Charles Schwab Vs. Vanguard: Which Broker Is Better?

Charles Schwab and Vanguard are two of the most popular brokers, and each offers a wide variety of features that help investors make smart financial moves that improve their wealth. While Charles Schwab is regularly a top performer in Bankrate’s annual best brokerage reviews, Vanguard has a reputation for low costs that is virtually synonymous with the brand, making it a favorite.

But Charles Schwab and Vanguard are both appealing for different kinds of investors — so which is better for your needs? Here’s how they compare on some of the most popular features. 

Schwab vs. Vanguard: Costs

Costs are low at both these brokers, and Schwab and Vanguard both let clients trade stocks and ETFs for no out-of-pocket commission. But that’s standard across the industry — where else do these power players differ? 

Options pricing is one area, and it’s a clear edge for Schwab here, which charges the industry standard of 65 cents per options contract. In contrast, Vanguard has a somewhat unusual tiered pricing model: Trades cost $1 if you have less than $1 million in Vanguard funds, or the first 25 trades per year are free if you have between $1 million and $5 million in Vanguard funds, or the first 100 option trades are free per year, if you have more than $5 million in Vanguard funds and then $1 per contract thereafter. For most people then, it costs $1 per contract at Vanguard. 

Pricing on mutual funds is attractive at both brokers. Schwab offers more than 4,000 no-transaction-fee mutual funds. In contrast, Vanguard offers access to all its mutual funds, some 160, and 3,000 or so others without a transaction fee. Vanguard’s funds are well-known for their low expense ratios, but the whole lineup is not always available at other brokers. If you’re looking for a particular low-cost Vanguard fund, a Vanguard account assures that you can get it. With either broker, you’re going to have plenty of choice and you’ll find a fund that works for you.  

As far as other typical account fees, both are investor-friendly and there are only a couple to point out. Schwab charges a $50 transfer-out fee if you’re moving out your whole account, while most brokers charge $75 to $100. Vanguard, for one, charges a $100 fee. Vanguard charges a pesky $25 annual fee, too, if you have less than $5 million in Vanguard funds. You can get rid of it easily by signing up for electronic document delivery. You’re probably doing that anyway, right? 

Winner: Schwab is a bit better if you look across the board or plan to trade options, but either broker will work well for those keeping costs low. Vanguard’s particular edge is giving clients full access to the range of its low-cost funds, which may not always be available elsewhere. 

Schwab vs. Vanguard: Account minimum

Neither Schwab nor Vanguard has an account minimum, making it easy for new investors to get started. Open the account now and then fund it when you’re ready to get started investing. You can use each broker’s educational resources, research and more, so you can get a full look.

Winner: Draw. Neither broker requires a minimum account balance.

Schwab vs. Vanguard: Tradable securities

Schwab and Vanguard both offer all the usual suspects when it comes to tradable securities — stocks, bonds, mutual funds, ETFs and options, even if the last one does not get a lot of attention at Vanguard. The lineup will be attractive to both short-term traders and long-term investors. But for those who need a little extra action, Schwab also offers futures and currency trading (forex), both of which are atypical selections in the world of online brokers. These latter two areas are more niche markets for individual investors, and most investors won’t access them anyway. 

Winner: Schwab has the edge. Schwab offers a broader range of tradable securities than Vanguard, though Vanguard’s offerings will suffice for almost all investors.

Schwab vs. Vanguard: Trading platform

The broker’s trading platform is one place that Schwab and Vanguard clearly differentiate themselves and the kind of clientele they’re targeting. 

Vanguard has a simple, no-frills order interface. You know what you want to trade, you’re looking to place an order, and you get it done. As a Vanguard client, you’re probably making a series of buy orders as you buy-and-hold your way to wealth over time. This basic platform is utterly fine for your needs. It’s not built for high-throughout trading — and that’s just fine. 

Schwab provides a basic order interface for those who want to just make their trade and get on with their lives, too. But for active traders, it ups the game with its thinkorswim trading platform, which it brought over as part of its purchase of TDAmeritrade. The thinkorswim platform is available in desktop, web and mobile versions, and it offers customizable layouts, technical studies, in-platform news and plenty of other trading tools. So if you’re looking to get more active, you can test-run the tools and see if they work for you. 

Winner: Schwab offers more, but it’s still a question of what you as the client need. If you’re not trying to trade your way to wealth — a feat that almost everyone fails at — you’ll be well-served by the basic platforms at either broker. So don’t get spooked by what seems like less at Vanguard. Plenty of investors have better things to do than sit at their desks all day looking at stock prices.

Schwab vs. Vanguard: Account types

Both Schwab and Vanguard offer a range of account types, meaning that they’re going to meet the needs of almost every customer. Each offers individual, joint and custodial accounts (for minors). Of course, they offer IRAs, including traditional and Roth IRAs as well as 529 education savings plans. Plus, both offer small-business retirement accounts, including the SIMPLE IRA, SEP IRA and solo 401(k) plans. So they’re evenly matched here for almost all account types.

On top of this, both brokers offer attractive robo-advisor accounts, which can build a portfolio of investments for clients who would rather someone else invest for them. Schwab Intelligent Portfolios and Vanguard Digital Advisor provide a standard do-it-for-me service, while each offers a higher-touch version of its advisory services at a higher price point, too. 

Winner: It’s a dead heat. You’ll be able to grow with both brokers as your financial needs grow.

Schwab vs. Vanguard: Fractional shares

While the best brokers for fractional shares let you buy partial shares of almost all stocks and exchange-traded funds (ETFs) as well as reinvest your dividends in them, neither Schwab nor Vanguard offers the full range of functionality. But they do offer a solid offering that helps newer investors. The appeal of fractional shares is that you can buy any stock regardless of price. 

On the one hand, Schwab’s Stock Slices lets you buy fractional shares of any stock in the S&P 500 stock index for as little as $5. This offering covers the largest stocks that drive the most volume, but it still leaves literally thousands of publicly traded stocks that are not covered. At Schwab, you can reinvest your dividends in fractional shares, putting the whole payout to work. 

On the other hand, Vanguard lets you buy partial shares of only Vanguard ETFs — not stocks or non-Vanguard ETFs. However, dividends from stocks, ETFs and mutual funds can be reinvested in partial shares, letting you take advantage of one of the big perks of dividend reinvestment. 

Winner: Schwab’s selection of supported securities beats out Vanguard’s, though both do let you reinvest dividends in partial shares. Fidelity Investments and Robinhood both offer a wider selection of covered securities in their fractional share programs, if that’s a key issue for you.

Schwab vs. Vanguard: Customer support

Schwab tops Vanguard not only in available support hours but in ways to contact the broker, too. Schwab offers 24/7 support by phone — a real help when you have a nagging midnight question. You can also set up a live chat or fall back to email or the self-service site. If you need in-person help, swing by one of Schwab’s 400 or so physical locations and be on your way. Schwab’s support staff have routinely been helpful and courteous and get you the answer you need. 

With Vanguard, you’ll also get knowledgeable and polite support, just across 12 hours a day — 8 a.m. to 8 p.m. Eastern. You’ll be able to email support with questions as well. 

Winner: Customer support is one of Schwab’s strongest suits, and while Vanguard is no slouch here, Schwab just offers more.

Who is Charles Schwab best for?

• Investors at any level who need access to research, education and helpful customer service.
• Investors and traders looking for a strong trading platform or who particularly like the thinkorswim trading platform.
• Those who may need a broad range of accounts, including a robo-advisor account, and are looking to grow with their broker. 

Who is Vanguard best for?

• Vanguard works well for long-term investors who are not especially interested in trading but rather finding attractive long-term investments. 
• Cost-conscious investors looking for low-cost ETFs and mutual funds, particularly Vanguard’s.  
• Investors who are primarily interested in funds but may still make a stock or options trade from time to time.

Bottom line

If you’re deciding between Charles Schwab and Vanguard, you’ll want to consider how their strengths fit your specific needs. Schwab is a great all-around broker, while Vanguard may be a better fit for long-term, buy-and-hold style investors, especially those who like Vanguard’s funds.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.