Vanguard vs. Fidelity

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

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

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.

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.

are you looking at something like VBMFX ?

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.

aga> are you looking at something like VBMFX ?

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.

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.

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?

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.

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.

You can also use their brokerage account to buy and sell ETFs and other companies' mutual funds.

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

"Elizabeth Richardson" wrote

Also, Vanguard has a good portfolio analysis tool to show your asset 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

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."

Note that requirements can be different when buying through a third party.

With an annual brokerage maintenance fee of $30, until one reaches Voyager ($250K) status.

Mark Freeland snipped-for-privacy@sbcglobal.net

14&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.

14&FundIntExt=INT>

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 snipped-for-privacy@sbcglobal.net

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 snipped-for-privacy@sbcglobal.net

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 snipped-for-privacy@sbcglobal.net