With the rise of index investing, more investors are looking to auto invest into index ETFs for the long term. Two of the biggest providers of low-cost index ETFs are Fidelity and Vanguard. When setting up an auto-investing plan, investors need to consider factors like fees, asset allocation ETFs, and available funds when choosing between the two. This article will dive deeper into the key factors in order to make an informed decision.
Fees and expense ratios are lower with Fidelity index ETFs
When evaluating index ETFs, fees and expense ratios are a top consideration. Fidelity offers a strong line-up of broad market ETFs with no minimums and expense ratios as low as 0.015%. This compares favorably to Vanguard’s comparable ETFs which have expense ratios in the 0.03% to 0.09% range. For investors contributing regularly via auto-investing plans, these small differences can compound into tens of thousands saved over decades of investing.
Vanguard still wins for asset allocation ETFs
While Fidelity may have an edge on core equity and bond ETFs, Vanguard continues to be a leader in asset allocation ETFs. Vanguard’s LifeStrategy funds and Target Retirement funds make it easy for investors to own a globally diversified portfolio in a single fund. The ability to own an appropriate stock/bond mix tailored to time horizon makes these very suitable for auto-investing plans.
Both offer extensive core index ETF selections
Both Fidelity and Vanguard offer hundreds of market cap weighted index ETFs covering key equity and fixed income markets. Whether looking for exposure to U.S. large caps, developed international markets, corporate bonds or government debt, most investors will find plenty of eligible options at either provider.
Consider index methodology differences beyond fees
While fees should be a primary factor, index methodology is also important. Some Fidelity index ETFs track proprietary indices which allocate based on alternative weightings like equal sector contributions. Understanding if market-weighting or alternative schemes are preferred can inform decisions between comparable ETF choices.
When setting up an auto-investing plan, choosing between Fidelity and Vanguard index ETFs requires comparing fees, availability of asset allocation funds and understanding index methodologies. For broad core equity and bond exposure at regular intervals, Fidelity offers a competitive option, but Vanguard continues to excel at blended allocation funds.