Two of the most popular online brokerages are Robinhood and Vanguard. The former is a highly streamlined platform designed for new investors. It presents users with a clean trading interface, without the intimidating wall of information and options that can scare off novices. Vanguard, meanwhile, offers a full-service trading platform and specializes in mutual funds. Here is what you need to know before deciding whether one or the other is best for you. Whether you have already made a decision about an online trading platform or are still mulling your options, a financial advisor can give you valuable advice on how best to proceed.
Robinhood vs. Vanguard: Fees
There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:
- Trading fees. Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
- Trading commissions. This is when a broker will charge you a percentage based on the volume or value of each trade.
- Inactivity fees. Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
- Non-trading/Other fees. Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.
Robinhood is a fee-free trading platform. Each person who signs up and links to a bank account is guaranteed a free stock. The free stock can range in value from $0.01 to $225.02. Users do not need to maintain a minimum account balance, and there are no fees associated with buying and selling stocks, including commission fees, trading fees and inactivity fees. When trading stocks, options and exchange-traded funds (ETF), the only fees associated are domestic overnight check deliveries, which cost $20.
Vanguard also has a $0 account minimum and charges $0 for trading stocks and ETFs. However, it does have fee schedules for other products and it carries products that Robinhood does not. Vanguard charges a $1 fee for all options contracts traded under $1 million. After a person has traded over that threshold, a sliding scale decreases the fees associated with options trading. Additionally, Vanguard charges $1 for every $1,000 of bonds traded and $0 for mutual fund purchases.
Robinhood vs. Vanguard: Services and Features
Robinhood, which gives users free trades of cryptocurrencies, was designed for mobile use and all functionalities are available on the app. Additionally, users can look at their stocks, recommendations and charts to help them make investment decisions. Also available on the app are live earnings calls.
Robinhood has a desktop product called Robinhood for Web with an interface that is easy to navigate. There’s a dashboard where users can view how their stocks have been performing over set periods. Additionally, users can see what stocks they own, their watchlist and more. The web app includes a search tool to help people view performance charts, news articles and other valuable information. Robinhood only offers support via email.
Vanguard lets users trade stocks, bonds and ETFs on the desktop website, as well as view news articles and charts, but they can’t trade futures or cryptocurrencies. The website is catered toward buy-and-hold investors and therefore updates every 20 minutes rather than in real-time with the market.
The heart of Vanguard’s platform, however, is its vast selection of mutual funds. Between its own products and its no-fee list, Vanguard offers the largest selection of mutual funds of any trading platform on the market. However, it’s important to note that this does not mean that the funds themselves are free. Any given mutual fund may charge administrative fees, sometimes referred to as operating expense ratios, meaning that your actual portfolio costs will reflect the products you’ve chosen.
Robinhood vs. Vanguard: Online Mobile Experience
The user experience of Robinhood is, above all else, streamlined. It reflects the firm’s clear intent to make investing feel like a familiar in-app experience, closer to Instagram than a conventional online trading platform. Users can quickly find their investment portfolio information, and assets are arranged in lists that are easy to search and sort.
Robinhood categorizes assets by tags, letting you quickly find other investments that are similar. The individual asset pages are similarly well laid out, with basic information presented alongside a clear interface for buying or selling each product.
Vanguard is generally well designed, and users will quickly be able to find critical tools such as portfolio management and how to look up individual assets. The app is delayed so there is no real-time data on the app, and watchlists are not shared between a customer’s account on the web and mobile app. However, the app is simple to navigate, and the buying and selling features are straightforward. The watchlists and research tools are a pared-down version of what is available on the web.
Robinhood vs. Vanguard: Who Should Use It?
Robinhood was designed with the mobile user in mind. It is free to get started and caters to people who want to have a high volume of trades. This app is also good for someone just getting started and who wants to learn how to create and adjust their own portfolio.
Vanguard was created for the buy-and-hold investor and focuses more on web-based users rather than mobile users. Therefore, if you are looking at long-term investments and want to access your investments primarily via a computer, Vanguard is the best option for you.
Investors who want to concentrate on long-term investments will find a lot to like about Vanguard, and will save some money in the process. It’s good for people who want to build a mutual fund-oriented portfolio with a wide variety of choices to meet just about every need. Robinhood is a somewhat gamified platform that is all about high user engagement and minimal friction in trading process. It offers too little information for experienced investors and, because of its sheer ease of use may entail too much risk for novices.
Tips for Investing
- Consider talking with a financial advisor about whether an online brokerage account is a good idea for you and, if so, which one would be best. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- A free, easy-to-use investment calculator will give you a good idea of when you will reach your financial goals as well as helping you track your progress toward those goals.
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