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Vanguard vs. Charles Schwab

Vanguard and Charles Schwab have both made their names as retail firms that offer personal financial services and investment advice. While both continue to sell financial and investment management as their flagship products, they have also gotten into the online trading platform game. Each offers clients a web- and app-based portal for trading. Although they are similar in many ways, there are a few key differences. A financial advisor can offer professional investment advice if you’d rather have some help.

Vanguard vs. Charles Schwab: Fees

One of the most important things when comparing two investment firms is how much using each is going to cost you. The fees are important but it’s also important to determine what you’re getting for the fees you’re paying. Just because someone is more affordable doesn’t mean they automatically win this category.

An online trading platform will generally charge four types of fees:

  • Trading Fees: Any fixed charge attached to each trade that you make. This is typically either a flat fee or it is based on the so-called spread when your broker charges you based on the difference between the buying price and the selling price of an asset.
  • Trading Commissions: This is when a broker will charge you for each trade you make based on a percentage of 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 or holding assets.
  • Non-Trading/Other Fees: Any form of fee for using this platform not covered above. For example, a brokerage might charge you for making deposits into your account, taking money out of it or signing up for additional services.

Like most major trading platforms, Vanguard and Charles Schwab offer competitive fee structures. Both offer $0 trading for stocks and exchange-traded funds (ETFs). However, unlike many platforms, Vanguard has made an effort to distinguish its fee structure from the mainstream. It offers more expensive options trading, with Charles Schwab charging $0.65 per contract and Vanguard charging $1.00 per contract to trade. Investors with more than $1 million in assets can receive a number of options trades free on Vanguard’s platform.

Charles Schwab charges $50 to trade mutual funds that are not on the firm’s no-fee list, a collection of several thousand mutual funds which the firm allows you to trade for zero cost. Vanguard offers considerably cheaper trading in mutual funds. All funds managed by Vanguard itself are free, as are several thousand funds on the firm’s no-fee list. For all others, Vanguard charges a $20 fee.

While these are dramatically different fee structures, it should be noted that the no-fee lists for both Schwab and Vanguard are extensive enough to meet virtually any investment portfolio strategy. Unless you have specific funds you’d like to purchase, the average investor will likely pay nothing to trade mutual funds on either platform. As with options, Vanguard offers reduced trading fees for mutual funds to investors with more than $1 million on the account.

Neither platform charges inactivity fees, and neither charges non-trading fees for basic transactions such as depositing or withdrawing money. Neither requires a minimum balance to open an account.

Vanguard vs. Charles Schwab: Services & Features

As trading platforms, Vanguard and Charles Schwab offer generally similar products. Both are full-service brokerages, meaning that investors can trade in most mainstream securities and will have access to most mainstream forms of data.

Both Vanguard and Charles Schwab offer a full suite of information and technical indicators for investors, supporting research from basic data such as price history to sophisticated information such as company profiles and real-time updates. However, in terms of services and features, Charles Schwab has several areas where it pulls ahead of Vanguard.

For sophisticated investors, Schwab supports trading in both futures contracts and foreign currency markets. Vanguard does not support either of these assets. This is not a loss for the average investor, who should likely not trade these high-risk assets. However, it may impact more sophisticated investors who have the experience and the finances to trade in these markets safely.

For average investors, Vanguard tends to build its prices to more aggressively favor large investors. Fees on products like mutual funds and options contracts fall off for individuals who have $1 million or more invested with the company. This is not necessarily a problem for ordinary investors, as Vanguard’s prices are not prohibitively high to begin with. (Indeed, the only meaningful difference is that Vanguard charges a little bit more than Schwab to trade each options contract.) However, it remains true that the best deals on Vanguard’s platform are reserved for the wealthiest traders.

Finally, Schwab offers two branded platforms on which to trade. For most investors, the firm’s standard platform, available by website and app under the “Charles Schwab” brand, is more than sufficient. Its second platform, known as “StreetSmart,” offers a more complex trading environment for sophisticated investors. StreetSmart offers some tools for high volume, semi-professional traders that neither Schwab’s base brand nor Vanguard effectively offers, including the ability to respond to real-time market changes.

This brand will do little for average investors, in fact, it will be prohibitively complicated for an ordinary investor. But StreetSmart does have a lot to offer the particularly experienced investor.

Finally, Schwab offers a significantly wider range of order types than Vanguard does. Schwab’s platform supports complex interactions, such as conditional orders and triggers. Vanguard’s platform offers far fewer complex order types; however, it does offer all of the basics such as stop-loss and limit orders.

Vanguard vs. Charles Schwab: Online & Mobile Experience

Vanguard vs. Charles Schwab

Charles Schwab offers a generally more robust and well-designed user experience than Vanguard. As full-service brokerages, both platforms offer many ways to contact the firm if you have questions or need support. You can call, email, or chat with either Vanguard or Schwab. However, Schwab’s contact information is more prominent and easier to find, taking several steps out of the support process. This is not necessarily a dealbreaker but, particularly given how stressful it can be to need help accessing your money, Schwab’s more customer-friendly support structure is noteworthy.

Of the two platforms, Schwab’s apps are particularly better designed than Vanguard’s. Through both the Charles Schwab and the StreetSmart app it is generally easy to find information, research stocks and make a long-term plan. Vanguard’s app is not poorly designed. You can easily access your portfolio, find a given asset and see that asset’s basic information such as price and short-term price history. However, it can be difficult to find more sophisticated information. In fact, often Vanguard’s app does not support some of the more in-depth technical analyses that investors might want.

The firm’s website offers considerably more depth than its app does. Even here you will find that your options are rather more limited than they are in Schwab’s trading environment. It is fairly easy to navigate, though, via tabs to technical indicators and analysis.

That said, Charles Schwab’s trading platform may confuse inexperienced investors. In particular, both the firm’s flagship brand and StreetSmart rely on what is known as the All-In-One Trading Ticket. This is the screen where users actually execute trades that they have lined up, allowing you a complete view of all the changes you plan to make to your market position.

While this has potentially quite a bit of value for highly experienced investors, it also removes your trading from the actual assets you planned on purchasing. (That is, before you can make a trade you must navigate away from that asset’s price information and onto a different screen entirely.) New investors may find the All-In-One confusing, with a wall of options presented in one place, while experienced investors may find more hindrance than a help.

Vanguard vs. Charles Schwab: Who Should Use It?

Vanguard vs. Charles Schwab

Long before brokerages got into the trading platform game, Vanguard made its name primarily as a dealer in mutual funds. It is clear that this is where the firm’s identity still primarily lies.

The Vanguard platform heavily favors investors who are likely to move slowly and hold assets for a long time. Funds are easy to trade and far cheaper than on almost any computing platform. Trading options are relatively few, the platform does not support more exotic assets such as foreign exchange and futures, and Vanguard offers fewer streams of data than many modern investors may look for. All of this speaks to a platform built for traders who want to buy and hold their investments for a long period of time.

If you are an active investor, Vanguard may not be for you. You will likely find its interface frustrating and its options limited. However, most investors should not be active investors. The odds of a retail investor beating the market are quite low. (In fact, few professional investors ever beat the market.) If you want to hold assets for a while, then Vanguard may be just the right choice for you. This is particularly true if you want to concentrate your investments in mutual funds

And let’s be honest, unless you’re a day trader, you probably should concentrate your money in mutual funds and hold mainly long-term assets.

For sophisticated, high-volume traders, the Charles Schwab platform may be the better choice. In particular, its StreetSmart brand offers a wealth of data and responsiveness. This makes it well-tailored to active, semi-professional, and day traders. While this reviewer finds the All-In-One ticket unnecessarily difficult, by and large, this platform will do well for investors looking to move fast on complicated positions.

Bottom Line

Both Vanguard and Charles Schwab have attractive features and distinctive qualities. Investors who want to concentrate on mutual funds and long-term investments will find a lot to like about Vanguard. They’ll also save some money in the process. Highly active investors or those taking complicated positions will prefer Charles Schwab, particularly its StreetSmart brand. Another factor to consider: Charles Schwab’s 2020 acquisition of TD Ameritrade has expanded opportunities for its clients.

Tips for Investing

  • Once you’ve decided how you’re going to trade, now it’s time to figure out what to do with that platform. SmartAsset’s free tool matches you with up to three 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.
  • Now that we’ve compared these services, let’s get into the details. In our review of Vanguard, we dive into the nitty-gritty of their trading platform. You can also learn all about Charles Schwab in our review here.

Photo credit: ©iStock.com/vgajic, ©iStock.com/NicolasMcComber, ©iStock.com/P. Kijsanayothin

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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