Vanguard historically has been the flagship low-cost index provider and offers nearly every imaginable index fund possible, but others are now giving Vanguard a run for its money. So, I thought it would be a good time to list fairly equivalent funds from three of the largest 401k and IRA providers: Vanguard, Schwab, and Fidelity. Note that I am attempting to pick the lowest-cost index fund with no loads and no transaction fees that appear most frequently in lazy portfolios. Schwab, along with their own funds, offers 2,000 choices without any loads or transactions from the OneSource list. (An easier place to navigate a sub-set of those funds is their OneSource Select list). Similarly, Fidelity has No Transaction Fee Funds (NTF) to choose from as well as their low-cost Spartan line of funds.
Comparison of Mutual Funds
Following is a list of fund offerings in table form for easy comparison, listing the ticker symbol, net expense ratio, and minimum investment. (I used the lower share class, but those with a large amount of assets are typically charged a lower expense.) Update 10/6/2010. Vanguard has reduced the minimum amount required to invest in its Admiral Shares from $100,000 to $10,000, making this share class more available to the majority of individual investors. Due to this change, I have updated the chart with applicable expense ratios. I will go in general order from the most commonly held funds to the least, but all are fairly common. Also, I'm choosing the fund I personally would choose to fulfill that particular asset class based on the offerings, but your opinion may differ. If there is an "OR," the first one listed is slightly preferred, in my mind. Note that due to the competitive pressures, these three brokerage firms now offer a varying degree of commission free ETFs. These cover a wider array of asset classes, so if you're interested instead in investing in ETFs, skip to the next section.
Note I used Vanguard's admiral share class expense ratio when making this determination, which requires a $10,000 minimum investment. On the other hand, I used Fidelity's investor class which also requires a $10,000 minimum. Their Advantage class has lower expense ratios, but requires a minimum of $100,000 which is out of range for most investors so I thought I would make it a more fair comparison. While costs and expenses are important, note that all three firms offer some of the best expense ratios available on the market. One should not fixate or stress out about a tiny difference in expense ratio as long as what you are paying is minimal and near the market leader.
For example, the 0.02% difference between VTSAX (Vanguard Total US Stock Market Admiral) and SWTSX amounts to $2 a year in expenses for every $10,000 invested. $2/year?! The tracking error would most likely be a much more significant variable than the $2 difference. If I had money with Schwab already, I wouldn't hesitate at all to invest in SWTSX. And many of these track a slightly different index, so that would be of graver concern. As another example, the fact that VGTSX contains emerging markets, while SWISX is only developed (as indicated in the footnotes) will prove to be more of a predictor of after tax performance than the tiny difference in expenses. It's certainly not worth the effort to add another brokerage firm in that case. While previously I've stressed that seemingly small differences in expense ratios compound to significant amounts over the course of several years, that's typically when comparing index funds to active funds, which often have 1%+ expense ratios. In any event, here's the comparison chart:
Note I used Vanguard's admiral share class expense ratio when making this determination, which requires a $10,000 minimum investment. On the other hand, I used Fidelity's investor class which also requires a $10,000 minimum. Their Advantage class has lower expense ratios, but requires a minimum of $100,000 which is out of range for most investors so I thought I would make it a more fair comparison. While costs and expenses are important, note that all three firms offer some of the best expense ratios available on the market. One should not fixate or stress out about a tiny difference in expense ratio as long as what you are paying is minimal and near the market leader.
For example, the 0.02% difference between VTSAX (Vanguard Total US Stock Market Admiral) and SWTSX amounts to $2 a year in expenses for every $10,000 invested. $2/year?! The tracking error would most likely be a much more significant variable than the $2 difference. If I had money with Schwab already, I wouldn't hesitate at all to invest in SWTSX. And many of these track a slightly different index, so that would be of graver concern. As another example, the fact that VGTSX contains emerging markets, while SWISX is only developed (as indicated in the footnotes) will prove to be more of a predictor of after tax performance than the tiny difference in expenses. It's certainly not worth the effort to add another brokerage firm in that case. While previously I've stressed that seemingly small differences in expense ratios compound to significant amounts over the course of several years, that's typically when comparing index funds to active funds, which often have 1%+ expense ratios. In any event, here's the comparison chart:
"Equivalent" Mutual Funds Offered by Vanguard, Schwab, and Fidelity
| Asset Class and Category | Vanguard | Schwab | Fidelity$ |
|---|---|---|---|
| Total US Stock Market | VTSMX 0.18%@ 0.07%+ $3,000 | SWTSX 0.09% $100 | FSTMX 0.10% $10,000 |
| International Index Fund | VGTSX* 0.34% 0.20%` $3,000 | SWISX 0.19% $100 | FSGUX 0.24% $10,000 |
| Total Bond Market | VBMFX 0.22% 0.12% $3,000 | RidgeWorth Intermediate Bond I - SAMIX# 0.32% $2,500 | FBIDX 0.22% $10,000 |
| REIT | VGSIX 0.26% 0.13% $3,000 | Cohen & Steers Realty Shares - CSRSX 1.00% $10,000 ------- OR SWASX 1.05% $100 | FRXIX 0.26% $10,000 |
| Inflation-Protected Bond | VIPSX 0.25% 0.12% $3,000 | ACITX 0.49% $2,500 ------- OR SWRSX 0.50% $100 | FINPX 0.45% $2,500 |
| Small-Cap | NAESX 0.28% 0.14% $3,000 | SWSSX 0.19% $100 | FSSPX 0.31% $10,000 |
| Small-Cap Value | VISVX 0.28% $3,000 | No good equivalent; use small blend | No good equivalent; use small blend |
| Emerging Markets | VEIEX 0.35% 0.22% $3,000 | SFENX 0.61% $100 | FPEMX 0.33% $10,000 |
Information is accurate as of 1/21/2010
Updated Fidelity funds 2/12/2012
Notes:
$ Fidelity Investor Share class (<$10,000 investment) expense ratio is listed; Advantage Share Class (<$100,000 investment)has lower expense ratios is not included.
@Vanguard investor share class (<$10,000 investment) expense ratio is listed first for each asset category
+Vanguard Admiral Share class (>$10,000 investment) expense ratio is listed second for each asset category, if available (note: the ticker symbol for this share class is different than the one listed. See this page for details.)
Updated Fidelity funds 2/12/2012
Notes:
$ Fidelity Investor Share class (<$10,000 investment) expense ratio is listed; Advantage Share Class (<$100,000 investment)has lower expense ratios is not included.
@Vanguard investor share class (<$10,000 investment) expense ratio is listed first for each asset category
+Vanguard Admiral Share class (>$10,000 investment) expense ratio is listed second for each asset category, if available (note: the ticker symbol for this share class is different than the one listed. See this page for details.)
*Vanguard's International Fund is the only one the includes Emerging Markets (22%). Schwab and Fidelity's index funds are only developed nations. Thus, a more appropriate comparison would be Developed Markets Index, VDMIX (0.29% ER). However, VGTSX is recommended over VDMIX for a Lazy Portfolio, so it is included instead.
`The Admiral Share Class of Vanguard's Total International Fund is supposed to be available in Q1 2011, unveiled with other changes to the fund, including tracking an index that includes international small-caps as well as Canada and Israel.
#Schwab's own Total Bond Market Index, SWLBX, is not used here for a couple reasons. First, it has a fairly high 0.55% net expense ratio (Schwab's weakness is definitely bond funds). Secondly, looking at the past performance, it clearly wasn't tracking the index it was supposed to (Barclays Capital U.S. Aggregate Bond index.) Take a look at the comparison of SAMIX, VBMFX, and SWLBX in 2008 here. There is certainly some variation between SAMIX and VBMFX, but SWLBX isn't even closely correlated with those two. For the year of 2008, the Schwab bond fund was down nearly 9%, while the other two were up just over 1%. Investigating it further, apparently a law firm is investigating the fund and its managers for "possible misrepresentations, omissions and/or breaches of fiduciary duties" as it was investing in high risk CMOs as opposed to the stated objectives. Certainly, past performance is not indicative of future results, but any fund manager that made that mistake (whether purposefully or not) should not be trusted with your money. Fidelity's diversified total bond fund, FTBFX (ER = 0.45%) also had a disastrous 2008 (for a bond fund), down a whopping 15% at one point (even worse than the Schwab fund!). Thus, it looks like Schwab is in good company and I'd avoid the Fidelity fund as well.
#Schwab's own Total Bond Market Index, SWLBX, is not used here for a couple reasons. First, it has a fairly high 0.55% net expense ratio (Schwab's weakness is definitely bond funds). Secondly, looking at the past performance, it clearly wasn't tracking the index it was supposed to (Barclays Capital U.S. Aggregate Bond index.) Take a look at the comparison of SAMIX, VBMFX, and SWLBX in 2008 here. There is certainly some variation between SAMIX and VBMFX, but SWLBX isn't even closely correlated with those two. For the year of 2008, the Schwab bond fund was down nearly 9%, while the other two were up just over 1%. Investigating it further, apparently a law firm is investigating the fund and its managers for "possible misrepresentations, omissions and/or breaches of fiduciary duties" as it was investing in high risk CMOs as opposed to the stated objectives. Certainly, past performance is not indicative of future results, but any fund manager that made that mistake (whether purposefully or not) should not be trusted with your money. Fidelity's diversified total bond fund, FTBFX (ER = 0.45%) also had a disastrous 2008 (for a bond fund), down a whopping 15% at one point (even worse than the Schwab fund!). Thus, it looks like Schwab is in good company and I'd avoid the Fidelity fund as well.
Fund and ETF Comparison
Here's a list of the same funds listed above (investor status; admiral status is cheaper) next to the ETF offerings from Vanguard, Schwab, and Fidelity/iShares with the net expense ratios listed. I have listed an alternative ETF as well where the choices are slimmer; these will be subject to your standard trading fee. (Update 5/5/2010: Vanguard Brokerage Service clients can now trade all 43 Vanguard ETFs commission free. This is in addition to the news that Fidelity customers can trade 25 popular iShares ETFs commission free, so your choices are much more widespread now for commission free ETF trading. And Schwab has its own 11 funds to choose from.) Note that the Schwab ETFs are newer so haven't had the time to acquire as many assets as the others. But for the typical investor, they will serve you well if you have a Schwab account and plan to dollar cost average. Just be sure to make the purchase with a limit order instead of a market order. Other firms are more well-established and have historically been popular with traders. Again, lowest expense offering in yellow.
NOTE: These expenses are only accurate as to when they were last updated and are no longer current as the firms continue to change their expense ratios. Schwab has even further reduced their costs. At this point, the expenses for most of these funds are so low that the tracking error as well as bid/ask spread are of greater concern than any expense ratio. For example, a Schwab fund that has an expense ratio of 0.06% vs. a Vanguard fund that has an expense ratio of 0.09% may not actually be "cheaper" due to a lower trading volume leading to inflated bid/ask spreads. Also, a fund with smaller assets under management or a non-ideal procedure may lag the index they are attempting to match. A total stock market index can have a tracking error of 0.1% or more which dwarfs a 0.03% difference in expense ratio. If the Schwab fund has a historical tracking error that is 0.1% greater than the corresponding Vanguard fund, for example, it may not actually be a better option. I recommend researching historical tracking errors, current bid/ask spreads and trading volumes when making a decision. All three firms have low cost offerings, though, so I wouldn't worry all that much about small differences. The competition on expense ratios has gotten so fierce that they are probably less of concern than the other aforementioned factors.
NOTE: These expenses are only accurate as to when they were last updated and are no longer current as the firms continue to change their expense ratios. Schwab has even further reduced their costs. At this point, the expenses for most of these funds are so low that the tracking error as well as bid/ask spread are of greater concern than any expense ratio. For example, a Schwab fund that has an expense ratio of 0.06% vs. a Vanguard fund that has an expense ratio of 0.09% may not actually be "cheaper" due to a lower trading volume leading to inflated bid/ask spreads. Also, a fund with smaller assets under management or a non-ideal procedure may lag the index they are attempting to match. A total stock market index can have a tracking error of 0.1% or more which dwarfs a 0.03% difference in expense ratio. If the Schwab fund has a historical tracking error that is 0.1% greater than the corresponding Vanguard fund, for example, it may not actually be a better option. I recommend researching historical tracking errors, current bid/ask spreads and trading volumes when making a decision. All three firms have low cost offerings, though, so I wouldn't worry all that much about small differences. The competition on expense ratios has gotten so fierce that they are probably less of concern than the other aforementioned factors.
Index Funds/Commission-Free ETFs Commonly Used in Portfolios
Asset Class
|
Vangrd Mutual Fund
|
Vangrd ETF
|
Schwab ETF
|
Fidelity/ iShares
ETF |
Altrnate
ETF |
Total US Stock Market
|
VTSMX
.18/.07%
|
VTI
0.07%
|
SCHB
0.06%
|
IWV
0.21% |
-
|
Extended Market
|
VEXMX
.30/.13%
|
VXF
0.15%
|
SCHM
(Mid-Cap) |
IJH
0.22% |
-
|
Small-Cap
|
NAESX
.28/.14%
|
VB
0.17%
|
SCHA
0.13%
|
IWM
0.20% |
-
|
Small-Cap Growth
|
VISGX
0.28%
|
VBK
0.15%
|
N/A
| 0.25% |
-
|
Small-Cap Value
|
VISVX
0.28%
|
VBR
0.15%
|
SFNFX&
(Small-Mid Mutual Fund) |
IWN
0.25% |
-
|
Value
|
VIVAX
.26/.14%
|
VTV
0.12%
|
SCHV
0.13%
|
IWD
0.20% |
-
|
REIT Index
|
VGSIX
.26/.13% |
VNQ
0.12%
|
SCHH
|
IYR
|
RWR
0.25%
|
International Index
|
VGTSX@
.32/.2% |
VXUS@
0.20%
|
75% SCHF/
| ACWX 0.34% |
-
|
Developed Markets
|
VDMIX
0.29% |
VEA
0.12%
|
SCHF
0.13%
|
EFA
0.35% |
-
|
Emerging Markets
|
VEIEX
.35/.22% |
VWO
0.22%
|
SCHE
0.25%
|
EEM
0.69% |
-
|
Pacific Stock
|
VPACX
.26/.14% |
VPL
0.18%
|
N/A
|
N/A
|
EPP&
0.50%
|
European Stock
|
VEURX
.26/.14% |
VGK
0.18%
|
N/A
|
N/A
|
IEV
0.60%
|
International Value
|
VTRIX
0.47% |
N/A
|
SFNNX&
Mutual Fund |
IDV
|
EFV/DWX
.40/.48%
|
International Small-Cap
|
VFSVX
0.55%
|
VSS
0.33%
|
SCHC
0.35%
|
SCZ
0.40% |
-
|
Total Bond
|
VBMFX
0.22%
|
BND
0.11%
|
SCHZ
0.10% |
AGG
0.22% |
-
|
Inflation-Prot Securities
|
VIPSX
.25/.12% |
N/A
|
SCHP
0.14% |
TIP
0.20% |
IPE
|
High-Yield Corporate
|
VWEHX
.32/.15% |
N/A
|
N/A
|
HYG
|
JNK
0.40%
|
Long-Term Treasury
|
VUSTX
.25/.12%
|
N/A
|
N/A
|
N/A
|
TLT/TLH
.15/.15%
|
Interm-Term Treasury
|
VFITX
.25/.12% |
N/A
|
SCHR
|
N/A
|
FIVZ/IEF
.15/.15%
|
Short-Term Treasury
|
VFISX
.22/.12% |
N/A
|
SCHO
0.12%
|
N/A
|
TUZ/SHY
.09/.15%
|
Short-Term Index
|
VBISX
22/.12%
|
BSV
0.14%
|
N/A
|
N/A
|
CSJ#
0.20%
|
Updated 2/2/2010 after Fidelity's introduction of 25 commission-free iShares
Updated 5/2/2010 since Vanguard's 43 ETFs now trade commission-free
Updated 6/22/10 after Schwab reduced the expense ratio for its ETFs
Updated 6/22/10 after Schwab reduced the expense ratio for its ETFs
Updated 9/20/10 after Schwab released its bond ETFs
Updated 1/31/11 for Schwab Mid-Cap and REIT ETFs as well as new Vanguard International Admiral Class fund and ETF Share Class
Updated 2/25/11 after Vanguard reduced ERs on EM, Euro, Pacific, Foreign Small (Announcement)
Updated 7/14/11 for Schwab's Aggregate Bond ETF and updated ERs on BND and AG; updated other Vanguard and iShares ETF ERs
Updated 2/12/12 for Fidelity's IYR, ACWX, IDV, and HYG.
Updated 1/31/11 for Schwab Mid-Cap and REIT ETFs as well as new Vanguard International Admiral Class fund and ETF Share Class
Updated 2/25/11 after Vanguard reduced ERs on EM, Euro, Pacific, Foreign Small (Announcement)
Updated 7/14/11 for Schwab's Aggregate Bond ETF and updated ERs on BND and AG; updated other Vanguard and iShares ETF ERs
Updated 2/12/12 for Fidelity's IYR, ACWX, IDV, and HYG.
Note 1: Commission-free only if you have your brokerage account with the provider (certain iShares are listed under "alternate" since not part of the commission-free list)
Note 2: Vanguard investor share class (<$10,000 investment) expense ratio is listed first for each asset category. Vanguard Admiral Share class (>$10,000 investment) expense ratio is listed second for each asset category, if available (note: the ticker symbol for this share class is different than the one listed. See this page for details.)
Important Note 3: As of 5/4/2011, it appears Vanguard increased ER on some of their funds, including VISVX from 0.28% to 0.37%. However, Vanguard explains: "The expense ratios of some Vanguard funds appear to have increased recently, but appearances can be deceiving. Fund expense ratios now reflect guidance from the Securities and Exchange Commission (SEC) about reporting requirements for funds that hold business development companies (BDCs), not any change in the costs incurred by fund shareholders." https://personal.vanguard.com/us/insights/article/bdc-expense-ratios-04292011 This applies to 15 of their funds. Thus, the fees investors pay to the fund hasn't changed at all in actuality. As I understand it, a new accounting rule by the SEC makes Vanguard state the expenses that are charged by the underlying securities held by the fund and add them to the management expenses. As of now, I have not adjusted the above, but I will monitor it. I'm not sure if other fund families have also already adhered to the new SEC standard and are reporting increased expense ratios for some of their funds.
Important Note 3: As of 5/4/2011, it appears Vanguard increased ER on some of their funds, including VISVX from 0.28% to 0.37%. However, Vanguard explains: "The expense ratios of some Vanguard funds appear to have increased recently, but appearances can be deceiving. Fund expense ratios now reflect guidance from the Securities and Exchange Commission (SEC) about reporting requirements for funds that hold business development companies (BDCs), not any change in the costs incurred by fund shareholders." https://personal.vanguard.com/us/insights/article/bdc-expense-ratios-04292011 This applies to 15 of their funds. Thus, the fees investors pay to the fund hasn't changed at all in actuality. As I understand it, a new accounting rule by the SEC makes Vanguard state the expenses that are charged by the underlying securities held by the fund and add them to the management expenses. As of now, I have not adjusted the above, but I will monitor it. I'm not sure if other fund families have also already adhered to the new SEC standard and are reporting increased expense ratios for some of their funds.
@The Vanguard International fund and ETF are the only ones that also contain small-cap international exposure at the market weight. The Schwab and Fidelity counterparts are simply large-cap international holdings. Thus, the Vanguard funds do not need to be supplemented with International Small-Cap, while it would be advisable for the others to do so.
#Only includes corporates
&Schwab's Fundamental Index Funds are mutual funds that follow the RAFI index. While their net expense ratios are competitive, they are subsidized and their gross expense ratios are larger. SFSNX = 0.53%, SFNNX = 0.61%. Thus, if you choose to invest, keep an eye out that the expense ratios don't increase as Schwab could pull a bait and switch (keep expenses low to get investors in and then jack them up). For this reason and the fact that they don't tend to be very tax-efficient, I would be reluctant to invest in these funds in taxable accounts. In retirement accounts, tax-efficiency doesn't matter and if they pull the bait and switch, you can transfer your shares to another fund without any tax ramifications. So, it wouldn't be much of a concern in those cases.
&Schwab's Fundamental Index Funds are mutual funds that follow the RAFI index. While their net expense ratios are competitive, they are subsidized and their gross expense ratios are larger. SFSNX = 0.53%, SFNNX = 0.61%. Thus, if you choose to invest, keep an eye out that the expense ratios don't increase as Schwab could pull a bait and switch (keep expenses low to get investors in and then jack them up). For this reason and the fact that they don't tend to be very tax-efficient, I would be reluctant to invest in these funds in taxable accounts. In retirement accounts, tax-efficiency doesn't matter and if they pull the bait and switch, you can transfer your shares to another fund without any tax ramifications. So, it wouldn't be much of a concern in those cases.
If you have a Fidelity account, there are five fixed income funds that have free trading: Barclays Aggregate (AGG), Barclays TIPS (TIP), iBoxx $ Investment Grade Corporate (LQD), JP Morgan USD Emerging Markets (EMB), and S&P National AMT-Free Municipal (MUB). AGG should be the backbone of your bond portfolio with a nice mix of TIP in there, if desired (a 2:1 ratio of these two funds is a common bond portfolio in its entirety). If you really want HY bonds (which rival equities in their volatility), then EMB is a decent proxy for HYG and VWEHX. LQD is a good fund to avoid treasuries, but it also quite risky for a bond fund. MUB is a good choice in taxable accounts for high-income investors.
Schwab and Fidelity Lazy Portfolios
As you can see, there are some good choices and some not so decent ones. Personally, if I were to set up a Lazy Portfolio with Schwab or Fidelity, I'd avoid the expensive funds in favor of the cheaper ones even if it didn't slice and dice as much as I intended. Even better, I'd invest in a cheaper equivalent ETF for those expensive funds (update: especially now with free trades). For example, instead of purchasing Cohen & Steers Realty Shares (CSRSX; 1.00% ER), it'd be a much wiser decision to go with the equivalent ETF, iShares Cohen & Steers Realty Majors (ICF) with its 0.35% ER or Vanguard REIT Index ETF (VNQ) with its 0.11% ER.
Here's a good mutual fund Schwab Lazy Portfolio in my mind (somewhat modeled off of Dr. Bernstein's No Brainer):
US Total Stock (SWTSX) - 25%
International Index (SWISX) - 25%
Intermediate Bond (SAMIX) - 25%
Small-Cap (SWSSX) -25%
And here's an approved Fidelity Lazy Portfolio using only funds:
US Total Stock (FSTMX) - 25%
International Index (FSIIX) - 25%
US Bond Index (FBIDX) - 25%
US Extended Market (FSEMX) - 25%
Again, if you want to add REIT, TIPS, emerging markets, or small-cap value, I'd recommend using ETFs. (Although the Schwab funds aren't terrible if you're investing a small amount since they have only a $100 minimum.) In fact, a lot of investors these days prefer to create the entirety Lazy Portfolio with ETFs. This can make sense depending on your personal circumstances. See this post for more explanation of funds vs. ETFs and consult this Vanguard calculator to compare costs of equivalent funds/ETFs. If you go the ETF route, you clearly cannot invest $100 at a time repeatedly as those commissions that typically range from $7-20 would be prohibitively expensive. ETFs do offer a lot of other advantages over mutual funds, though, such as better tax efficiency, dynamic prices, easier to tax loss harvest, and lower costs in general. Essentially, ETFs are cheaper to own, but they have transaction costs each time you make a purchase. Update: Again, there are now several ETFs to choose from that have no transaction fees, so this barrier for ETF investing has essentially been struck down. There still are valid reasons to choose mutual funds over ETFs, though, such as ease of automatic investing, ability to purchase partial shares such that investments are round amounts, buying at the NAV at the end of the day, not having to place a limit order in the middle of the workday, etc. For those investors with accounts at Vanguard, it might make sense to purchase mutual funds and convert to lower-cost ETFs at a later time if the above reasons make mutual funds more appealing at the onset for you (again, this is due to their patented structure and will not cause you to realize any capital gains).
Update 5/5/2010: For an even more complete picture of these brokerage firms, I thought it might be helpful to add a chart comparing the commission structure, account fees, and minimum amounts. Vanguard joined in on the price war and is now offerings its ETFs commission fee, while also slashing its commission structure, making the brokerage service a viable alternative to Schwab and Fidelity for those who trade more frequently. This clearly is in response to similar moves by Schwab and Fidelity in the past several months.
In summary, it's free for Schwab customers to trade their 11 ETFs (3 bond ETFs were released August 2010), free for Fidelity customers to trade 25 iShares ETFs, and now free for Vanguard customers to trade their 43 ETFs. Also note that I'm purposefully excluding non-transaction free mutual fund purchases as it simply makes no sense to pay a larger transaction fee for a mutual fund when you can most likely get a similar ETF for less. For that matter, there are plenty of transaction free mutual funds to choose from as seen from the above links. (In case you were curious, though, Schwab charges $49.95, Fidelity charges $75, and Vanguard will set you back $35, $20, or $8 depending on your total assets.) While I'm including phone and broker assisted trade fees, you should only be trading online as doing otherwise will cost you unnecessarily (although not with VBS anymore). Vanguard Brokerage Services (VBS) is actually a different account than the Vanguard mutual fund account; that is, you don't need it if you're simply going to invest directly in Vanguard's own mutual funds. In any event, here's a basic chart comparing the commissions as well as account fees and minimums.
In summary, it's free for Schwab customers to trade their 11 ETFs (3 bond ETFs were released August 2010), free for Fidelity customers to trade 25 iShares ETFs, and now free for Vanguard customers to trade their 43 ETFs. Also note that I'm purposefully excluding non-transaction free mutual fund purchases as it simply makes no sense to pay a larger transaction fee for a mutual fund when you can most likely get a similar ETF for less. For that matter, there are plenty of transaction free mutual funds to choose from as seen from the above links. (In case you were curious, though, Schwab charges $49.95, Fidelity charges $75, and Vanguard will set you back $35, $20, or $8 depending on your total assets.) While I'm including phone and broker assisted trade fees, you should only be trading online as doing otherwise will cost you unnecessarily (although not with VBS anymore). Vanguard Brokerage Services (VBS) is actually a different account than the Vanguard mutual fund account; that is, you don't need it if you're simply going to invest directly in Vanguard's own mutual funds. In any event, here's a basic chart comparing the commissions as well as account fees and minimums.
Commission Schedule, Account Fees, and Minimums
Vanguard vs. Schwab vs. Fidelity
Vanguard vs. Schwab vs. Fidelity
| VBS^ | Schwab | Fidelity | |
|---|---|---|---|
| Online Trades (<$50,000 in assets) | $7 for first 25; subsequent trades $20 | $8.95 | $7.95 |
| Online Trades ($50k - $500k in assets) | $7 | $8.95 | $7.95 |
| Online Trades ($500k- $1M in asssets) | $2 | $8.95 | $7.95 |
| Online Trades (>$1M in assets) | First 25 trades free; subsequent trades $2 | $8.95 | $7.95 |
| Automated Phone | Same as online price structure | $13.95 | $12.95 |
| Broker Assisted | Same as online price structure | $33.95 | $32.95 |
| Account service fee | $20 per account if <$50k; No charge if >$50k | No charge* | No charge# |
| Account minimum% | $3000 | $1000 | $2500 |
| Options Trades Online (<$1 M) | $30 + $1.50 per options contract | $8.95, plus $0.75 per contract | $7.95, plus $0.75 per contract |
| Options Trades Online (>$1 M) | $8 + $1.50 per contract | $8.95, plus $0.75 per contract | $7.95, plus $0.75 per contract |
| Treasuries | $10 or free & | No charge | No charge |
| Other Secondary Trades (CDs, Muni Bonds, MBS, etc.) | $50 (Mortgage-backed, munis) or free (US gov't agency, corporate, CDs) | $1/bond | $1/bond |
Information is accurate as of 5/05/2010
^ Again, this is specific to Vanguard Brokerage Service. If you simply want to purchase Vanguard mutual funds, this is a different account and has no annual service fee assuming you sign up for e-delivery of documents.
* One exception - Schwab's Personal Defined Benefit Plan account has opening costs
* One exception - Schwab's Personal Defined Benefit Plan account has opening costs
# Fidelity charges a $12 annual mutual fund low balance fee for each noncore Fidelity fund under $2,000
% For most accounts. There may be a few exceptions.
& $10 if total assets are <$100,000. $0 if total assets are >$100,000.
For more information and up-to-date commission schedules, see Vanguard's, Schwab's, and Fidelity's (pdf) own pages.
For more information and up-to-date commission schedules, see Vanguard's, Schwab's, and Fidelity's (pdf) own pages.
