Selecting the right brokerage is a personal choice. While some traders prefer having help every step of the way, others like to totally DIY it. Some investors want a range of mutual funds and ETFs (preferably with low fees or even free). Others are anxious to dip their toes into the cryptocurrency pool.
Fidelity, Robinhood and Vanguard are three strong contenders in the online stock broker arena. Let's find out how they compare and contrast to see if one of them is right for you.
|Options Trades||$0.65/contract||$1/ contract||$0|
Founded in 1946 and based in Massachusetts, Fidelity is the largest broker-dealer in the United States. Currently, it lists $6.7 trillion in assets under management on its books.
As of August 2019, Fidelity is one of the very few Fortune 500 companies with a female CEO, Abigail Johnson. A true financial powerhouse, it offers a brokerage firm, financial advice and education, retirement services, index funds, mutual funds, wealth management and life insurance.
Robinhood is a robo-investor platform founded by Vladimir Tenev and Baiju Bhatt and launched in 2013 in California. It's quickly gained popularity for the fact that it's completely free to set up an account and trade. Plus, Robinhood is one of the few online brokerages that let you trade cryptocurrencies such as bitcoin.
However, the platform has had its fair share of controversy — largely over checking and savings accounts that promised to pay unprecedentedly high rates. But turns out, the SIPC (which regulates broker-dealers) hadn't been consulted. Therefore Robinhood's “banking” program has been put on hold for now.
Still, Robinhood's no-fee model makes the service appealing, particularly to young people. As of May 2019, the company was valued at $5.6 billion.
Vanguard was founded in 1975 by John C. Bogle. It was structured as a client-owned mutual fund company. And although its services have expanded, it consistently has offered some of the lowest fees offered to investors. In fact, Bogle was credited with being the first to make low fee index funds available to individual investors. Vanguard is based in Pennsylvania and manages $5.3 trillion in assets as of 2019.
One of Vanguard's biggest draws is its massive suite of commission-fee funds.
How Are They the Same?
All three brokerages offer many features. First, let's take a look at how they're similar.
|Commission-Free Trades||All three brokers charge no commissions for online stock, option and ETF trades.|
|Minimum Investment||None of these services requires a minimum investment|
|Investment Types||Stocks, options and exchange-traded funds (ETFs)|
|Investment Account Types||Taxable accounts|
|Broker Assisted Trades||All three services offer broker assisted trades.|
How Are They Different?
Let's take a look at the areas where Fidelity, Robinhood and Vanguard differ.
|Account Types||Whereas Fidelity and Vanguard both offer a wide variety of taxable, IRA, trust and custodial accounts, Robinhood offers only taxable and IRA accounts.|
|Options Trading Costs||Fidelity: No commissions, but $0.65/contract
Vanguard: No commissions, but $1/contract
|Mutual Fund Trading||Fidelity and Vanguard offer free mutual fund trading. Mutual funds are not available with Robinhood.|
Features Unique to Fidelity
Fidelity has an in-depth and easy-to-use web platform. Whereas both Vanguard and Robinhood are bare bones, Fidelity investors are treated to real-time trading updates. And its mobile app offers a customizable interface, meaning individuals can create a site that fits their needs best.
Features Unique to Robinhood
With an incredibly low commission schedule and no account minimum requirement, Robinhood is easy to get started with. Simply download and start trading! Robinhood also offers cryptocurrency trading in certain states.
Robinhood has no annual fee, no trading fees, no transfer fees and no account minimum for its regular accounts. (There is a $2,000 minimum — the regulatory minimum — for a Robinhood Gold account.) In fact, one of Robinhood's biggest strengths is how few fees come with the service.
Features Unique to Vanguard
While not a totally unique feature, it must be said that Vanguard's commitment to low cost is written into the framework of the company. It's what inspired John Bogle to found Vanguard in the first place.
The company has no outside owners. This keeps costs low and is unique in the investment field. The company is owned only by shareholders.
Of the three, Vanguard has the highest minimum deposits required to get started. You need $1,000 to start investing in Vanguard Target Retirement Funds or Vanguard STAR® Fund. Most other Vanguard funds require a minimum of $3,000, depending on the share class.
Let's get the easiest comparison out of the way first.
None of the three services — Fidelity, Robinhood or Vanguard — requires a minimum deposit.
Robinhood charges no fees. Zilch. Nada.
Vanguard charges no commissions on most stock, options and ETF trades. However, there is a $1-per-contract price for options. The broker also charges $20 annually per mutual fund you have with them and/or $20 per brokerage account you have with them. If your account is under $10,000, Vanguard says that it will review how much your annual fee is. You can eliminate the mutual fund fees by signing up for electronic message services, aka “going paperless.”
Vanguard also charges a flat $5 per month fee for participants in a 403(b) plan.
Fidelity charges no fees for most stock, options and ETF trades. However, you'll still need to pay 65 cents per contract on options trades.
Fidelity has a supremely robust and easy-to-use platform. Fidelity's wide range of services and account options are reflected well in its web and mobile platforms. Especially when compared to Robinhood and Vanguard, Fidelity has a platform that is easiest to use and feels the most modern.
Robinhood has remarkably low fees throughout its platform. Since there are no fees for trades, frequent traders can save a lot of money by using it.
Vanguard is beloved in the personal finance world for its range of fee-free funds. Plus, you can trade just about anything with the broker and hold any type of account.
Fidelity offers 24/7 customer help, with a chat bot on its website to answer questions in addition to a phone number and customer service email address.
Robinhood has a support email address you can direct questions to, as well as a Frequently Asked Questions (FAQ) section and a Help Center.
Vanguard has its help center segmented into the types of accounts you might need help with, as well as common questions listed out. You can call Vanguard M–F from 8am to 10pm EST or email at any hour.
Fidelity offers two-factor authentication for online logins and the option of Fidelity My Voice, a call-in feature that verifies your login via your voice. Fidelity is a member of FINRA and participates in BrokerCheck, a tool that allows people to verify Fidelity's information, legal history and account standing.
Robinhood is a member of FINRA and SIPC. It does share some user information with third-party organizations, mainly for advertising and marketing purposes. However, on its Terms and Conditions page, Robinhood doesn't specify what these third parties are.
Vanguard utilizes time-out features for the website, unique passwords to create an account and security questions to verify your login. Vanguard also sends an email and letter for every account transaction. If you don't recognize an action on your account from these notifications, you can call the help line. Vanguard has an extended validation SSL, which was granted after an audit from security firm Comodo.
Who Are They Best For?
Fidelity is best for long-term investors who may start with small contributions but will be able to increase their contributions and diversify their accounts as they age. Fidelity offers enough services and account types that it's a good choice to grow with someone over the course of their career and life.
Robinhood is best for frequent traders. Robinhood is the platform to use if you have more experience and are looking for an option that is low-cost, self-directed, and has retirement accounts available.
Robinhood has by far the most limited investing options out of these three robo investors.
Vanguard is best for those ready to build a complete investing portfolio. It's a trusted investment name and comes with some of the lowest fees in the entire investing world. It's also ideal for investors who can regularly contribute $500-plus a month. Vanguard heavily favors its wealthier clients, so people just beginning their investing journey are not an ideal fit. The monthly contribution rate probably applies to those in the middle and later stages of their careers.
Which Is the Best?
So which brokerage is the best?
- Robinhood is best for younger investors who are interested in actively managing their investments and are looking to trade regularly.
- Vanguard is best for high earners who want a simple-to-use brokerage where they can invest over the long term.
- Fidelity is the most flexible of the three options here and is best for people who are just beginning their careers and want to start investing with a brokerage that they can grow with as their financial needs develop.