Why Vanguard over Schwab?

[AspiringMustachian]

I know Vanguard seems to be the preferred index fund provider of this board. Why do you guys prefer Vanguard over Charles Schwab? They seem to have quite a few low cost index mutual funds and ETFs too. What makes Vanguard better?

[seattlecyclone]

Vanguard has a wider variety of index funds, and their ETFs tend to be more popular. This popularity means the bid/ask spread is typically lower. That said, you can do a whole lot worse than invest in Schwab's index ETFs. On a scale of 1 (buying high-load/high-fee funds from a financial advisor who skims 1% off the top each year) to 10 (buying Vanguard index funds), I would put Schwab ETFs at about a 9.9.

[Bbqmustache]

I loved my Schawb ETF IRA account.  Had to move it to Merrill because of my wife's new job (broker affiliated compliance issues).  I miss Schwab!

[MDM]

For various reasons, we have accounts in Fidelity, Schwab, and Vanguard.

Vanguard: Overall low cost funds, as seattlecyclone notes.
Fidelity: Offered an incentive to consolidate various individual stock lots we had at other brokers.  Has Spartan funds.
Schwab: Offers the best deal for custodial IRAs.  See http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child%27s-roth-ira-with-very-low-income/

[AspiringMustachian]

Right now I have a mix of Schwab ETFs and mutual funds. What would be the advantage of using the Schwab index ETFs over Schwab index mutual funds?

[MooseOutFront]

Right now I have a mix of Schwab ETFs and mutual funds. What would be the advantage of using the Schwab index ETFs over Schwab index mutual funds?

The only advantage is that they have slightly lower expense ratios and in some cases at Schwab, ETFs are offered for an asset class where a mutual fund is not.  The down side if you have to manually transact ETF purchases which is a pain for my 401k where money comes in every month and I prefer it being auto-invested.  For example Large Cap Value SCHV ETF has an expense ratio of 0.07% vs SFLNX mutual fund's 0.35%.  For me I have to go for the lower fees there even with more work.

On the other hand Small Cap blend (SCHA ETF) has an expense ratio of 0.10% vs the similar mutual fund SWSSX's 0.17% ER.  That's not much difference so to me it may be worth switching to the mutual fund even though I've been buying SCHA manually each month in my 401k.

I have both Vanguard and Schwab.  Between the two I can get into any asset class I want at the lowest prices around (I'm a dirty slicer and dicer so I want all the asset classes).  Schwab is a great place to open a Coverdell ESA also. Vanguard no longer offers that product.

[Grog]

Vanguard shareholder structure is unique and some people prefer it like that:
https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

Don't forget that many thinks comes together, low cost are only one aspect. You have tracking error, securities lending, and so on. In many of this point Vanguard does an excellent job, so people trust them with their money even if maybe are no more the cheaper.

[Indexer]

Vanguard shareholder structure is unique and some people prefer it like that:
https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

Don't forget that many thinks comes together, low cost are only one aspect. You have tracking error, securities lending, and so on. In many of this point Vanguard does an excellent job, so people trust them with their money even if maybe are no more the cheaper.

Exactly!

I remember reading an article about how a couple Vanguard funds(specifically one of the small cap indexes) was making so much money on securities lending it was negating the management expenses(the expense ratio).  For reporting purposes the fund still had a positive ER, but the securities lending revenue comes back in the form of higher dividends that more than offset the ER.

Vanguard does this because the company is indirectly owned by its investors so profits get passed back to the investors.  Schwab and Fidelity aren't going to do that.  Any profits for them will go back to their stockholders or the 'family.'   

[stuckinmn]

I loved my Schawb ETF IRA account.  Had to move it to Merrill because of my wife's new job (broker affiliated compliance issues).  I miss Schwab!

I also work at a brokerage firm and am subject to the same rules, but the finra rules do allow you to have a mutual fund account with vanguard.  No etfs as that requires a brokerage account.  I have no idea if Merrill applies an even stricter standard but you might want to check it out if you want to just do plain indexing.