Vanguard vs. Fidelity
RML
into an IRA upon retirement, I am considering using either Fidelity or
Vanguard. Any opinions welcome.
anoop
Pros for Vanguard:
- Better selection of index funds. They are especially better
when it comes to bond index funds.
Pros for Fidelity:
- Cheaper stock trades.
- Many local branches.
Anoop
Mark Freeland
news:1163955653.6...@f16g2000cwb.googlegroups.com...
>
> Pros for Vanguard:
> - Better selection of index funds. They are especially better
> when it comes to bond index funds.
What are the virtues of a bond index? Unlike equities, bonds mature, so
there is forced turnover. All (?) bond index funds sample, so there is a
management factor in any case. Costs of actively managed funds can be
comparable as well. I don't see the usual advantages of index funds with
bond funds.
For example, compare Vanguard's intermediate bond index fund (VBIIX) with
its intermediate term investment grade fund (VFICX):
VBIIX VFICX
expense 0.18% 0.21% (index fund charges $10 for <$10K)
duration 5.9 4.9 years (lower means less interest rate risk)
yield 5.08% 5.29%
R2 vs. 1.00 0.99
5-10 yr
Beta 1.00 0.83 (lower means less relative volatility)
Std dev 4.44 3.70 (lower means less absolute volatility)
Avg. grade AA2-3 Aa3
Turnover 76% 51%
All data except turnover, std dev from Vanguard (others from M*). Bond
grades for both are right at the high/medium border (slightly lower for
managed fund), turnover is less for managed fund (in spite of its lower avg
maturity), costs comparable, index tracking comparable, duration lower for
managed fund, volatility (and M* risk) lower for managed fund.
I do believe that Vanguard is somewhat better than Fidelity with bond
funds - their funds tend to be somewhat lower cost (10-20 basis points) than
Fidelity's, but otherwise pretty comparable. And in bond funds, cost is
almost everything.
Mark Freeland
BnetO...@sbcglobal.net
Bucky
Basically, Vanguard account is great for Vanguard mutual funds, but
poor for stocks, ETFs, and other companies' mutual funds. Last time I
checked, Vanguard's brokerage account charged $30 for stock trades. So
if you plan on investing in only Vanguard mutual funds, go with
Vanguard.
If you like to invest in other stocks, ETFs, and are content with
Fidelity mutual funds, then go with Fidelity. You can buy Vanguard ETFs
to access some of Vanguard's mutual funds.
cporro
from what i've read bonds will protect you in long bear markets. now if
you want a bond that is really secure you go with Treasuries that are
backed by the US government. there are corporate and munis but these
aren't sure things. they could go under. you could try and buy say 30
corporates in different sectors to diversify and stay safe but this
gets pricey. i've never bough a bond before, but i guess the bare
minimum on a lot can be a hefty sum.
so from what i gather (in a purely hands off, non-real world way :D)
bond funds are an easy way to play it safe if you aren't interested in
Treasuries and don't have at least 100,000 to invest.
and those bond index funds (i think) use a mechanical model to decide
whats in the fund. i don't think they are actively managed.
but then again, i'm figuring this stuff out myself.
P.Schuman
cporro
low expense ratio (.2%). so yes, something like this. from what i've
read its hard to get the security (through deversification) if you
don't have around 100k...that's is unless you do tresury-ish issues.
again, this is "book" knowledge. i myself am just starting to look at
bonds.
Andrew Koenig
news:1169059417.3...@51g2000cwl.googlegroups.com...
>i didn't look too close but it seems this is total bond market index,
> low expense ratio (.2%). so yes, something like this. from what i've
> read its hard to get the security (through deversification) if you
> don't have around 100k...that's is unless you do tresury-ish issues.
To add to the comment above: The minimum initial purchase for VBMFX is
$3,000. There is a $10/year account maintenance fee if your balance is less
than $10,000. If you have $100,000 to invest, you can buy VBTLX, which is
the same fund except that it has a 0.11% expense ratio instead of a 0.20%
expense ratio.
Vanguard announced today that they will be opening an ETF share class of the
same fund, with an expense ratio of 0.11%. Once that happens, you will be
able to buy or sell as little as one share at a time if you're willing to
pay the brokerage fees and bid/ask spread.
You would need an awful lot of money to achieve the same amount of
diversification by buying individual bonds, and I imagine it would be hard
to keep your expenses down to 0.11%, especially if you place a value on your
time.
P.Schuman
"Andrew Koenig" <a...@acm.org> wrote in message
news:Vdvrh.746211$QZ1.3...@bgtnsc04-news.ops.worldnet.att.net...
> "cporro" <cpo...@gmail.com> wrote in message
> news:1169059417.3...@51g2000cwl.googlegroups.com...
>
> >i didn't look too close but it seems this is total bond market index,
> > low expense ratio (.2%). so yes, something like this. from what i've
> > read its hard to get the security (through deversification) if you
> > don't have around 100k...that's is unless you do tresury-ish issues.
>
> To add to the comment above: The minimum initial purchase for VBMFX is
> $3,000. There is a $10/year account maintenance fee if your balance is less
> than $10,000. If you have $100,000 to invest, you can buy VBTLX, which is
> the same fund except that it has a 0.11% expense ratio instead of a 0.20%
> expense ratio.
>
> Vanguard announced today that they will be opening an ETF share class of the
> same fund, with an expense ratio of 0.11%. Once that happens, you will be
> able to buy or sell as little as one share at a time if you're willing to
> pay the brokerage fees and bid/ask spread.
tnx for the note - I'll have to go look on the Vanguard site,
as I've just been shifting some cash into 3mo + 6mo CDs,
and have been looking at other fixed income safety nets.
cporro
account there is no account maintenance charge and your only expense
seems to be the expense ratio on the fund. you do have to keep a min
balance but its pretty low...3k?
sorry if i come off as a vanguard salesman. i've just been thinking
about getting rid of my brokerage account. i never really trade stocks.
Andrew Koenig
> if you don't do vanguard's brokerage account and do their mutual fund
> account there is no account maintenance charge and your only expense
> seems to be the expense ratio on the fund. you do have to keep a min
> balance but its pretty low...3k?
This statement is almost true, but not quite.
The minimum balance is $500, not $3,000. $3,000 is the amount you need to
open an account, but you can withdraw from it later.
If your balance is below $10,000, they they charge a $10/year account
maintenance fee. If your balance is below $2,500, there is another $10/year
low balance fee.
> sorry if i come off as a vanguard salesman. i've just been thinking
> about getting rid of my brokerage account. i never really trade stocks.
You can also use their brokerage account to buy and sell ETFs and other
companies' mutual funds.
Elizabeth Richardson
> maintenance fee. If your balance is below $2,500, there is another
$10/year
> low balance fee.
>
Re: Vanguard fees. The above is the fee per fund. However, if all of your
investments with Vanguard total more than $50,000 (taxable and tax-deferred
accounts combined), account maintenance fees are waived.
Elizabeth Richardson
BeachBum
"Elizabeth Richardson" <eric...@worldnet.att.net> wrote
allocation
among short term reserves, stocks (domestic and international) and bonds.
You can add non-Vanguard accounts to the analysis - I find it very helpful
in
keeping track of my total asset allocation including my Fidelity funds, et
al.
BeachBum
Mark Freeland
> "cporro" <cpo...@gmail.com> wrote in message
> news:1169252649....@11g2000cwr.googlegroups.com...
>
>> if you don't do vanguard's brokerage account and do their mutual fund
>> account there is no account maintenance charge and your only expense
>> seems to be the expense ratio on the fund. you do have to keep a min
>> balance but its pretty low...3k?
>
> This statement is almost true, but not quite.
>
> The minimum balance is $500, not $3,000. $3,000 is the amount you need to
> open an account, but you can withdraw from it later.
Could you provide a reference? What I read in the prospectus for the
Vanguard Index funds is:
"Account Minimums for Investor Shares: To open and maintain an account.
$3,000. ...
"Low-Balance Accounts: All Vanguard funds reserve the right to liquidate
any investment-only retirement-plan account or any nonretirement account
whose balance falls below the minimum initial investment."
http://www.sec.gov/Archives/edgar/data/36405/000093247106000785/vit485b042006.txt
Note that requirements can be different when buying through a third party.
> You can also use their brokerage account to buy and sell ETFs and other
> companies' mutual funds.
With an annual brokerage maintenance fee of $30, until one reaches Voyager
($250K) status.
Mark Freeland
BnetO...@sbcglobal.net
Andrew Koenig
news:S7ush.338$4H1...@newssvr17.news.prodigy.net...
>> The minimum balance is $500, not $3,000. $3,000 is the amount you need
>> to open an account, but you can withdraw from it later.
>
> Could you provide a reference? What I read in the prospectus for the
> Vanguard Index funds is:
>
> "Account Minimums for Investor Shares: To open and maintain an account.
> $3,000. ...
>
> "Low-Balance Accounts: All Vanguard funds reserve the right to liquidate
> any investment-only retirement-plan account or any nonretirement account
> whose balance falls below the minimum initial investment."
> http://www.sec.gov/Archives/edgar/data/36405/000093247106000785/vit485b042006.txt
https://flagship.vanguard.com/VGApp/hnw/FundsFeesMinimums?FundId=0314&FundIntExt=INT
This page talks about the intermediate-term bond fund, but other funds
contain similar language:
An annual $10 fee is generally deducted for each nonretirement fund account
with a balance of less than $2,500. In addition, the fund account may be
liquidated if the balance falls below $500. If your Vanguard account assets
(including IRAs, employer-sponsored plans, brokerage accounts, annuities, as
well as nonretirement fund accounts) total $50,000 or more, the low-balance
fee may not apply.
Mark Freeland
> "Mark Freeland" <BnetO...@sbcglobal.net> wrote in message
> news:S7ush.338$4H1...@newssvr17.news.prodigy.net...
>
>>> The minimum balance is $500, not $3,000. $3,000 is the amount you need
>> Could you provide a reference? What I read in the prospectus for the
>> Vanguard Index funds is [$3,000]:
> https://flagship.vanguard.com/VGApp/hnw/FundsFeesMinimums?FundId=0314&FundIntExt=INT
>
> This page talks about the intermediate-term bond fund, but other funds
> contain similar language:
>
> An annual $10 fee is generally deducted for each nonretirement fund
> account with a balance of less than $2,500. In addition, the fund account
> may be liquidated if the balance falls below $500. If your Vanguard
> account assets (including IRAs, employer-sponsored plans, brokerage
> accounts, annuities, as well as nonretirement fund accounts) total $50,000
> or more, the low-balance fee may not apply.
Thanks. There is an apparent conflict between the website and the
prospectus. I have sent email to Vanguard to resolve the sources, and will
post the substance of the response here.
Mark Freeland
Bnet...@sbcglobal.net
Mark Freeland
news:QSPsh.12137$ji1....@newssvr12.news.prodigy.net...
> "Andrew Koenig" <a...@acm.org> wrote in message
> news:stush.429913$Fi1.3...@bgtnsc05-news.ops.worldnet.att.net...
>> account with a balance of less than $2,500. In addition, the fund account
>> may be liquidated if the balance falls below $500. If your Vanguard
>> account assets (including IRAs, employer-sponsored plans, brokerage
>> accounts, annuities, as well as nonretirement fund accounts) total
>> $50,000 or more, the low-balance fee may not apply.
>
> Thanks. There is an apparent conflict between the website and the
> prospectus. I have sent email to Vanguard to resolve the sources, and
> will post the substance of the response here.
Vanguard has not responded to my email inquiry in 5 business days. I have
reminded them of the question, and wanted to let people here know that while
Vanguard may have forgotten, I have not, and will post information that I
receive.
Mark Freeland
BnetO...@sbcglobal.net
Mark Freeland
news:QSPsh.12137$ji1....@newssvr12.news.prodigy.net...
> "Andrew Koenig" <a...@acm.org> wrote in message
> news:stush.429913$Fi1.3...@bgtnsc05-news.ops.worldnet.att.net...
>> An annual $10 fee is generally deducted for each nonretirement fund
>> account with a balance of less than $2,500. In addition, the fund account
>> may be liquidated if the balance falls below $500. If your Vanguard
>> account assets (including IRAs, employer-sponsored plans, brokerage
>> accounts, annuities, as well as nonretirement fund accounts) total
>> $50,000 or more, the low-balance fee may not apply.
>
> Thanks. There is an apparent conflict between the website and the
> prospectus. I have sent email to Vanguard to resolve the sources, and
> will post the substance of the response here.
Vanguard's response (the relevant portion):
"If your fund balance is below $500 in June, your fund will be liquidated. A
redemption check will be sent to your address of record. This includes
UGMA/UTMA accounts and Vanguard STAR Fund."
To harmonize each of these statements: Vanguard is allowed to liquidate your
account if it drops below $3K (prospectus), but its current policy is the it
WILL liquidate your account if your balance is below $500 in June (but not
at other times).
Much of the remainder of Vanguard's response was to reiterate the low
balance fee policy that Andrew Koenig quoted, above.
Mark Freeland
BnetO...@sbcglobal.net