Before you open an IRA, it's smart to shop around for the best broker for your investing style. The brokerage you choose will ultimately affect how much you pay in fees, as well as how many investments you can choose from.
Vanguard and Fidelity are two mutual fund managers turned discount brokers. Let's take a look at Vanguard vs. Fidelity in some of the most important areas to consider when opening an IRA.
Vanguard vs. Fidelity: At a glance
| Offer | Fidelity | Vanguard |
|---|---|---|
| Rating | Rating image, 5.0 out of 5 stars. 5.0/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. |
| Commissions | $0 commission for online U.S. stock and ETF trades; trade fractional shares for as little as $1 | $0 online; $25 broker-assisted fee for some phone trades of stocks and ETFs from other companies (Less than $1 million) |
| Account Minimum | $0 | $0 |
| Next Steps | Open Account for Fidelity Read Full Review | Read Review |
Commission prices: Vanguard vs. Fidelity
The internet has helped make it cheaper than ever to be an investor. Here are the standard commission prices for online trading with Vanguard and Fidelity, sorted by the type of investment:
| Brokerage | Stocks and ETFs | Stock options | Mutual funds |
|---|---|---|---|
| Vanguard | $0 per trade | $0 + $1.00 per contract | $0 for Vanguard and no-transaction- fee mutual funds, up to $20 per purchase for other mutual funds |
| Fidelity | $0 per trade | $0 + $0.65 per contract | $0 for Fidelity funds and no-transaction-fee funds; $49.95-$75 per purchase for other funds |
Data sources: Vanguard and Fidelity.
We should note that there is some fine print with commission prices, but much of it is in your favor. Many investors can avoid mutual fund commissions altogether thanks to thousands of no-transaction-fee (NTF) funds that these two brokers allow you to trade, such as the proprietary products offered by each company. You can also collect valuable bonuses and free trades through special offers for IRAs, which act as an effective discount on trading costs.
In other words, commission schedules tend to be more of a guide than a rule, since many trades are now completely fee free.
Mutual fund selection and commission-free choices
Vanguard and Fidelity make it easy to invest in their own funds, but they also offer thousands of funds from other asset managers. Both brokers also offer thousands of combined no-transaction-fee options to choose from in both index fund and actively-managed fund form -- no loads, no transaction fees, and no commissions! So although Fidelity's mutual fund commission rate appears much higher than Vanguard's, it's a non-issue if the funds you want are available on the NTF list.
| Brokerage | Total mutual funds | No-load, no-transaction-fee funds (NTF) |
|---|---|---|
| Vanguard | More than 6,800 | More than 3,000, including all Vanguard mutual funds |
| Fidelity | More than 10,000 | More than 3,300, including all Fidelity mutual funds |
Data sources: Vanguard and Fidelity.
Here, quality is more important than quantity. And if you have any particular loyalty to either company's brand of mutual funds -- meaning that you want a specific Vanguard fund or Fidelity fund -- it would be advantageous to go straight to the source. If you're determined to get the lowest possible fees, check out Fidelity's zero expense ratio index mutual funds.
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Minimum deposit requirement for IRAs
You won't find a minimum deposit requirement for Fidelity or Vanguard brokerage accounts. However, if you want to open an IRA, you should be aware of some minimum investment requirements for mutual funds.
There is no minimum investment to open a retail IRA with Fidelity. Many Fidelity mutual funds don't have an initial minimum investment requirement, although a few require a substantial initial commitment.
To open a Vanguard IRA, you'll need a minimum of $1,000 for Vanguard's target date retirement funds or STAR® funds, whereas most other funds have at least $3,000 minimums.
Of course, if you prefer stocks or ETFs, minimums are irrelevant. The minimum is whatever it costs to buy a single share of your favorite stock or exchange traded fund (ETF).
International stocks and ADR investments
You don't need a passport to take your portfolio overseas. Fidelity and Vanguard are two of only a handful of brokers that enable investors to buy and sell stocks directly on foreign markets.
| Type of Investment Options | Vanguard | Fidelity |
|---|---|---|
| American depositary receipts (ADRs) | Yes | Yes |
| Stocks traded on international stock markets | No | Yes |
| Mutual funds and ETFs of foreign stocks | Yes | Yes |
Data sources: Vanguard and Fidelity.
Always consider that trading on international markets can result in additional fees and expenses, and this is true with a brokerage account with either firm. If you want to invest internationally with Vanguard, check out its offerings for international stock and bond mutual funds and ETFs. This is the best way to invest internationally with Vanguard while avoiding fees and diversifying your portfolio. Vanguard charges a fee of $50 for some foreign securities transactions, on top of a commission.
Fidelity offers the ability to buy international stocks in 25 countries with 16 different currencies. Fidelity's commissions vary by currency and stock exchange around the world. Even though both brokers make it possible to trade internationally, it may be advantageous to invest via domestic tickers when possible to avoid higher fees and commissions.
Mobile app: Vanguard vs. Fidelity
If brokers want to keep up in the 21st century, they have to offer access to clients' IRAs on the go. Here's how each discount broker's users and customers rated their mobile applications.
| Brokerage | Apple App Store | Google Play |
|---|---|---|
| Vanguard | 4.7 stars | 3.5 stars |
| Fidelity | 4.8 stars | 4.4 stars |
Data sources: Vanguard and Fidelity.
IRA fees: Maintenance and inactivity fees
Although fees are largely going extinct, some live on. Fidelity charges no account fees for retail brokerage accounts or IRAs. Vanguard IRA accounts that are mutual-fund-only charge an annual fee of $25 for each Vanguard mutual fund. Vanguard brokerage account customers can avoid the $25 annual fee by signing up for electronic delivery of statements.
If you've ever seen the deluge of paper mail that a portfolio of stocks and mutual funds can create, you may prefer to have it all delivered electronically anyway. (Fun fact: The Wall Street Journal recently reported that 2 million trees are consumed each year printing mutual fund reports!)
You can also avoid Vanguard's account fee by having at least $5 million of qualifying assets with Vanguard. (But if you have that much money, you might not mind a $25 annual fee.)
Discount brokers drive down costs largely by eliminating many of the frills of full-service brokers. Today, though, many features are coming back, even though the costs are not. Online discount brokers offer their clients basic research functionality just for having an open account.
Vanguard offers a wide range of market news, insights, commentary, and research to help customers understand market trends and make investment decisions. It also offers a plethora of proprietary retirement tools, including its portfolio analysis tool for retirement savers. The tool analyzes your portfolio to show you how similar allocations have historically performed, going so far as to analyze it for expenses and taxes.
Similarly, Fidelity offers third-party research that includes insight from S&P, analyst upgrades and downgrades from hundreds of research companies, plus proprietary tools like Fidelity's insight into analysts' historical accuracy. The company's Planning & Guidance Center can be a real help in building a retirement portfolio, as it can score your savings progress and show you how changes to your assumptions and portfolio affect your retirement outlook.
We've just touched on a few highlights of each broker's research library. In truth, you'll find plenty to explore with either broker.
Best for IRAs: Vanguard vs. Fidelity
Considering they may be better known for their mutual funds, Vanguard and Fidelity have a lot to offer when it comes to brokerage services for IRAs. But which is better for you ultimately depends on how you invest. Investors who prefer Vanguard's funds may be better off going that route, while Fidelity loyalists would be wise to open an account with Fidelity, as it offers inexpensive and free ways to invest in its own mutual funds and ETFs.
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Alternatives to Consider
We recommend comparing brokerage options to ensure the account you're selecting is the best fit for you. To make your search easier, here's a short list of our best trading platforms of 2024.
| Account | Fees | Account Minimum | |
|---|---|---|---|
Featured Offer Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | $0 for stocks, ETFs, and options; $5 monthly for Robinhood Gold | $0 | Open Account for Robinhood |
| $0 for stocks, $0 for options contracts | $0 | Open Account for SoFi Invest | |
Rating image, 5.0 out of 5 stars. 5.0/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | $0 commission for online U.S. stock and ETF trades; trade fractional shares for as little as $1 | $0 | Open Account for Fidelity |
FAQs
Fidelity offers more than 10,000 investment funds from hundreds of companies, including more than 3,300 no-transaction-fee (NTF) funds. Although Vanguard offers a similarly competitive selection of over 3,000 NTF funds, if you want the widest possible range of investment opportunities, Fidelity could be the better choice.
Vanguard is famous for being a pioneer in the world of passive, low-cost, uncomplicated index fund investing. The investment philosophy of Vanguard is more geared toward passive investing -- buying well-diversified index funds with thousands of stocks and bonds, and not trying to beat the market. (Although Vanguard offers some actively managed funds, too.)
Fidelity has a wider range of investment funds if you want active management, and a more robust array of services if you want to buy and sell individual stocks. For example, Fidelity offers a wide range of market research, and gives you the ability to buy international stocks in 25 other countries (and 16 foreign currencies). If you want to pick stocks and build your own actively managed portfolio, Fidelity could be the best brokerage.
Our Brokerages Experts
By:Matt Frankel, CFP®
Writer, Analyst
Matt is a Certified Financial Planner™ and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
By:Ben Gran
Fact CheckedEric McWhinnie
Eric McWhinnie has been writing and editing digital content since 2010. He specializes in personal finance and investing. He also holds a bachelor’s degree in Finance.
