Vanguard vs. Robinhood: Which Broker Is Right for You?

Investors of all stripes are likely to consider Vanguard vs. Robinhood, two of the best online brokers. Vanguard is one of the older brokers in the industry, and its long-term success lies in its broad mutual fund offering to passive investors. Robinhood is an upstart, famous for zero-dollar commission fees and a one-of-a-kind user experience. Which broker is best for you? Read on, where we'll break it down in our review of Vanguard vs. Robinhood.

Ratings methodology

Like many brokers, Vanguard offers zero-commission trading for online stock, ETF, and Vanguard mutual fund trades. In terms of options contracts, Vanguard's $1 commissions are much higher than what we typically see for competitors, but it's worth noting that accounts with over $1 million invested with Vanguard get a certain number of options trades for free.

Vanguard's mutual fund commissions are lower than what we usually see with other brokers. There are no commissions for Vanguard's own mutual funds, as well as many other no-transaction-fee (NTF) funds, and commissions are only $20 for funds on the transaction-fee (TF) list. And just like with options, Vanguard gives high-balance accounts a certain number of mutual fund trades for free. Vanguard charges a $25 account service fee annually, but it's easy enough to avoid by signing up for e-delivery of account communications.

Since Robinhood announced $0 commissions on stocks and ETFs in 2013, it has been a race to the bottom for nearly every major broker. Today, Robinhood continues to forge ahead by offering $0 commissions on options and cryptocurrencies as well. With no account maintenance fee, Robinhood offers a low-cost broker experience for its customers. However, transferring an account from Robinhood will cost you $100, which is typical among brokers.

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For investors interested in stocks and ETFs only, there isn't much difference between Vanguard vs. Robinhood. But mutual fund investors may favor Vanguard. Options and cryptocurrency traders will look to Robinhood for the best commissions.

Vanguard offers one of the largest mutual fund families we've found, and it's frequently ranked as one of the best brokers for mutual funds. Currently, Vanguard boasts 422 funds with a variety of management styles, asset classes, and strategies. Vanguard doesn't require a minimum dollar amount to open an account, but many mutual funds have investment minimums Most investment minimums are $3,000 (there are a few with $1,000 minimums), but can exceed $50,000 for some mutual funds. Vanguard also offers investors a variety of investments including stocks and ETFs, options, CDs, and bonds.

Robinhood offers users stocks and ETFs like other brokers, and it allows them to be traded as fractional shares. With fractional shares, those with less to invest can own some of the biggest names. Like Vanguard and many other brokers, Robinhood allows users to trade options. Unlike other brokers, Robinhood lets users trade cryptocurrencies.

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When it comes to investments available to trade, there are stark differences between Vanguard vs. Robinhood. Both brokers offer stocks, ETFs, and options. However, Vanguard offers more traditional investments including mutual funds, CDs, and bonds. Robinhood offers the fractional shares of many stocks, and also offers cryptocurrencies. Vanguard offers fractional shares, but only for its own ETFs, which allow investments of as little as $1. The type of investments offered is one of the larger differences between Vanguard and Robinhood.

Vanguard offers a wide range of investment account types beyond taxable accounts. Vanguard customers can open joint accounts, retirement savings accounts, and custodial accounts. Among its retirement accounts, Vanguard offers traditional and Roth IRAs, as well as SEP and SIMPLE IRAs. Vanguard also offers Vanguard Digital Advisor®, a robo-advisor, to rebalance accounts automatically. Additionally, users can open a margin account to invest borrowed money.

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Robinhood offers users only a few types of accounts. Investors on Robinhood can trade in standard (taxable) brokerage accounts, as well as in traditional and Roth IRAs. For the cost of $5 per month, users can unlock Robinhood Gold, which gives certain benefits such as lower margin rates, a high interest rate on your uninvested cash, and superior trading tools.

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For investors seeking only a taxable trading account or basic IRA, Robinhood is a good choice. An investor with any other type of retirement account -- or the need for a custodial or joint account -- will value the variety of accounts offered by Vanguard. Vanguard offers many account types while Robinhood offers only a few.

Vanguard's trading platform lacks the fancy gadgets offered by many brokerage firms. However, it provides the necessary tools to its target user -- the passive investor. The Vanguard platform includes all of the features typically offered by a broker:

• Portfolio information
• Account history
• Trading capabilities

The Vanguard mobile app operates similarly, and is highly rated on the App Store.

Robinhood is one of our most highly rated stock trading apps, and for good reason. With a streamlined approach, the Robinhood app doesn't outshine its competitors in terms of features. However, the visual appeal and ease of trading offered by the app have yet to be replicated by competitors we've seen. Robinhood's desktop platform is modeled after the mobile app and provides similar features, but without as much pizzazz.

Both brokers offer a highly rated interface. However, Vanguard's platform is built for the passive investor while Robinhood's platform is designed for active traders. Interested investors can try out both and then stick to their personal preference.

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Vanguard is a strong choice for passive, long-term investors seeking more than the typical taxable account or IRA. Plus, Vanguard offers a suite of highly rated mutual funds and may be the right broker for investors seeking to buy the Vanguard family of funds without paying commissions. Each of these funds can be held in a tax-advantaged account, potentially saving investors money. As mentioned above, investors should be aware of investment minimums required by some Vanguard funds.

Robinhood offers $0 commissions on trades of stocks, ETFs, cryptocurrencies, and options but doesn't offer mutual funds or certain other types of investments. For crypto and derivatives traders, removing broker commissions from the equation can add up. Investors with smaller portfolios can take note of Robinhood's fractional shares on many stocks and no account minimums. For crypto, derivative, and fractional share investors, Robinhood is a strong choice, and the platform certainly offers more features for active traders than Robinhood does

In the case of Vanguard vs. Robinhood, finding the best broker for you may not be straightforward, but both are good options for many investors. When choosing a broker, fees, minimums, investments offered, and tax efficiency matter. Think about the factors that are most important for your investing needs, and see which one feels like a better fit for you.