Vanguard vs. Charles Schwab: A Comparison of Leading Brokers

By Jordan

The investing world is always changing. Although Vanguard and Charles Schwab might be better known as asset managers (or, in Schwab's case, a bank), both companies also act as brokers to process millions of trades for their customers around the clock. If you plan on opening a new brokerage account, either broker could be a very good choice for you.

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Here's how these two popular choices compare on the basis of commissions, research, and other important criteria for long-term investors.

Trading costs and commissions

While there's more to a brokerage than its trading costs, how much you pay to place a trade is important, especially for people who are more active in the markets. Here are the typical commissions for trading several different investments:

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Source: company websites.

With the exception of mutual funds and options, the difference in commission prices amounts to just a couple of dollars in either direction.

Keep in mind that there is some leeway with commission costs. Both brokers offer a long list of ETFs and mutual funds that can be traded for free. In addition, promotionaloffers for IRA accountscan further reduce your actual trading costs. Vanguard cuts commissions for investors who keep at least $50,000 invested in its ETFs and mutual funds, too.

Commission-free ETFs and NTF Funds

If funds play an integral role in your portfolio, you'll be pleased to find that Vanguard and Charles Schwab offer thousands of commission-free ETFs and no-transaction-fee (NTF) mutual funds that you can trade free of any transaction fees.

Source: company websites.

Depending on how you build your portfolio, either broker could be a good fit for fund investors. You can easily construct a diversified portfolio just from the commission-free ETFs and NTF mutual funds available on either brokerage.

Account minimums

Although it takes money to make money, it doesn't take much money to get started. Vanguard and Charles Schwab have no-minimum account requirements.

We'll caution that it may be wise to start with a little more than just pocket change. You'll need to have enough money in your account to buy at least one share of a stock, ETF, or mutual fund (and pay the commission) to actually make an investment.

Trading platform

We at The Motley Fool like to invest in businesses that we think will be great businesses years and decades from now. For this reason, we don't really care all that much about the features and functionality of a trading platform, so long as we can easily make the occasional buy or sell order.

Long-term investors will find Vanguard and Charles Schwab suitable for their needs. Truthfully, a preference for any platform is usually rooted in subjective personal opinion, so we'll let you be the judge of which platform feels better to you.

You can place trades from your phone thanks to app-based platforms offered by Vanguard and Charles Schwab. Image source: Getty Images.

International stocks and ADRs

Cancel your flight. You don't need to go overseas to invest in foreign companies. Vanguard and Charles Schwab customers can trade American depositary receipts (ADRs) from their online accounts.

If you want to invest in stocks that don't have a listing in the United States, your options are a little more limited. Vanguard can route trades to international stock markets, but that comes with the cost of a $50 fee in addition to a commission on every trade. Charles Schwab doesn't offer the ability to trade foreign stocks on foreign exchanges.

Research quality and tools

More information is generally a good thing. Both brokers have plenty of research material and tools, including stock and fund screeners, news sourced direct from the wires, and proprietary features available only to their customers.

Third-party research is also plentiful, as both offer access to insights from Standard & Poor's for example. Vanguard also provides research from Thomson Reuters and First Call. Schwab customers can tap into the wisdom of Credit Suisse, Morningstar, and Argus Research analysts from their account. Truly, you'll find plenty of easy-to-use research tools at either broker.

Mobile app

You can now make a trade from virtually anywhere around the world thanks to mobile trading apps. Here's how each brokers' users and clients rated their mobile capabilities on iOS and Android (as of Dec. 6, 2016).

Source: Relevant app stores.

Naming the better broker: Vanguard vs. Charles Schwab

Can we call it a tie? The truth is that either broker is suitable for a long-term investor, depending on one's needs. Vanguard offers more access to foreign stocks; Charles Schwab offers more commission-free ETFs. Ultimately, the better brokerage is dependent on how you invest.

To be clear, The Motley Fool does not endorse any particular broker. Visit our Broker Center to compare key features and limitations of several brokerages all on one page. And if you're in the market for a broker to house your IRA, make sure to check out current special offers for IRA accounts to see if you qualify for some excellent perks just for opening or transferring an account.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.