It is important to select the right brokerage firm when it comes to investing especially for a beginner investor, two of the most common are Fidelity and Vanguard. These two companies have existed for many years in the financial services industry and provide a large number of investment products. Nevertheless, there are some distinctions between the two firms that affect the investment strategy and experience in a particular way. In this article, we are going to compare and contrast Fidelity and Vanguard so that beginner investors can know what to look for when choosing an investment firm.
When selecting a brokerage firm it is important to consider the types of investments that will be available to you. Both Fidelity and Vanguard offers a vast array of investment products including mutual funds, ETFs, stocks, bonds and others. However, there are some differences in the particular products offered by the two firms.
Fidelity is one of the largest companies that offer mutual funds and has over 10,000 funds available for investment. They also provide a number of ETFs, including their own Fidelity branded ETFs as well as a way to buy individual stocks, bonds, options and other investments.
On the other hand, Vanguard is one of the most popular companies that provide index funds. They provide investors with a number of index funds that invest in different sectors of the market such as the S&P 500 or foreign countries. Most passive investors who like to hold their position and do not want to active trade prefer Vanguard.
Now say you are a new investor and you want to create a portfolio that is diverse across different asset classes. If you are interested in actively managed funds and more choices then Fidelity could be the right for you. But if you are more oriented towards passive approach and want to minimize the costs, then the index funds of Vanguard may be more suitable for you.
Another significant factor to compare between Fidelity and Vanguard is the fees that they charge for their services. These costs can make a big difference to your investment returns over time, particularly if you are a longer term investor.
Fidelity has a fee based system in which the expense ratio varies according to the type of mutual fund or ETF. There are some cheap positions, but they are not the cheapest, especially for the actively managed funds.
On the other hand, Vanguard is a company that has been known for its low cost approach. They are popular for providing index funds and having some of the lowest expense ratios in the industry. This is in line with their philosophy of minimizing the cost so that more money is returned to the investor.
According to Morningstar, the average expense ratio of Fidelity’s mutual funds is 0.72%, but Vanguard has an average expense ratio of 0.10%. This may not seem like a big deal in the short-term but over the years it can really affect your investment portfolio.
Customer service is also an factor to consider especially if you are a new investor with questions or in need of help. Both Fidelity and Vanguard have telephone, e-mail and chat support.
When it comes to customer service, Fidelity is one of the best, and the representatives work round the clock. They also have a learning center that has webinars and articles to help investors make the right decisions when investing.
Vanguard, however, is not very much into customer relations and rather focuses on the do-it-yourself approach, providing the tools that enable investors to make their own decisions. The educational materials that they provide are directed towards helping investors to make informed decisions.
If you are a beginner investor who wants to get more personal treatment and assistance, Fidelity’s customer service may be more suitable for you. On the other hand, if you enjoy the DIY approach and have a lot of confidence in the educational materials available, then the Vanguard model could be suitable for you.
In the contemporary society, the technology and the user interface are important factors that contribute to the effectiveness of the investing process. Both companies provide online platforms and mobile applications to help with investing and portfolio management.
Fidelity’s platform has received positive reviews for its simplicity and functionality, as well as the number of features that it offers, such as research tools, portfolio analysis, and trading. Their mobile app is very popular and has a high rating which makes it easy for investors to trade and manage their accounts from their mobile devices.
Vanguard’s platform is also easy to use, but it may not have all the features of Fidelity’s platform. Vanguard has been developing its platform for the simplicity and ease of use and thus it is ideal for the new investors who do not like to complicate things.
If you are a beginner investor who wants more features in a simple to use platform then Fidelity might be the best for you. But, if you are looking for a simpler and easier to use platform, then Vanguard’s proposal may be more interesting.
Thus, it can be stated that the contest between Fidelity and Vanguard can be quite challenging for the beginner investors. Each of the firms has its own advantages. Fidelity offers a large number of investment choices and good customer service, while Vanguard is famous for low-cost index funds and learning on auto-pilot. Fidelity has a more complex platform with more features compared to Vanguard.
In the end, the battle between Fidelity and Vanguard could be quite a tough one for beginner investors as both companies offer unique advantages. It is therefore important that you consider your investment goals, risk appetite and preferences then make a decision between the two. It is necessary to consider all the factors that were mentioned in this article and do more research. Investing is a process that lasts for years and selecting the right brokerage firm can make a big difference for you.
