Author Topic: Vanguard or Schwab  (Read 5679 times)

petra

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Vanguard or Schwab
« on: February 26, 2017, 08:26:53 AM »
Hi folks,

I'm reading MMM for a while now and finally started investing.
I do not live in US but SA and my options for investing are limited, cannot open Vanguard, most brokers in US do not want to open the account for me, etc...
I finally found out the broker in US that wanted to open an account for me and started buying Vanguard ETFs...

I get charged $15 for ETF transaction.
I purchase VTI, VXUS, BND, not all at once but each month one of them to save on the fee, so by the end of the year I would have ~70% VTI,  ~20% VXUS, ~10% BND or close to that.
I got an option to purchase SCHB, SCHF and SCHZ without the $15 fee, but they are not Vanguard but Schwab. Currently Schwab offers lower fee for their VTIs than Vanguard also.
I am a big fan of Vanguard and still pay the transaction fee and currency transfers etc...

What do you think, should I continue buying Vanguard and paying $15 for each transaction, pay higher fee or switch to Schwab for free purchases and lower fee (who knows for how long)?
SCHB (0.03%) instead VTI (0.05%), SCHF (0.08%) instead VXUS (0.11%), SCHZ (0.05%) instead BND (0.06%) and no purchase fee ($15)?
They are not the same as Vanguard but that is as close as it gets. Or you have any other recommendation?
Thank you.

seattlecyclone

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Re: Vanguard or Schwab
« Reply #1 on: February 26, 2017, 08:58:54 AM »
Schwab ETFs are basically as good as Vanguard. If you're in a situation where you can buy the Schwab ones for free but get charged per transaction for Vanguard, you might as well go with Schwab.

Indexer

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Re: Vanguard or Schwab
« Reply #2 on: February 26, 2017, 08:59:43 AM »
If you were going to do this purchase once and then leave it for 20 years $15 doesn't mean much.

Since this will be a monthly transaction go with the Schwab funds. In another topic I showed how Vanguard ETFs are still cheaper than Schwab after you add back in securities lending income, but at this point we are splitting hairs and debating 1/100th of a percent. $15 per trade is a lot. Go with Schwab funds.

Radagast

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Re: Vanguard or Schwab
« Reply #3 on: February 26, 2017, 12:29:32 PM »
Schwab funds are fine. I have heard Interactive Brokers is another place that is friendly to global investors.

petra

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Re: Vanguard or Schwab
« Reply #4 on: February 26, 2017, 01:41:55 PM »
Thanks for the info. Interactive Brokers is not a broker I would ever take, as my cousin has a very bad experience with them. He actually recommended me current broker. After $100k assets their fee goes down by half and no account or inactivity fee.
TD use to provide international accounts as few of my colleagues have an account with them, but for some reason from last year they do not accept new customers from my county.
It is a pity that US brokers are not more open to international investors, even with higher assets requirements.
I usually pay for a transfer $60 to send money to US, but that is still better than using my local broker and pay other fees and dividend reinvestment fees.

Can you folks recommend me what Schwab ETF should I take to be as close as possible to:
1. VTI (Vanguard Total Stock Market ETF)? Is SCHB (US Broad Market ETF) enough?
2. VXUS (Vanguard Total International Stock ETF)? SCHF (International Equity Index ETF) or add some more?
3. BND (Vanguard Total Bond Market ETF)? Is SCHZ (U. S. Aggregate Bond Index ETF) enough?

Radagast

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Re: Vanguard or Schwab
« Reply #5 on: February 26, 2017, 02:38:54 PM »
Thanks for the info. Interactive Brokers is not a broker I would ever take, as my cousin has a very bad experience with them. He actually recommended me current broker. After $100k assets their fee goes down by half and no account or inactivity fee.
TD use to provide international accounts as few of my colleagues have an account with them, but for some reason from last year they do not accept new customers from my county.
It is a pity that US brokers are not more open to international investors, even with higher assets requirements.
I usually pay for a transfer $60 to send money to US, but that is still better than using my local broker and pay other fees and dividend reinvestment fees.

Can you folks recommend me what Schwab ETF should I take to be as close as possible to:
1. VTI (Vanguard Total Stock Market ETF)? Is SCHB (US Broad Market ETF) enough?
2. VXUS (Vanguard Total International Stock ETF)? SCHF (International Equity Index ETF) or add some more?
3. BND (Vanguard Total Bond Market ETF)? Is SCHZ (U. S. Aggregate Bond Index ETF) enough?
VTI --> SCHB correct
BND --> SCHZ correct
VXUS --> SCHF + SCHC + SCHE
Schwab splits their ex-US funds into large companies in Europe/Japan/Etc., small companies in Europe/Japan/Etc., and companies in China/Russia/Brazil/etc. SCHF is most similar to VXUS overall, but missing about 30% in small companies and developing markets. Personally, I use small and developing markets funds and skip the large developed markets fund so I like this method better.

Car Jack

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Re: Vanguard or Schwab
« Reply #6 on: February 26, 2017, 03:25:33 PM »
It's always worthwhile to look more closely at each fund when you're asking this detailed of questions.  I have Schwab, Vanguard and Fidelity accounts.  I buy SCHB myself (close to total stock) as well as SCHX (close to S&P 500).  If I were going to buy VTI, I would do it from a TDAmeritrade account.  No transaction fee (you do have to sign up for that) and if you start with enough money, you might be able to qualify for one of the opening bonuses.

There is no magic about Vanguard or their funds.  Look at what makes up the fund or ETF and the costs involved.  Over the last year, the rest of the world has caught up and passed Vanguard on costs and everybody is better than them for customer service now.  I have 1 account with 1 fund at Vanguard and don't dare do anything with it for fear that they'll screw it up.

Heckler

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Re: Vanguard or Schwab
« Reply #7 on: February 26, 2017, 09:59:12 PM »
You are comparing funds with a 0.02% fee difference, but not calculating your $15 trade (and $60 transfer?!?- yikes!) as part of your costs.  Do yourself a favour and calculate the percent fee you are paying for each transaction, and the answer will be evident.

Monthly transactions at this high a cost surely won't make sense once you put them in percentage terms.  Think about saving up and make higher value contributions less often.

$15 fee on a monthly $1000 contribution is 1.5%  on top of the funds 0.0x%.  Or 0.15% on $10,000/month - still three times the fund's fees.

And dont forget your costs when you go to sell.
« Last Edit: February 26, 2017, 10:12:21 PM by Heckler »

petra

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Re: Vanguard or Schwab
« Reply #8 on: February 27, 2017, 06:16:05 AM »
Thanks for the answers.
Even paying transfer fee is better than all investment opportunities in my country. It is a pity that US brokers do not accept international clients anymore as they use to (TD Ameritrade is a good example, as they would be a best option for me, but do not accept internationals from my country anymore).

I compared
VTI with SCHB
BND with SCHZ
VXUS with SCHF 60%, SCHE 20%, SCHC 20%

and I will stick with Vanguard for now for few reasons, assets, spread, etc…

I still need to pay $60 transfer fee no matter what I do. The only difference is $15 to buy and $8 or so to sell in the future once I pass 100k assets.
I will consolidate my transfers to two times per year, so that should put the costs down of this $60.
And as mentioned once I reach 100k my fee will go down by half for both buy and sell, so that we will better.

Taking into consideration that my pension plan charges me 2% of money I put in per year + 20% of gains, my cost of buying ETFs is not so big. And putting DRIP for free is a big +++, as most of the local brokers charge 0.5% for this. I'm anyway looking at 20+ years here, and after 10 years of holding assets I do not pay capital gains.
Do have in mind that in SA we are limited on low cost investments. US is way ahead on this from the rest of the world.
Thanks.

Radagast

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Re: Vanguard or Schwab
« Reply #9 on: February 27, 2017, 08:42:39 AM »
Have you thought about lost interest and gains? Supposed you contribute $20,000k per year and the market returns 8% nominal per year. You loose an average of three months (actually slightly more...compounding on compoudning) of lost dividends and gains twice per year. That means every six months you lose ... am I doing this right... $400... 8%*$20,000*(1/4 year). You are probably better off using Schwab funds and contributing every 2 or 3 months.

NoStacheOhio

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Re: Vanguard or Schwab
« Reply #10 on: February 27, 2017, 11:50:13 AM »
Monthly transactions at this high a cost surely won't make sense once you put them in percentage terms.  Think about saving up and make higher value contributions less often.

+1. Pool the funds in a regular bank account (savings or whatever), and transfer quarterly.

I'd be way less worried about the $15 fee than the $60 fee. Quarterly transfers alone cut $480/year off your fees. Sure you may miss out on some gains, but you're avoiding a substantial guaranteed loss right off the bat. Couple that with switching to Schwab funds and it's $660/year savings.

petra

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Re: Vanguard or Schwab
« Reply #11 on: March 01, 2017, 01:21:10 PM »
Thanks for all the comments and help.