Fidelity vs. Vanguard vs. TD Ameritrade - which one or something else for ETF index funds?

ElainePDX

Level 2 Member
I need a little advice. We are finally moving some cash out of Wells Fargo Advisors (having liquidated some investments there) and my H wants to go into a portfolio of ETF index funds. I opened a Fidelity Investment account when I got our FIDO Amex card, and I thought we should just do it there. A friend of his suggested TD Ameritrade, claiming the fees are lower.

I know I can research this myself online but if any of you have this kind of info at your fingertips, I'd be most grateful if you could put those fingertips to your keyboard and advise me of why we might (or might not) prefer Fidelity, Vanguard or TD Ameritrade? Or another firm?

We are also helping our 20something son get some of his cash invested (again, sold out of Wells to do it) and are thinking ETF index funds as well as perhaps something a little more risky, given his young age. Yes, he does have a Roth IRA (at TIAA CREF) but beyond that, we'd like to have him open an investment account at a firm like Fidelity, etc. which he can use for investments into the future.

Are there reasons to prefer one firm over the other? Thanks much!
 

Matt

Administrator
Staff member
The fee issue is pretty negligible and not something I would lose sleep over.

It can matter more with lower investment value but overall with each etf being about $10k or more it's not something you will really notice. I'll do a post, as I want to confirm that, but that's my gut feeling.
 

asthejoeflies

Moderator
Staff member
We have both Fidelity and Vanguard accounts. Vanguard offers far superior index funds IMO, especially Admiral funds if you have the cash - with an expense ratio of something like 0.20% vs. the cheapest FIDO one being more like 0.80%. Over time, if you're just indexing, the fees do add up. I don't lose sleep over them but I prefer Vanguard when I have a choice - it does make a difference. Depending on your terminology, the benefit of the broker owned funds over ETFs is you dont' pay a commission to buy them. (Though almost all brokerages have fee free ETFs as well)
 

Matt

Administrator
Staff member
We have both Fidelity and Vanguard accounts. Vanguard offers far superior index funds IMO, especially Admiral funds if you have the cash - with an expense ratio of something like 0.20% vs. the cheapest FIDO one being more like 0.80%. Over time, if you're just indexing, the fees do add up. I don't lose sleep over them but I prefer Vanguard when I have a choice - it does make a difference. Depending on your terminology, the benefit of the broker owned funds over ETFs is you dont' pay a commission to buy them. (Though almost all brokerages have fee free ETFs as well)
The research I was planning to get to ( at some point between diapers and a billion other things was to compare things like the Spartan funds with td and Vanguard:

spartan.PNG
 

ElainePDX

Level 2 Member
Thank you @asthejoeflies and @Matt - as I expected, you guys know where to begin such comparisons far better than I do. We're hoping to assemble info and then take action by mid-Sept.

Another question - should my son (age 27, single, no loans) be concerned about choosing tax-managed funds, or would something like Spartan be good for him? I am looking for something he can buy and basically forget about....that is, money he can just leave there for a few years, assuming he does an "investment tune-up" every 6-12 months, but with little management needed until he gets married, buys a house, has a kid, whatever. Meanwhile, when he claims to have no time, his assets can be invested.
 
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Annie H.

Egalatarian
http://www.obliviousinvestor.com/why-i-prefer-vanguard-lifestrategy-funds-to-target-retirement-funds/

Vanguard funds are going to be cheaper and a much better alternative. I hope the above article --it's a great blog, sign up!--will give you a good start. Bogleheads.org can be extremely helpful for asking questions, great wikis and lots of other resources. it's slightly more complicated than just set and forget and this website also recommends a few books for a basic understanding and education.
 

Matt

Administrator
Staff member
http://www.obliviousinvestor.com/why-i-prefer-vanguard-lifestrategy-funds-to-target-retirement-funds/

Vanguard funds are going to be cheaper and a much better alternative. I hope the above article --it's a great blog, sign up!--will give you a good start. Bogleheads.org can be extremely helpful for asking questions, great wikis and lots of other resources. it's slightly more complicated than just set and forget and this website also recommends a few books for a basic understanding and education.
OK we are going to split hairs here, and I personally like to default to throwing out Vanguard as the best option, but the fact of the matter is that there are other ETFs that can offer better prices - that was going to be what I looked into. There will be options that surprise you (if you are a finance geek and surprised and excited by such things!)
 
Reactions: SCC

Annie H.

Egalatarian
OK we are going to split hairs here, and I personally like to default to throwing out Vanguard as the best option, but the fact of the matter is that there are other ETFs that can offer better prices - that was going to be what I looked into. There will be options that surprise you (if you are a finance geek and surprised and excite by such things!)
We're not exactly splitting hairs. I should have said,"if you want to set and forget it's a good idea to use a fund of funds such as Lifestyle Retirement which is a better option than Spartan funds although it will cost you more than if you just bought Vanguard funds and put together your own portfolio of funds." U right, me wrong. Yours bigger. :).
I no longer keep current with this stuff but I believe this field is moving faster than I've ever seen especially --or because of --Robo advisors.
 

Matt

Administrator
Staff member
Here's a Top 100 list- interestingly the #1 is iShares (after a waiver that brings them from 0.15% to 0%) followed by Schwab in #2 and #3. Vanguard is there at number three. If you look at the top 100, even those at the bottom are only charging .14% for sectors, so it is a lot of hair splitting regarding these:

http://saverocity.com/finance/top-100-etfs-expense-ratio/

I agree that Target Date type funds are great options for set it and forget it - will have to look a bit more closely at the different Lifestyle retirement options out there, thanks for that.
 

Jig

Level 2 Member
Wanted to mention Schwab's ETFs often have lower fees than even Vanguard at this time. (Whoops, Matt beat me to it by 2 mins!)

However, far more important than the miniscule fund fee differences, I would strongly encourage anyone looking at their investment decisions to figure out their overall asset allocation and how they intend to manage it going forward. The answer for most non-deep finance types should be something like a Vanguard retirement target date fund with regular automatic investments from their checking/cash accounts. Unfortunately, even Vanguard's target date funds are massively skewed by home country bias with 60% US equities for a 40 year old, and equity bias to some extent with 90% equities for a 40 year old. Most long term academic research suggests those are far too high for a human's true risk tolerance given equity volatility.

Roboadvisors with more diversified asset allocation could be a solution, prepackaged optimized asset mixes can add 1% annually even without some additional edges like momentum and value. Wealthfront seems like the best of the roboadvisors to me, but just getting involved with their process is too much for most people's knowledge base. Their risk tolerance questionnaire is a good step, but most people don't know their own risk tolerance levels well (i.e. high when equity markets rising, but suddenly low when equity markets fall). Nor are people good at predicting how often they need cash liquidity and how much. Which leads to them pulling out of products like Wealthfront just when they should stay the course, and vice versa. Most will have some level of blind belief in a brand like Vanguard, which will protect them somewhat from themselves.
 

Annie H.

Egalatarian
Answer both @Matt & @Jig. I do not get robo advisers at all esp. when they are charging 75 bps (I'm not interested and so don't pay full attention, guess they start @ 15bps) but I can get a real human being to manage my investments for 30bps (fixed fee--admittedly it's because my account is larger). Fixed fee, low-cost, index/passive advisors are a real niche and very hard to find. I've had a post on "do you need a FA on my back burner forever)., Jig, you make very good points about knowledge, risk tolerance, and esp. asset allocation, etc. Add in the controversy about TLH- tax loss harvesting and how often to rebalance and beginners heads spin. Problem is if folks can't do it themselves, they're not usually qualified-- or interested in learning acquiring the knowledge-to do it themselves. I think I read Vgd has now gone from 1% down to 30bps but I may be wrong. I'm not a fan of their mgt. at all,. Very cookie cutter even though you get to speak to a real live FA.

@Matt-- if you don't know-- and you probably do-- the "competition" among various fund families w/regard to Target Date is fierce and brokerages keep "tweaking" the AA-- higher equity and more risk--in order to compete by showing higher returns and attract more clients. It's gotten a lot harder to do "set and forget" because target date funds don't stay stable and you might have a 20XX fund where you thought your exposure was XX/XX (equity/fixed) and you might find that instead of 70/30 you have 80/20 and more risk. A couple years ago I tracked returns of target date (Vanguard) vs. lifestyle and was surprised to find lifestyle with less risk (lower equity) were beating target date.

Best advisor in the world, bar non-- John Gorlow at Cardiff Park Advisors. You can't find anyone more ethical and concerned about clients who sometimes take on the appearance of cult-followers :) Check out the website just for an easy to follow education on passive investing and portfolio design (for readers in general, not you two). Took me forever to find him and lots of battle scars from interacting, even hiring, a few others in this low, fixed fee, passive investment niche.

http://www.cardiffpark.com/

I'd be glad to answer any questions about Cardiff Park--either by PM or publicly. I get no referral fees, airline miles or points. I am, however, trying to figure out a way for him to offer CC payments to his clients-- so far unsuccessfully--at a lower cost to him than Quickbooks Bill Pay Services!
 

ElainePDX

Level 2 Member
Thanks everyone and happy to see a @Saverocity blog post on the topic too. I am going to ask both my husband and son to read this entire thread as well as some of Matt's posts. Or they'll get no dinner ;) !

Seriously, he will be done with his latest 100% travel contract and will be home in mid Sept. and we want to help him get his finances in order. He's saved just about all his salary so he has significant funds - at least for a 20something - to work with. His current Roth IRA is a lifestyle fund from TIAA-CREF. But going forward it makes sense to make some new choices.

Keep the ideas coming - I really appreciate them all!
 

thorax

Level 90 ( ͡° ͜ʖ ͡°) Warlock
I need a little advice. We are finally moving some cash out of Wells Fargo Advisors (having liquidated some investments there) and my H wants to go into a portfolio of ETF index funds. I opened a Fidelity Investment account when I got our FIDO Amex card, and I thought we should just do it there. A friend of his suggested TD Ameritrade, claiming the fees are lower.

I know I can research this myself online but if any of you have this kind of info at your fingertips, I'd be most grateful if you could put those fingertips to your keyboard and advise me of why we might (or might not) prefer Fidelity, Vanguard or TD Ameritrade? Or another firm?

We are also helping our 20something son get some of his cash invested (again, sold out of Wells to do it) and are thinking ETF index funds as well as perhaps something a little more risky, given his young age. Yes, he does have a Roth IRA (at TIAA CREF) but beyond that, we'd like to have him open an investment account at a firm like Fidelity, etc. which he can use for investments into the future.

Are there reasons to prefer one firm over the other? Thanks much!
Have you looked at all at Motif Investing? They basically allow you to create your own fund with up to 30 stocks (or ETFs) and a rebalance of the entire holding, or 'motif', only costs $9. You can also chose motifs that they have setup for various industries or use someone else's motif if they have made it public.

https://www.motifinvesting.com/
 

Matt

Administrator
Staff member
I've written about Motif a few times in the past, frankly I haven't really taken them too seriously due to the gimmicky nature of their product, but they can create a good ETF mix for the price.
 

Annie H.

Egalatarian
I've used Fido, Ameritrade and Schwab through institutional accounts and Vanguard, E-trade and Scott trade on my own. I think it does matter whether you have an individual or institutional account. Fidelity is horrible with institutional accounts and appear to only do it because advisors want/need that option for their clients. TD Ameritrade is horrible all the way around--individual and institutional-- in my experience. Just. horrible. I paid to leave (double the usual fee) although Schwab did reimburse. I've been pleased with Schwab on all fronts and continue to hold our accounts there. Vanguard is... Vanguard-- clunky although they are supposedly upgrading and if you wish to hold Vanguard funds, there isn't a better place. No sure what their ETF schedule is. For infrequent/passive investors service is more important than fee as far as I'm concerned--you can shop around and find discount brokers.
 

thorax

Level 90 ( ͡° ͜ʖ ͡°) Warlock
I've written about Motif a few times in the past, frankly I haven't really taken them too seriously due to the gimmicky nature of their product, but they can create a good ETF mix for the price.
It's different, yes. But I dunno about gimmicky. As far as I'm concerned, if Chase and Goldman like it - I probably should too.
 

Matt

Administrator
Staff member
It's different, yes. But I dunno about gimmicky. As far as I'm concerned, if Chase and Goldman like it - I probably should too.
I doubt they like it for their own investments vs like it for a crap shoot that it might make profit from trade fees with all the people who think they are Gordon Gekko now.

It's neat, and can work for ETFs , but it's not really it's intended audience. If you checkout the site more closely you'll see what I mean by gimmicky- it creates 'fancy' portfolios to be sold to others and has silly names and whatnot.... Certainly making it's money from the people who think they know how to invest.
 

thorax

Level 90 ( ͡° ͜ʖ ͡°) Warlock
Okay, I guess I see what you're saying. Intended audience or not though, if it works and is a good deal...
 

Nguyen

Level 2 Member
I have TDAmeritrade. It offers some free commission on ETFs when you keep them for 30 days without trading such as Vanguard funds. It also has promotions for giving money/gift card along with some free trades when you transfer new money to new or existing account. For example, I got $100 and 25 free trades for a year when moving $25K in.
 

PointsEarner615

Level 2 Member
I have TD Ameritrade as well and they have over a 100 commission free ETFs, with the majority of them between iShares and Vanguard. I've been pretty happy for the most part.

I did however just open up a Roth IRA with Fidelity since they offer the ability to purchase TIPS at auction commission free. TD Ameritrade charges $25 for the privilege.
 

credipig

Level 2 Member
I would like to clarify one misconception regarding ETFs vs mutual funds. When one buys an ETF they pay a commission to buy and sell it. They also pay the fund management fee, since it is subtracted from the fund's NAV. Of course you could get around that by selling the ETF before that occurs, but then you deal with short term gain taxes.

After 24 years investing, I've learned slow and steady is the best strategy. I have an allocation of 65% stock funds/35% bond funds and intend to keep it that way. I attribute much of my investing success to Bogleheads.
 

Annie H.

Egalatarian
I attribute much of my investing success to Bogleheads.
I'm a Boglehead, you're welcome.;)

Welcome to Saverocity. We have way more fun than BH's. Hope it won't be too hard for you to get used to little or no moderation! @Matt sometimes talks tough but he's a real sweetheart and has provided all of us with a very, very excellent forum.
 

SC Trojan

Level 2 Member
I've had TDAmeritrade and Fidelity. In my opinion Fidelity is WAY better. I closed my TDAmeritrade account a few years ago because they wait until the last minute to send out your tax forms, which really ticks me off. Also, they didn't always track my tax basis, which was just lazy and created a lot of hassle when I sold stocks. Fidelity is just super professional in everything they do, and the few times I have called them for help they have been VERY knowledgeable.
 

Annie H.

Egalatarian
I've had TDAmeritrade and Fidelity. In my opinion Fidelity is WAY better. I closed my TDAmeritrade account a few years ago because they wait until the last minute to send out your tax forms, which really ticks me off. Also, they didn't always track my tax basis, which was just lazy and created a lot of hassle when I sold stocks. Fidelity is just super professional in everything they do, and the few times I have called them for help they have been VERY knowledgeable.
I nominate you for Level 2 because you told the truth about TDAmeritrade. I've had problems with Fidelity and 529s and Institutional accounts but TD Ameritrade makes WM clerks look good!
 
R

RamboAroundTheWorld

Guest
I set The Great Satan up with a Vanguard account after I got them to ditch Chase Brokerage. They've been doing very will with the index funds and their customer service is quite good.
 

Ryan-o

Level 2 Member
They also pay the fund management fee, since it is subtracted from the fund's NAV. Of course you could get around that by selling the ETF before that occurs, but then you deal with short term gain taxes.
What exactly do you mean by this? Sorry a bit of a noob here. Couldn't you avoid short term taxes if traded within a tax advantaged account?
 

Matt

Administrator
Staff member
What exactly do you mean by this? Sorry a bit of a noob here. Couldn't you avoid short term taxes if traded within a tax advantaged account?
Yes, you would avoid cap gains and losses with a tax advantaged account.

But you shouldn't bother. The amounts in question aren't worth fussing over, plus you might argue that they are already baked in anyway.

ETFs are a basket of stocks that have internal rebalancing, this is done to maintain their tracking to the index (or strategy) you pay a fee for the management of that. The fees you should be paying are about 0.14% or less annually. Therefore if you have a $10,000 Roth you are looking at $14 per year in management fees.
 

credipig

Level 2 Member
Good point Matt. I like to really watch those fees though. That's just me. In my mind $14 on $10,000 for one year isn't a big deal. $1400 on $1,000,000 for example, is meaningful to me. Year over year, those fees really add up. But I'm not a trader; I'm a long term investor. So the direct mutual fund route is best for me. ETFs would be best for a trader.
 

Matt

Administrator
Staff member
Good point Matt. I like to really watch those fees though. That's just me. In my mind $14 on $10,000 for one year isn't a big deal. $1400 on $1,000,000 for example, is meaningful to me. Year over year, those fees really add up. But I'm not a trader; I'm a long term investor. So the direct mutual fund route is best for me. ETFs would be best for a trader.
Well, I specifically mentioned that price because we are talking with Ryan on another thread, and that's his Roth amount right now - the trade fees would destroy any profit sniping.

Though I am very confused by your view that an ETF is for traders - ETFs are tools to implement investment strategies, they are really interchangeable with mutual funds in terms of costs for the most part. From what I can see you can hold ETFs for less than the lowest cost mutual fund - and if you are at the 1M mark then the trade fees on a small basket are negligible.

What funds do you hold? Would be keen to examine them vs ETFs for your annual costs.
 

Mountain Trader

Level 2 Member
I just rediscovered this thread and wanted to add that I have now had it with Fidelity enough to move a big chunk of assets over to Schwab next week.

It seems every time I contact Fido, I get an argument or contradiction of some kind. The latest episode was when I called to confirm the date funds would free up from our latest (and likely last) "deposit cash/earn miles". First CSR gave vague date too far out, had no support for answer, then wanted to argue. He switched to second opinion, which also sounded too far out. Got supervisor (in another city-they have people everywhere it seems, so get names, locations and extensions). I told her "Let's read the T & Cs", which say money is out of jail when award miles are given. She responds that miles were awarded in mid February. I log onto my FF account and then ask her if award was made in mid February, why did airline post them in the third week in January?

And the errors always seem to go their way.

Bottom line for me is they have some good managed funds if that's what you want. Other than that, I am only going to keep enough over there to use my FIA 2% card and my back-up ATM card, and do the rest of my business elsewhere.

Schwab not only says they appreciate your business, they act like it.
 

credipig

Level 2 Member
Matt, it was late. I was off. :) I understand the only real difference in cost is the extra transaction fee for buying/selling the ETF. Mutual fund management fees are subtracted from the mutual fund share price.
 

SC Trojan

Level 2 Member
I haven't tried Schwab. I have Fidelity and Vanguard and prefer Fidelity, though I have nothing specific against Vanguard to be honest. Fidelity just seems to do everything 1st class IMO. I've made a couple bonehead errors on my accounts and they REALLY took the time to be knowledgeable and walk me through things to get it right. Possibly the best customer service I've had in anything. Like I said, nothing against either Vanguard or Schwab, but don't sleep on Fidelity!
 
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