Vanguard vs. Charles Schwab: A Comparison of Leading Brokers
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice, and in 2017 he received the SABEW Best in Business Award.
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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 brokerage account, either broker could be a very good choice for you.
Here's how these two popular brokerage services 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. In the cases of Vanguard and Schwab, here are the commissions for trading several different investments:
|Vanguard||$0 per trade||$1 per contract||$20|
|Charles Schwab||$0||$0.65 per contract||$49.95|
As you can see, both brokers have joined the $0 commission club when it comes to online stock trading (but there are still commissions for phone and broker-assisted trades). For mutual funds, Vanguard is significantly cheaper, while options traders would save money with Schwab.
Mutual fund investors should keep in mind that these costs apply only to some funds. Both brokers offer a long list of mutual funds that can be traded for free.
No-transaction-fee mutual funds
If funds play an integral role in your portfolio, you'll be pleased to find that Vanguard and Charles Schwab offer thousands of no-transaction-fee (NTF) mutual funds.
|Broker||NTF Mutual Funds|
|Vanguard||About 3,400, including all Vanguard funds|
|Charles Schwab||Nearly 4,300|
Depending on how you build your portfolio, either broker could be a good fit for fund investors. You could easily construct a diversified portfolio from just the NTF mutual funds available with 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 or ETF, or to meet the minimum initial investment for a particular mutual fund (and pay the commission, if applicable).
Both of these brokers have platforms that are more than sufficient for most long-term investors. Schwab's platform offers more features that should appeal to more active investors, including its Schwab Mobile platform (which can be used even on Apple Watch) and its full-featured desktop StreetSmart Edge platform. Both of Schwab's platforms are available to all investors, regardless of account size. On the other hand, Vanguard's trading platform is geared toward long-term investors who simply want to be able to place an occasional buy or sell order.
Long-term investors will find Vanguard and Charles Schwab suitable for their needs, but active investors and frequent traders would probably be better served with Schwab. 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 more than 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 Standard & Poor's, 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 March 6, 2020).
|Broker||Apple App Store||Google Play|
|Vanguard||4.8 stars||2.5 stars|
|Charles Schwab||4.8 stars||4.4 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 features that appeal to active investors. 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.