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Whose Funds are Better…Fidelity, Vanguard or Schwab!?

The three-headed monster in the low-cost brokerage game is easily made up of the powerhouses of Fidelity, Vanguard, and Charles Schwab.

As of the end of 2021, the low-cost brokerages held the following assets under management (AUM):

  • Fidelity - $10.4 Trillion
  • Vanguard - $7.2 Trillion
  • Schwab - $6.7 Trillion

*Chart image sourced via Statista

All three are brokerage behemoths, but the question for an investor is whose investment funds are better and who should you invest with. At the end of the day, all we as investors really care about is getting the biggest bang for our buck.

One of the questions I get all the time on social media is from investors who send me screenshots of their investments, and they want to know which funds they should keep or remove:

In this individuals case (above) they are holding 5 different investment funds (split between 3 index mutual funds & 2 ETFs):

  1. VTI – Vanguard Total Stock Market Index Fund
  2. SWPPX – Schwab S&P 500 Index Fund
  3. VOO – Vanguard S&P 500 ETF
  4. SPY – SPDR S&P 500 ETF
  5. VBIAX – Vanguard Balanced Index Fund

You may have noticed that I bolded “Total Stock Market” and “S&P 500” in their fund examples above, and the reason is that those 4 funds are all doing virtually the same exact thing (tracking the U.S. stock market). 

They have 3 S&P 500 funds, as well as a total stock market index fund. The total stock market index fund is doing practically the same thing as the S&P 500 funds because the S&P 500 makes up ~80% of the entire U.S. stock market. Due to the S&P 500’s heavy weighting in the total U.S. stock market, there is no real diversification advantage in owning both an S&P 500 and a total stock market index fund from within the same portfolio.

Back to the question at hand though, are any of these funds better than the other?

Let’s take a deeper dive into the performance of the S&P 500 index funds for Fidelity, Vanguard, and Schwab (as well as the Vanguard total stock market ETF – VTI):

If you zoom into the highlighted 1-, 3-, 5- and 10-year performance sections, you might notice something very similar…

THEIR PERFORMANCE IS NEARLY IDENTICAL!

Look at the longest track record (10-year performance) and you will see that the Vanguard S&P 500 index fund average annual return was 14.60%, Fidelity’s was 14.62%, and Schwab's 14.57%. You will also see that the Vanguard Total Stock Market ETFs (VTI) 10-year performance wasn’t far off at 14.25% (lagging performance due to mid-and small-cap stocks held in the total market ETF, which underperformed the S&P 500 during that time-stretch).

So what this all really means is that if you’re trying to pick and choose which funds to use from the major brokerages, they are all virtually the exact same investment (assuming you're deciding between the same type of index fund for each brokerage).

Don’t waste hours, days, or weeks (god forbid months or years) deciding which funds to pick. 

The important thing to do is to just pick one, then focus on buying more shares every single month, regardless of market condition. 

Don’t overthink this one.

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