Published in: Buying Stocks | Jan. 29, 2019
Online Stock Brokers: Vanguard vs. Ally Invest
By: Jordan Wathen
There's more to picking an online stockbroker than just costs and commissions. Here's how Vanguard and Ally Invest compare on features that are important to long-term investors.
When you're ready to start making investments for the future, you'll need to open up a brokerage account to place your trades. Two well-known online discount brokers, Vanguard and Ally Invest, make buying stocks, funds, and ETFs a snap.
Below, we'll compare Vanguard and Ally Invest in several key factors like commissions, international stocks, and account minimums to help you determine which broker better fits the needs of your portfolio.
Trading costs and commissions
Broker Stocks/Options ETFs Mutual Funds Vanguard Stocks: $7.00 per trade + Options: $20 + $1 per options contract $7.00 per trade $20.00 per purchase Ally Invest $4.95 per trade + $0.65 per options contract $4.95 per trade $9.95 per purchase
As you can see, the differences in commission prices between the two companies are marginal at best, adding up to a little more than a couple dollars for each trade.
In addition, many investors qualify for discounts. Investors who keep at least $50,000 invested in Vanguard's funds qualify for discounted trades, for example. Ally Invest offers discounted stock and options trades ($3.95 and $0.50 per option, respectively) for investors who maintain a balance of at least $100,000 or make 30 trades per quarter. IRA investors can substantially reduce the cost of trading by tapping into numerous special offers for opening an IRA account.
Commission-free ETFs and NTF Funds
Investors can further reduce their trading costs by investing in ETFs and mutual funds that are designated commission-free or no-transaction-fee (NTF). Vanguard provides its clients thousands of ETFs and mutual funds that can be bought and sold fee-free.
Broker Commission-Free ETFs NTF Mutual Funds Vanguard All Vanguard ETFs Thousands (including Vanguard mutual funds) Ally Invest 100+ None
If funds are important to you, Vanguard's list of commission-free ETFs and NTF mutual funds might be a compelling advantage for it. While Ally Invest now offers over 100 commission-free ETFs, it offers no NTF mutual funds. Thus, depending on the funds you wish to invest in, either broker may have the better deal for you.
You can open an account at Vanguard or Ally Invest with just a few dollars. Both brokerages are no-minimum brokers, meaning that you won't have to meet large initial deposit requirements just to open an account.
Keep in mind that some brokers give you cash bonuses, commission-free trades, added research capabilities, and other perks for keeping a higher balance. These offers are always changing, but we keep an updated list of offers in our broker center. You might consider making a larger initial deposit if you can collect a big bonus or score some commission-free trades.
We have a confession to make: We're long-term investors, not traders. Therefore, we tend to spend more of our time holding stocks rather than trading them, and we don't have a particularly strong opinion about trading platforms.
As with operating systems or soft drinks, we tend to think that the debates about which broker has the best platform mostly comes down to personal preference and opinion. If the bells and whistles of a trading platform are important to you, we'd suggest trying out a broker's demo account to see how it fits you. Because, ultimately, different trading or investing styles require different features.
International stocks and ADRs
You can invest in foreign companies by buying American depositary receipts (ADRs) on U.S. markets as a client of either broker. However, if you want to go direct to the source to trade on an international market, there are some limitations. Only Vanguard will allow you to transact on an international exchange, but it charges a $50 fee in addition to a commission to make each trade.
Notably, investors can shop from thousands of ETFs and mutual funds that hold foreign stocks, so these limitations really only apply to buying or selling shares of individual companies.
Research quality and tools
One of the best parts of having a brokerage account is getting supplemental research to help you make good investment decisions. Vanguard customers have access to reports and research from Standard and Poor's, Thomson Reuters, and First Call, just to name a few third-party research providers. Ally Invest offers profit and loss calculators, streaming charts, plus market and company snapshots for individual stocks. Depending on your personal needs, you could find either brokerage provides ample research to fit your investment style.
Better online stock broker: Vanguard or Ally Invest?
Truly, you could make the case for either brokerage being the "better" broker, because it's all dependent on your personal portfolio. Ally Invest has lower published commissions across the board, but it doesn't offer access to international markets. Vanguard has higher standard commissions, but provides more opportunities to invest in foreign stocks, and offers a vast list of commission-free ETFs and no-transaction-fee mutual funds. Ultimately, it's about how a broker's services fit within the puzzle of your personal portfolio.
If commissions are an important factor for you, Ally is worth a second look. You can read our complete review of Ally here.
Using the wrong broker could cost you serious money
Over the long term, there's been no better way to grow your wealth than investing in the stock market. But using the wrong broker could make a big dent in your investing returns. Our experts have ranked and reviewed the top online stock brokers - simply click here to see the results and learn how to take advantage of the free trades and cash bonuses that our top-rated brokers are offering.