Online Brokerage Comparison: Vanguard vs. Ally Invest
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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 see how Vanguard and Ally Invest compare across 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
|Vanguard||$0 per trade||$1 per contract||$20|
|Ally Invest||$0||$0.50 per contract||$9.95|
As you can see, both brokers have joined in with most other online brokers in offering commission-free stock trading. Note that this only applies to online trades -- if you make a trade through the broker's automated phone system or with the assistance of a real, live broker, you should expect to pay some type of commission.
For options and mutual funds, neither broker is particularly expensive, but Ally Invest is certainly the lower-cost choice. If commissions are an important factor for you, Ally Invest is worth a second look. You can read our complete review of Ally Invest here.
That said, Vanguard offers all of its own mutual funds as well as many others without commissions. And in contrast, Ally Invest doesn't have commission-free mutual funds.
Trading mutual funds
Mutual fund 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 with thousands of mutual funds that can be bought and sold fee-free, while Ally Invest does not.
|Broker||NTF Mutual Funds|
|Vanguard||About 3,400 (including all Vanguard funds)|
If funds are important to you, Vanguard's list of NTF mutual funds might give it a compelling advantage. Ally Invest currently offers no NTF mutual funds (although its mutual fund commission is an industry-low $9.95). Obviously, if you aren't planning to buy mutual funds this won't be a major factor, but Vanguard has the clear edge for most mutual fund investors.
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 are always changing, so keep an eye on our updated list of offers from the best online stock brokers. You might consider making a larger initial deposit if you could collect a big bonus or score some commission-free trades.
It's also worth noting that many mutual funds have minimum initial investment requirements, so while you can open an account with any amount of money, be sure to check the minimums for any mutual funds you're interested in.
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.
Plus, both Vanguard and Ally Invest have simple, user-friendly trading platforms that are well suited to most long-term investors. Frequent traders and sophisticated investors might prefer to choose a broker that offers a complex trading platform.
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 for options, but it doesn't offer any no-transaction-fee mutual funds or access to international markets. Vanguard has higher commissions on options and on any mutual funds that don't trade on an NTF basis, but gives the opportunity to invest in foreign stocks, and offers a vast list of no-transaction-fee mutual funds. Ultimately, it's about how a broker's services fit within the puzzle of your personal portfolio.