Published in: Buying Stocks | Dec. 4, 2018
Vanguard vs. Charles Schwab: A Comparison of Leading Brokers
By: Jordan Wathen
Vanguard and Charles Schwab are popular brokerages for their low costs, ETF and mutual fund availability, and research qualities. Here's how the two compare to one another.
Image source: Getty Images.
The investing world is always changing. Although Vanguard and Charles Schwab might be better known as asset managers (or, in Schwab's case, a bank), both companies also act as brokers to process millions of trades for their customers around the clock. If you plan on opening a new brokerage account, either broker could be a very good choice for you.
Here's how these two popular choices compare on the basis of commissions, research, and other important criteria for long-term investors.
Trading costs and commissions
While there's more to a brokerage than its trading costs, how much you pay to place a trade is important, especially for people who are more active in the markets. Here are the typical commissions for trading several different investments:
|Vanguard||Stocks: $7 per trade + Options: $20 + $1 per contract||$7 per trade||$35 per purchase|
|Charles Schwab||$8.95 per trade + $0.75 per options contract||$8.95 per trade||$76 per purchase|
With the exception of mutual funds and options, the difference in commission prices amounts to just a couple of dollars in either direction.
Keep in mind that there is some leeway with commission costs. Both brokers offer a long list of ETFs and mutual funds that can be traded for free. In addition, promotional offers for IRA accounts can further reduce your actual trading costs. Vanguard cuts commissions for investors who keep at least $50,000 invested in its ETFs and mutual funds, too.
Commission-free ETFs and NTF Funds
If funds play an integral role in your portfolio, you'll be pleased to find that Vanguard and Charles Schwab offer thousands of commission-free ETFs and no-transaction-fee (NTF) mutual funds that you can trade free of any transaction fees.
|Broker||Commission-Free ETFs||NTF Mutual Funds|
|Vanguard||55 ETFs (All Vanguard ETFs)||Thousands (including Vanguard mutual funds)|
|Charles Schwab||200+ (Schwab, State Street, Guggenheim, PowerShares, etc.)||3,989|
Depending on how you build your portfolio, either broker could be a good fit for fund investors. You can easily construct a diversified portfolio just from the commission-free ETFs and NTF mutual funds available on either brokerage.
Although it takes money to make money, it doesn't take much money to get started. Vanguard and Charles Schwab have no-minimum account requirements.
We'll caution that it may be wise to start with a little more than just pocket change. You'll need to have enough money in your account to buy at least one share of a stock, ETF, or mutual fund (and pay the commission) to actually make an investment.
We at The Ascent like to invest in businesses that we think will be great businesses years and decades from now. For this reason, we don't really care all that much about the features and functionality of a trading platform, so long as we can easily make the occasional buy or sell order.
Long-term investors will find Vanguard and Charles Schwab suitable for their needs. Truthfully, a preference for any platform is usually rooted in subjective personal opinion, so we'll let you be the judge of which platform feels better to you.
International stocks and ADRs
Cancel your flight. You don't need to go overseas to invest in foreign companies. Vanguard and Charles Schwab customers can trade American depositary receipts (ADRs) from their online accounts.
If you want to invest in stocks that don't have a listing in the United States, your options are a little more limited. Vanguard can route trades to international stock markets, but that comes with the cost of a $50 fee in addition to a commission on every trade. Schwab investors can access over 30 international markets through Schwab's Global Services Desk. The Schwab Global Account platform also offers trading in eight currencies and 12 foreign markets.
Research quality and tools
More information is generally a good thing. Both brokers have plenty of research material and tools, including stock and fund screeners, news sourced direct from the wires, and proprietary features available only to their customers.
Third-party research is also plentiful, as both offer access to insights from Standard & Poor's for example. Vanguard also provides research from Thomson Reuters and First Call. Schwab customers can tap into the wisdom of Credit Suisse, Morningstar, and Argus Research analysts from their account. Truly, you'll find plenty of easy-to-use research tools at either broker.
You can now make a trade from virtually anywhere around the world thanks to mobile trading apps. Here's how each brokers' users and clients rated their mobile capabilities on iOS and Android (as of Dec. 6, 2016).
|Broker||Apple App Store||Google Play|
|Vanguard||2.0 stars||4.0 stars|
|Charles Schwab||3.5 stars||4.0 stars|
Naming the better broker: Vanguard vs. Charles Schwab
Can we call it a tie? The truth is that either broker is suitable for a long-term investor, depending on one's needs. Vanguard offers more access to foreign stocks; Charles Schwab offers more commission-free ETFs. Ultimately, the better brokerage is dependent on how you invest.
In that consideration - make sure you check out our complete rating of today's best brokers to see which brokers are even more highly rated than either Schwab or Vanguard.
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.