The individual investor services market is a hotly contested space. Vanguard and Fidelity are legacy brokerages that have provided millions of customers a multitude of services over the past several decades. Then there’s a relatively new competitor known as Robinhood. The following is a breakdown of how each company serves investors.
For more help managing your money, consider working with a financial advisor.
Overview of Robinhood vs. Vanguard vs. Fidelity
Robinhood has been in business for almost a decade. Founded on the idea of disrupting legacy investment firms by democratizing investment access, it has experienced more publicity over the last several years for its trading activity. It is currently focused on enhancing its services according to customer feedback. It has no minimums, low fees and limited trade functionality compared to its competitors.
Vanguard has carved out a space in the market through its low fees for exchange-traded funds (ETFs) and mutual funds. In addition, its investment funds are available to clients using other brokerage firms. However, it is less apt for trading individual stocks.
Founded in 1946, Fidelity is the longest-standing company of the three. It brings together almost every financial service customers could need under one roof. Plus, it charges low to no fees for a swath of asset types and provides an impressive array of free educational resources.
Robinhood vs. Vanguard vs. Fidelity: Fees
Most investment firms have made concentrated efforts to reduce fees for clients. As a result, you’ll likely experience minimal charges with any of these three firms. Here are some key highlights of the fees that each platform charges its customers.
Robinhood does not charge fees or commissions to trade, and there are no inactivity fees, no fees for moving money in or out of your account and very few non-trading fees. Instead, Robinhood makes money by pocketing the small difference between the buying and selling price of an asset. This generates very little money, typically only pennies or less per share traded, but over millions of transactions those pennies add up. Robinhood Gold also offers margin trading to subscribers who pay a $5 monthly fee, which allows margin trading at 7.5% interest rate and – as of April 2023 – 4.4% APY on idle cash.
When trading Vanguard mutual funds and ETFs, you won’t face any commission fees on those trades. You also avoid commission charges on hundreds of non-Vanguard ETFs and mutual funds when you buy online. Trading individual stocks on Vanguard, which charges a $20 annual account service, will cost you $7 per trade. Minimum balances for mutual funds range from $1,000 to $100,000. The firm recently lowered the minimum investment on many low-cost Admiral Shares index mutual funds, from $10,000 to $3,000.
Fidelity lets customers trade stocks, ETFs and bonds free of charge. There are several thousand no-fee mutual funds. Fidelity charges $49.95 to trade funds that aren’t on its no-fee list. Options trading costs $0.65 per contract. There is a zero expense ratio for four Fidelity funds. The Depository Foreign Trust Company foreign settlement fee is $50 per trade. Fidelity’s margin interest rates range from a low of 8.75% to a high of 13.075%. Its lowest rate is for margins of $1 million or more.
Robinhood vs. Vanguard vs. Fidelity: Services & Features
Although each company offers various services, they focus on different areas. For example, Fidelity offers 401(k)s, individual retirement accounts (IRAs), 529 plans and a robo-advisor account. In addition, its customer service is available at all hours by phone. Its live chat feature is open 8 a.m. to 10 p.m. Monday through Friday and 9 a.m. to 4 p.m. Saturday and Sunday ET. Also, clients can access help from the firm via Twitter, Facebook and Reddit. Lastly, it offers banking through its cash management account.
Vanguard emphasizes passively managed funds with minimal fees. That said, you can take control of trading as you would with other investment accounts or use a robo-advisor. Unlike Fidelity, it does not offer a bank account. However, both companies sport ample, free learning resources. Finally, Vanguard’s customer service is available by phone Monday through Friday, 8 a.m. to 8 p.m. ET.
Robinhood has the most truncated services of the three, with one exception: it allows investors to put money in cryptocurrencies. Vanguard has some access to specific crypto funds and companies, but not the currency itself. Robinhood allows investors to trade stocks with a streamlined app but does not support mutual funds, bonds and many foreign stocks. However, in July the company launched over 300 American Depositary Receipts (ADRs), bringing the total number of ADRs available to more than 650.
As for SIPC protections, Robinhood covers customers up to $500,000 (including $250,000 for claims for cash). Its total excess insurance policy protects securities and cash up to an aggregate of $100 million and is limited to a combined return to any customer of $10.5 million, including cash of up to $1.75 million. Lastly, Robinhood provides a financial news and education podcast, along with newsletters and videos. It is also beefing up its free online educational resources.
Robinhood vs. Vanguard vs. Fidelity: Online & Mobile
Robinhood offers a sleek, agile mobile and desktop experience that new users can effortlessly use. In addition, the company has recently added features to its app. Robinhood holds a 4.2-star rating on the Apple store and 3.9 stars on Google Play.
The absence of customization stands in contrast to Fidelity, which offers tons of personalized options and plentiful data for curious investors to explore. The app has an excellent balance of complexity and intuitive use. Fidelity has a 4.8-star rating on the Apple store and 4.2 stars on Google Play.
Vanguard has an odd combination of 4.7 stars on the Apple store and 2 stars on Google Play. Apple users praise the app’s fantastic user interface, while Android users have expressed frustration over their version’s limited functionality.
Who Should Use Robinhood, Vanguard and Fidelity?
While all three companies allow customers to trade stocks, their key differences draw varying investor types. Investors looking for a simplified, inexpensive method for stock trading may want to consider Robinhood. Its streamlined app makes trading a snap and keeps costs down. In addition, Robinhood is the only company of the three that gives direct access to cryptocurrencies. However, investors with an eye for mutual funds, bonds, robo-advisors and international stocks may want to look elsewhere.
Although Robinhood can be a great place for new investors to start, Fidelity’s services also have broad appeal. With accessible robo-advisor accounts, excellent user experience on mobile and desktop and minimal fees, someone looking to put their first dollar in the stock market can feel as comfortable as a seasoned investor.
Vanguard promotes an inexpensive set-it-and-forget-it style of investing. Investors wanting passive management should look no further, as Vanguard’s investment funds are so popular that non-client investors often buy into them.
As an individual investor, you can ensure your online brokerage account meets your needs by virtue of the sheer amount of options available today. Of the three companies in this article, Robinhood offers inexpensive stock and cryptocurrency trading services and educational resources for new investors. However, Fidelity and Vanguard are more suitable if you’re looking for diversification through mutual funds and access to more account types.
Fidelity is a financial one-stop shop and offers its clients excellent support, education and low fees. In addition, new and not-so-new investors alike will feel at home in its mobile and desktop apps. Though it is the oldest of the three companies, it has shown itself adaptable and sharp in today’s market.
If the thought of employing a sophisticated investment strategy gives you hives, Vanguard might be the best option for you. It focuses on low-cost passively managed funds that produce returns without requiring you to log on and adjust your portfolio constantly.
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