Vanguard or Fidelity – Who is Winning?

Aug 3rd, 2011 by Ziva Beck in Saving for Retirement

Recently, my daughter started a new job and asked me what to do with her 401K plan from the old job. This is a common scenario that many will encounter in their careers.

You can leave your 401K plan with the old employer, move it to the new employer’s 401K plan or rollover to an IRA account.

In some instances, you might consider staying with your current 401K plan because it offers something that is not available in an IRA account. For example, your 401K plan offers asset management option for a low management fee or maybe you really like some of the funds offered by your plan and you will need to pay commission to purchase them in an IRA account or you would like to keep your money in a Stable Value fund that is offered in 401K plans but is not available in IRA accounts.

In most situations, it is better to rollover to an IRA account. It offers the flexibility of many investment choices including stocks, mutual funds, ETFs, bonds and more. It also gives you a better control over mutual fund expenses.

Vanguard and Fidelity are two very popular choices for an IRA account. I have an account with Vanguard so my initial thought was that Vanguard is a good option. Still, I wanted to have more information before making a recommendation for my daughter.

A closer look at fees and expenses for both Vanguard and Fidelity (as of 7/31/11) is below. The first table looks at transaction and account fees and the second table looks at expenses for several selected funds.

Both companies offer free transactions on their proprietary funds and ETFs. There are some differences in transaction fees for other investments. For example, Vanguard charges less for trading stocks and Fidelity charges less for trading bonds. When looking at fund expenses, it looks like Vanguard has lower expenses for actively managed funds and funds with Admiral shares (requires investment of $10,000 or above).  I have also looked at the fund selection available. Vanguard offers a higher selection of indexed funds and ETFs and Fidelity has a higher number of actively managed funds.

Overall, I still like Vanguard slightly better because of the lower expenses and higher selection of indexed funds and ETFs.

Useful Links –

Vanguard Fees

Fidelity Fees

Vanguard Fund Selection

Fidelity Fund Selection

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