When starting your investment journey, picking where to invest in index funds is important. The two firms we will be talking about today, Fidelity and Vanguard, have a few key differences. When looking at what they each offer, pay attention to fees and performances. I like to compare funds side by side so you can […]
When starting your investment journey, picking where to invest in index funds is important. The two firms we will be talking about today, Fidelity and Vanguard, have a few key differences.
When looking at what they each offer, pay attention to fees and performances. I like to compare funds side by side so you can choose what’s best for your portfolio.
Vanguard is known for its low-cost funds and they have excellent options available. Their average expense ratio is .07%. One downside is they have a $3000 minimum to get invested per fund you want to buy, so if you’re interested in 3 different funds you’ll need $9000 to get started. If you’re not at that point you can move along from Vanguard altogether.
The industry average expense ratio is .23%, so 3x more costly. But, Fidelity offers even lower with their average expense ratio being .04%, so .03% less than Vanguards.
Over 30 years time, the expense ratio fees add up to be about $6.7k with Vanguard and about $3.8k with Fidelity. This isn’t a super significant difference, but compared to the industry average of $21k this is a big difference!
High fees do mean you keep less of your account’s growth overall, so being aware and making sure you get low-cost fees on your fund is important.
With index funds, you aren’t looking for superior performance of one over the other. If they’re the same type of fund, they should have the same performance. I still like to compare just to see what I can expect from my funds.
I also like to compare different funds in the same category to help me narrow down my options.
When it comes to making a decision, here are some things to keep in mind!
If you choose the best-performing fund, it comes with more risk than the others. If this is long-term money, maybe that’s what you’re going for! If not, you may want to choose something more focused on keeping its value than growing.
Fidelity funds are the lower-cost option, but you may have to have a Fidelity account to use them. Another thing to consider if you want to invest in individual stocks on a limited budget, Fidelity offers stock slices!
One reason you may want to use Vanguard is for its low-cost robo-advisor. They offer it with a fee of only .15% vs Fidelity’s .35%, but Fidelity waives the fee if you have less than $10k invested. For beginner investors, this may be the way to go.
Don’t let the fear of fees hold you back from starting your investment journey. You can always make changes later!