I do like about the Vanguard website is the ability to restrict access to only recognized devices.

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Re: Vanguard vs. Fidelity

Post by corp_sharecropper » Thu Jun 04, 2020 11:03 pm

petulant wrote:
Thu Jun 04, 2020 4:29 pm
There are some circumstances where Vanguard vs. Fidelity really matters. But if these are the only relevant details, OP's decision is akin to deciding between Coke and Pepsi.
Umm. Well that's a big difference, man. Because anyone that would choose Pepsi can go ahead and hang out with all the ginger red heads while us normal people sip coca cola.

Oh, and Ford is better than Chevy, just wanted to preempt you on that one.

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Re: Vanguard vs. Fidelity

Post by petulant » Fri Jun 05, 2020 6:08 am

nanameg wrote:
Thu Jun 04, 2020 7:32 pm
petulant wrote:
Thu Jun 04, 2020 4:29 pm
There are some circumstances where Vanguard vs. Fidelity really matters. But if these are the only relevant details, OP's decision is akin to deciding between Coke and Pepsi.
What circumstances are you referring to?
Fidelity has an HSA account for people trying to invest HSA balances like me. Vanguard tends to have much lower expense ratios on some of its fixed income mutual funds like MMFs for people interested in those products. There are probably more.

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Re: Vanguard vs. Fidelity

Post by jakehefty17 » Fri Jun 05, 2020 6:13 am

Either is fine. Both brokerages offer industry leading low cost mutual funds for your Roth IRA. That's what really matters. Either is fine for an investor with your funds. Vanguard funds have higher minimum investments for somebody just starting out.

I switched my Roth IRA to Fidelity from Vanguard last year. Reasons being consolidating to Fidelity with their 2% cashback card, and Fidelity's mutual funds were slightly more tailored to my interests due to the specific indexes they track. Fidelity's cash management and debit card is also convenient. Overall I just felt Fidelity had more to offer, and I've been happy with the change.

All that said, I wouldn't suggest you change without a few good reasons. Don't switch on a whim because your husband uses them. Do your research and make an informed decision. To reiterate - either is fine.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

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Re: Vanguard vs. Fidelity

Post by SxSW » Fri Jun 05, 2020 10:24 am

sport wrote:
Thu Jun 04, 2020 5:01 pm
If you opt for Fidelity, be sure you stick to the low cost offerings. They have many high cost products and will use them if you let them manage your account. Vanguard has no high cost products and no commissioned salespeople to sell you anything.
How do you define high cost? Vanguard has several funds with expense ratios of over half a percent. VMMSX is 93 basis points. Vanguard's salespeople (known as investment consultants, if you read Glassdoor) may not be commissioned, but that doesn't mean they aren't heavily pressured to sell Vanguard products to you.

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Re: Vanguard vs. Fideli

Post by SxSW » Fri Jun 05, 2020 10:34 am

ChrisBenn wrote:
Thu Jun 04, 2020 8:31 pm

The mutual fund ownership bit has never seemed to actually present in any way meaningful. Sure, you "own" a share - but by buying it you sign away proxy voting rights to the fund -- so the whole mutual ownership thing feels like a bit if a sham from the investors point if view.

Note I still think vanguard is a fine company - I just have not seen how the mutual ownership benefit claim is actually meaningful.
I agree. It's one thing to discuss what it might do, or could do in theory, but I've yet to see concrete examples of how this arrangement actually benefits shareholders in term of service or fees. In The House That Bogle Built, the author correctly pointed out that Vanguard management can decide to spend whatever they want and still define it as 'at cost'.

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Re: Vanguard vs. Fidelity

Post by ruralavalon » Fri Jun 05, 2020 10:35 am

Investor1319 wrote:
Thu Jun 04, 2020 4:21 pm
I have about $30K invested in my IRA (total stock market) in Vanguard. My husband has about $33K invested in his IRA (S&P) with Fidelity. I'm struggling with whether I should stay with Vanguard or switch to Fidelity since I am a smaller investor (at least right now) and read that Fidelity is better for smaller, beginner investors. I know the total stock market fund and s&p are supposed to run pretty closely, but my husband always seems to do better with his. Any advice? Thanks!!
Both Vanguard and Fidelity are good choices for funds and for location of IRAs, it's largely a matter of personal preference. My personal preference is Vanguard.

If at Fidelity stick to their low expense ratio index funds.

I do think it is simpler and helpful to have all accounts at a single location. Either Vanguard or Fidelity will be fine.
Last edited by ruralavalon on Fri Jun 05, 2020 10:40 am, edited 1 time in total.
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Re: Vanguard vs. Fidelity

Post by sport » Fri Jun 05, 2020 10:39 am

SxSW wrote:
Fri Jun 05, 2020 10:24 am
Vanguard has several funds with expense ratios of over half a percent.
So Vanguard has several. How many does Fidelity have in this category? Some Fidelity funds have an ER over 1.00%. Some examples are: FSCOX is 1.21%, FEMEX is 1.31%, FEDDX is 1.25%.

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Taylor Larimore
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Vanguard's Fund Ownership

Post by Taylor Larimore » Fri Jun 05, 2020 10:50 am

The mutual fund ownership bit has never seemed to actually present in any way meaningful. Sure, you "own" a share - but by buying it you sign away proxy voting rights to the fund -- so the whole mutual ownership thing feels like a bit if a sham from the investors point if view.
Chris Benn:

Vanguard's "mutual fund ownership bit" has been VERY "meaningful" for investors:
"For the 10-year period ended December 31, 2018, 9 of 16 Vanguard bond index funds, 14 of 17 Vanguard balanced index funds, and 94 of 106 Vanguard stock index funds—for a total of 117 of 139 Vanguard index funds—outperformed their Lipper peer-group averages." -- Vanguard
Best wishes
Taylor
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Re: Vanguard vs. Fidelity

Post by petulant » Fri Jun 05, 2020 11:31 am

One way that I believe mutual ownership of Vanguard's funds helps is in how product improvements work. Generally, BlackRock and Fidelity have an incentive to create a new fund with a lower expense ratio rather than update an existing fund. An existing fund has a lot of inertia, especially in taxable accounts, so BlackRock or Fidelity can continue to earn a higher expense ratio from captive investors while starting a new fund to attract additional investors. Vanguard has no incentive to take advantage of captive taxable investors and can push through product improvements like lower expense ratios or better indexes (for better or worse). Gus Sauter, a previous Chief Investment Officer from Vanguard, on his interview with Rick Ferri on the BH Podcast specifically cited this as a factor to consider.

mervinj7
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Re: Vanguard vs. Fidelity

Post by mervinj7 » Fri Jun 05, 2020 12:02 pm

petulant wrote:
Fri Jun 05, 2020 11:31 am
One way that I believe mutual ownership of Vanguard's funds helps is in how product improvements work. Generally, BlackRock and Fidelity have an incentive to create a new fund with a lower expense ratio rather than update an existing fund. An existing fund has a lot of inertia, especially in taxable accounts, so BlackRock or Fidelity can continue to earn a higher expense ratio from captive investors while starting a new fund to attract additional investors. Vanguard has no incentive to take advantage of captive taxable investors and can push through product improvements like lower expense ratios or better indexes (for better or worse). Gus Sauter, a previous Chief Investment Officer from Vanguard, on his interview with Rick Ferri on the BH Podcast specifically cited this as a factor to consider.
But in practice, Fidelity dropped the expense ratios on all their index funds before Vanguard did. That was heavily discussed in this forum. Why should a theoretical factor matter to the average investor? In fact, one could argue that Fidelity had more incentives to lower expenses on competing funds in order to get more assets under management. Check the expense ratio for Total Market, Total Bond, and Total international for both Vanguard and Fidelity.

petulant
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Re: Vanguard vs. Fidelity

Post by petulant » Fri Jun 05, 2020 12:28 pm

mervinj7 wrote:
Fri Jun 05, 2020 12:02 pm
petulant wrote:
Fri Jun 05, 2020 11:31 am
One way that I believe mutual ownership of Vanguard's funds helps is in how product improvements work. Generally, BlackRock and Fidelity have an incentive to create a new fund with a lower expense ratio rather than update an existing fund. An existing fund has a lot of inertia, especially in taxable accounts, so BlackRock or Fidelity can continue to earn a higher expense ratio from captive investors while starting a new fund to attract additional investors. Vanguard has no incentive to take advantage of captive taxable investors and can push through product improvements like lower expense ratios or better indexes (for better or worse). Gus Sauter, a previous Chief Investment Officer from Vanguard, on his interview with Rick Ferri on the BH Podcast specifically cited this as a factor to consider.
But in practice, Fidelity dropped the expense ratios on all their index funds before Vanguard did. That was heavily discussed in this forum. Why should a theoretical factor matter to the average investor? In fact, one could argue that Fidelity had more incentives to lower expenses on competing funds in order to get more assets under management. Check the expense ratio for Total Market, Total Bond, and Total international for both Vanguard and Fidelity.
That's true as far as some expense reductions go, but on the other hand Fidelity opened the ZERO index funds with no way for holders of other funds to move to them. And we've seen much less competitive expense ratio reduction by BlackRock and State Street. The latter literally opened new Core funds that were nearly duplicative with existing funds and left high expense ratios on the existing funds. State Street just opened a new S&P 500 fund with an expense ratio at .03% while leaving the original trust at .0945%. Similar behavior from Fidelity may occur in the future.

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Investor1319
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Re: Vanguard vs. Fidelity

Post by Investor1319 » Fri Jun 05, 2020 1:29 pm

Thank you everyone for all of your helpful posts!! I really appreciate you taking the time to respond.

ChrisBenn
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Re: Vanguard's Fund Ownership

Post by ChrisBenn » Fri Jun 05, 2020 1:44 pm

Taylor Larimore wrote:
Fri Jun 05, 2020 10:50 am
The mutual fund ownership bit has never seemed to actually present in any way meaningful. Sure, you "own" a share - but by buying it you sign away proxy voting rights to the fund -- so the whole mutual ownership thing feels like a bit if a sham from the investors point if view.
Chris Benn:

Vanguard's "mutual fund ownership bit" has been VERY "meaningful" for investors:
"For the 10-year period ended December 31, 2018, 9 of 16 Vanguard bond index funds, 14 of 17 Vanguard balanced index funds, and 94 of 106 Vanguard stock index funds—for a total of 117 of 139 Vanguard index funds—outperformed their Lipper peer-group averages." -- Vanguard
Best wishes
Taylor
Jack Bogle's Words of Wisdom: “My only regret about money is that I don't have more to give away.”
So there's always the danger of "you don't know what you don't know", but, well, I still don't see the causal relationship between the specific ownership structure and lower fees/less tracking error. (Since if we are talking about outperforming other index funds it's probably due to fees/less tracking error)

I definitely believe that Vanguard championed the low fee index fund, and has sort of forced that on the industry (via education and socialization of the concept, as well as demonstration via results). But, I don't see how ownership stripped of voting rights causes that. John Bogle's, ethos, leadership, strategic vision, hires, etc. absolutely. But there doesn't seem to be anything inherent in the ownership structure.

I could be absolutely wrong, and there's some aspect of the mutual ownership sans voting rights that I'm not aware of or don't understand. But still, how it would inevitably leads to lower costs/better tracking, well, I guess I just don't see it - and haven't seen anyone articulate it.

(I don't think it's a bad ownership structure, I really don't know enough to have an opinion on that; I just don't see how it's directly beneficial to the fund holders at this point in time -- since other differently structured companies offer comparable funds with the similar low costs)

Doug007
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Re: Vanguard vs. Fidelity

Post by Doug007 » Fri Jun 05, 2020 2:11 pm

I recently opened an account at Fidelity and the customer service is really very good. Vanguard has absolutely atrocious customer service. As I type this I am on hold with Vanguard for 30 minutes + and counting because I can't complete a simple transaction through their antiquated online system. As soon as I can transfer all my funds from Vanguard I will promptly close my account. I am done with Vanguard. Fidelity service has been superb.

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ruralavalon
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Re: Vanguard vs. Fidelity

Post by ruralavalon » Fri Jun 05, 2020 4:26 pm

Doug007 wrote:
Fri Jun 05, 2020 2:11 pm
I recently opened an account at Fidelity and the customer service is really very good. Vanguard has absolutely atrocious customer service. As I type this I am on hold with Vanguard for 30 minutes + and counting because I can't complete a simple transaction through their antiquated online system. As soon as I can transfer all my funds from Vanguard I will promptly close my account. I am done with Vanguard. Fidelity service has been superb.
I completed two simple on-line transactions in the last month or so using the Vanguard app. I had no problems at all.

I can't remember the last time I had to use customer service for a transaction, it may have been when I did an in-service rollover of my 401k with in-kind transfers of Treasury bonds about 15 years ago.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Bronco Billy
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Re: Vanguard vs. Fidelity

Post by Bronco Billy » Fri Jun 05, 2020 4:38 pm

Its mostly like "what is better Ford or Chevy" . I have money at both places. You cant buy all the VG funds at FIDO, but I like FIDO a little better.

SxSW
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Re: Vanguard's Fund Ownership

Post by SxSW » Fri Jun 05, 2020 8:58 pm

Taylor Larimore wrote:
Fri Jun 05, 2020 10:50 am

Vanguard's "mutual fund ownership bit" has been VERY "meaningful" for investors:
"For the 10-year period ended December 31, 2018, 9 of 16 Vanguard bond index funds, 14 of 17 Vanguard balanced index funds, and 94 of 106 Vanguard stock index funds—for a total of 117 of 139 Vanguard index funds—outperformed their Lipper peer-group averages." -- Vanguard
Best wishes
Taylor
I'm well aware of the funds' performance, but I don't see an explanation of how the fund ownership structure had a direct connection to that.

mike_in_ny
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Re: Vanguard vs. Fidelity

Post by mike_in_ny » Fri Jun 05, 2020 9:37 pm

Does anyone else have any input on difference between the "big 3" companies (Schwab,
Vanguard, Fidelity) in terms of their distribution of capital gains?

I NEVER get capital gains distributions on my Vanguard funds (all core index). In contrast,
I get ~0.5% distribution on my Schwab S&P500 fund each year. I do not know about Fidelity.
This starts to add up and contributes to AGI and current year tax bill.

My understanding is Vanguard is different because of this:
https://www.bloomberg.com/graphics/2019 ... tax-dodge/

jay4u
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Re: Vanguard vs. Fidelity

Post by jay4u » Fri Jun 05, 2020 9:57 pm

I would stay as far away from Vanguard as I could if I were you. They messed up a trade I was trying to do thru their web site, which ended up costing me a lot of money ($40k). After calling and emailing their basic answer to me was that I should not rely on their web site, I should call in transactions! [OT comment removed by moderator Flyer24]I moved all my money to Schwab and have been very happy with their services and web site.,

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