Vanguard vs. Robinhood: Discount Brokers Go Head to Head
You're on a roll. You've paid your bills, and you've amassed some savings, but now you want to think about growing your money for the future. To do that, you'll need to open a brokerage account to make investments from the comfort of your own home. Vanguard and Robinhood, two popular brokerage services, may be a good choice for you. Here's how they compare for long-term investors.
Trading costs and commissions
The key to investing is growing your money, not spending it all on commissions. Luckily, Vanguard and Robinhood can help you keep you minimize trading costs with low or no commissions to buy and sell many popular types of investments.
Data source: company websites.
Robinhood is a clear winner on commissions, given that it doesn't charge a commission on any trades. However, you can't use it to trade options or invest in mutual funds. Vanguard charges commissions, but it offers you access to more types of investments.
But before declaring Robinhood as a clear-cut winner for low commissions, it's important to point out that Vanguard customers can do a lot of commission-free trading, too.
Commission-free ETFs and NTF Funds
If you like funds, you should love funds that you can trade for free. Vanguard offers thousands of ETFs and mutual funds you can buy and sell for free. (Every ETF trade is free at Robinhood.)
Data source: company websites.
Depending on your needs, either broker could be suitable. If ETFs are your style, Robinhood's commission-free trades have some obvious appeal. Investors who want to invest in mutual funds would naturally default to Vanguard here.
Account minimums
Being rich is of little advantage when it comes to modern brokerage services. Vanguard and Robinhood have no minimum account requirements, so you can sign up with a single dollar as your initial deposit. Realistically, you'll want to have enough to buy at least one share of a stock, ETF, or fund to make an investment.
As an additional consideration, take note that some brokers reward new customers for meeting certain minimum deposit requirements. Check out the current special offers for IRAs as well as deals for traditional taxable brokerage accounts. You might qualify for cash bonuses, commission-free trades, or both!
Trading platform
We're sorry to tell you that we're not much for trading stations with 20 monitors, or flashy charts on a trading platform. The Motley Fool is all about finding great companies to invest in for years, if not decades.
Basically, we don't trade much, so we don't have strong opinions on what we see when we log in to place a trade. If you prefer to invest for the long haul, you'll find that placing infrequent trades through Vanguard and Robinhood is simple enough.
There's just one thing you should know: Robinhood is only available on mobile devices -- phones, tablets, or other electronics on which you might install an app. For some people, that's ideal. For others, it just won't do.
Robinhood is a mobile-only platform; Vanguard customers can trade on their computers and mobile devices. Image source: Getty Images.
International stocks and ADRs
If international stocks are important to you, you'll want to follow closely. Vanguard customers can trade American depositary receipts (ADRs) listed in the United States. You can also place trades through Vanguard's block desk direct on international markets, although the company charges a $50 fee on top of a commission for each trade.
Robinhood does not allow for trading in OTC stocks, which includes many ADRs. The company points out on its website: "certain foreign domiciled securities are tradable on Robinhood. These include the securities of companies domiciled in Canada and Israel that trade above $5." In other words, its selection of ADRs may be more limited than at other brokers.
Research quality and tools
One perk of having a brokerage account is that you can occasionally get access to research and tools that you otherwise wouldn't have.
Vanguard provides a number of screening tools to find new stocks and funds, in addition to portfolio analysis tools to help you better understand the risk and rewards of your portfolio as a whole. Vanguard also has news and research from Standard & Poor's, Thomson Reuters, and First Call.Robinhood, on the other hand, doesn't provide any research capabilities, which is one of the trade-offs that come with no commission prices.
Mobile app
Both brokers generally receive good marks for the quality of their mobile applications. Here's how each brokers' users and clients rated their mobile capabilities on iOS and Android, as of Dec. 6 2016.
Data source: relevant app stores.
Vanguard vs. Robinhood: Who wins?
In reality, both brokers could be suitable for long-term investors. Vanguard offers access to more investments and research, funds, and foreign markets, but it comes at the cost of trading commissions. Robinhood's clients can trade commission-free, but have limited or no access to foreign stocks, mutual funds, and stock options.
Picking a broker is a personal decision, and to be clear, The Motley Fool doesn't endorse any particular broker. That said, we're willing to help in your search for a good brokerage for you. See Fool.com's Broker Center to compare leading brokerages in categories ranging from commissions to account minimums and research.
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