Vanguard vs Fidelity ...balanced approach with low cost index funds?

[stephenson]

Hi All,

Am a couple of years away from departure from megacorp.

Wife and I both have IRAs from before megacorp (we transferred the funds from the several companies we had them with to Vanguard this past year ... VTSAX, VSMAX, VGSLX) and, I have megacorp 401k (fees are very competitive with Vanguard's Admiral fees, but far less choice), and 401 supplement (it is a tracking fund system based on megacorp's choices) so I don't have access to it until I depart).

My plan was to transfer my 401k to Vanguard in order to increase choices and be able to monitor more effectively (megacorp's manager has pretty basic interfaces online) and to engage more effectively with the broader investing community.

As I considered it more, and looked at costs and services between Vanguard and Fidelity (have a taxable account with them), it occurred to me that I might be able to build a basic passive index portfolio structure that was somewhat the same ...Fidelity does have a few advantages over Vanguard in some areas, while Vanguard usually has lowest fees ...this is where I stopped and asked how much lower for same fund ...I reviewed the Fidelity listing of Spartan Funds - it looks like:
- VTSAX (0.05 fee) crosses to FSTVX (0.05 fee)
- VSMAX (0.09 fee) crosses to FSSVX (0.20 fee)
- VGSLX (0.1 fee fee) crosses to FSRVX (0.09 fee)

While Fidelity's Small Cap index fund fee is twice Vanguard's, the other two are very comparable.

So, I was considering a simplified approach to build a portfolio set at Vanguard and at Fidelity from my megacorp 401k that were close to parallel and that both would meet their minimums for "enhanced services" ...Flagship for Vanguard and Private Client for Fidelity ....would appreciate thoughts on why this is might be a good idea and why it might not be.

I like being thoughtful about investments and would probably put an hour a day into it when I depart megacorp, would probably trade stocks a bit for fun and excitement, but would maintain most of portfolio in low cost funds or ETF equivalents.

Sorry for rambling ...pretty exciting time ...would appreciate thoughts and comments!


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[LOL!]

We have accounts and index funds at both places, but frankly, I would go with WellsFargo for Vanguard ETFs (I get free trades at WF) if I had to be at only one place.

Otherwise, Vanguard for funds and some money at Fidelity for bonuses and software tools like RIP and GPS. I made a transaction at Fidelity yesterday and there was NO RECORD anywhere of the pending transaction. Only this morning did I see that it was completed. I didn't know if I had forgotten to click on "confirm" or not because of the lack of pending status anywhere. Vanguard is not much better in that regard.

 

[photoguy]

I prefer vanguard and one reason is that while some spartan funds are equivalent in ER they don't always have a cheap alternative (at least for the funds I looked at).

However it doesn't hurt to have both accounts assuming you can get the funds you want at equivalent expense ratios. I don't think it helps much either, but I can see how if one account got locked, having both would maintain access to your funds.

 

[mrfeh]

Hi All,

Am a couple of years away from departure from megacorp.

Wife and I both have IRAs from before megacorp (we transferred the funds from the several companies we had them with to Vanguard this past year ... VTSAX, VSMAX, VGSLX) and, I have megacorp 401k (fees are very competitive with Vanguard's Admiral fees, but far less choice), and 401 supplement (it is a tracking fund system based on megacorp's choices) so I don't have access to it until I depart).

My plan was to transfer my 401k to Vanguard in order to increase choices and be able to monitor more effectively (megacorp's manager has pretty basic interfaces online) and to engage more effectively with the broader investing community.

As I considered it more, and looked at costs and services between Vanguard and Fidelity (have a taxable account with them), it occurred to me that I might be able to build a basic passive index portfolio structure that was somewhat the same ...Fidelity does have a few advantages over Vanguard in some areas, while Vanguard usually has lowest fees ...this is where I stopped and asked how much lower for same fund ...I reviewed the Fidelity listing of Spartan Funds - it looks like:
- VTSAX (0.05 fee) crosses to FSTVX (0.05 fee)
- VSMAX (0.09 fee) crosses to FSSVX (0.20 fee)
- VGSLX (0.1 fee fee) crosses to FSRVX (0.09 fee)

While Fidelity's Small Cap index fund fee is twice Vanguard's, the other two are very comparable.

So, I was considering a simplified approach to build a portfolio set at Vanguard and at Fidelity from my megacorp 401k that were close to parallel and that both would meet their minimums for "enhanced services" ...Flagship for Vanguard and Private Client for Fidelity ....would appreciate thoughts on why this is might be a good idea and why it might not be.

I like being thoughtful about investments and would probably put an hour a day into it when I depart megacorp, would probably trade stocks a bit for fun and excitement, but would maintain most of portfolio in low cost funds or ETF equivalents.

Sorry for rambling ...pretty exciting time ...would appreciate thoughts and comments!


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I have accounts at both Fido and Vanguard, and I own funds from both companies. The vast majority of our money is w/ Fido.

It's quite easy to build a boglehead portfolio at Fido, as you've realized. You can buy Vanguard ETFs and hold them at Fido ($8 per purchase; if you don't buy often, that cost is negligible). I hold VBR at Fido for my small-value.

Look here:Fidelity - Bogleheads

 

[travelover]

.........My plan was to transfer my 401k to Vanguard in order to increase choices and be able to monitor more effectively (megacorp's manager has pretty basic interfaces online) and to engage more effectively with the broader investing community...........

One reason to hang onto a 401(k) right now is to be able to take advantage of a stable value interest fund, which tend to pay more than a money market fund and don't have the downside that bonds have if interest rates rise.

 

[gauss]

Not sure about your age, but if you are less than 59 1/2, there are advantages to leaving the money in the 401k vs an IRA (penalty free withdrawals - ie "rule of 55").

Also, funds in a 401k may have more asset protection features than those in an IRA (depending upon your state laws).

Also +1 to Travelover's comment above about the possible availability of "stable" value funds in 401ks.

Some, but not all, employers will allow former employees/retirees to continue to take new loans against their 401ks whereas taking a loan against an IRA would be a really bad thing to do.

It is good to be aware of these advantages in that you will probably never see them in the marketing materials from the IRA companies.

-gauss

 

[MRG]

Both are fine fund companies. I have money in my 401k in Vanguard, so I don't directly deal with them.

For my rollover I use Fidelity. I like to sit face to face with my guy. I get excellent phone service and their website is better from what I've seen.
I've listened to some complain about Vanguards customer service but I have no personal experience. I do know they use a 'Swiss Army' approach for heavy phone days. I like that in some ways, but realize you might not be talking to the specialists.

My sister was talking with someone at Vanguard on one of those days, during the call wrapup he'd asked if all her questions were answered, she was happy. He gave her his name and real title, a C level exec.

There's been a couple of good reasons above on why your 401k might be good. In my case I was able to use the rule of 55 for my backup plan.

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[stephenson]

Good stuff, Everyone!

I do like the Fidelity site better, Fidelity does have some generally parallel funds to Vanguard with pretty low fees ...their reps have been very sharp when I have dealt with them ...As long as I can meet the levels required, think I'll do so sort or split between the two companies to be able to take advantage of their differences.

Follow up question for someone who has been paying attention to both of these companies for many years ...has Fidelity specifically morphed quite a bit to be able to compete with Vanguard? Or, is their structure simply a reflection of. Changing world, smarter investors, internet accessibility, etc?


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[MRG]

Follow up question for someone who has been paying attention to both of these companies for many years ...has Fidelity specifically morphed quite a bit to be able to compete with Vanguard? Or, is their structure simply a reflection of. Changing world, smarter investors, internet accessibility, etc?


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Actually for many years Fidelity was #1, Vanguard grew from like #8 in the 80s to #1 today. Vanguard did much to reduce fees for everyone, by pushing their fee's down. The internet and other new technologies changed the whole Mutual Fund industry. From the 80s to today, you have better informed investors, lower fees, better customer service, instant access to your data.

Depending on what your looking for, the "ICI Factbook" has a lot of good historical data on different fund facts.


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[target2019]

Follow up question for someone who has been paying attention to both of these companies for many years ...has Fidelity specifically morphed quite a bit to be able to compete with Vanguard? Or, is their structure simply a reflection of. Changing world, smarter investors, internet accessibility, etc?

I think all financial institutions have adapted to ever-evolving market characteristics and expectations.

As mentioned above, Vanguard has moved into #1 position. To get there required paying attention to many factors, so that old and new customers get served.

You could say that Fidelity's Spartan funds were a response to Vanguard's offerings. I'm sure there's similar adaptation of Vanguard to other business models.