Are Schwab ETFs Better Than Vanguard? The Ultimate Showdown

Hey there, fellow investors! I’ve been diving deep into the world of ETFs lately, and I keep hearing the same question pop up in conversations are Schwab ETFs better than Vanguard? It’s like the investing world’s version of Coke vs Pepsi, and today I’m gonna break it all down for you

As someone who’s spent way too many hours comparing expense ratios and performance metrics (seriously, my wife thinks I’m obsessed), I’m excited to share what I’ve learned about these two investment giants Whether you’re a seasoned investor or just starting out, this comparison might help you figure out which broker’s ETFs deserve your hard-earned cash

The ETF Powerhouses: Quick Overview

Before we dive into the nitty-gritty let’s get a quick snapshot of these two investment behemoths

Cost Comparison: The Expense Ratio Battle

Let’s be real – when it comes to ETFs, costs matter A LOT. Even tiny differences in expense ratios can add up to thousands of dollars over time.

Schwab’s Cost Structure

Schwab has been aggressive in the “race to zero” expense ratios. Many of their core ETFs have incredibly low expense ratios, sometimes even undercutting Vanguard by a few basis points. For example:

• Schwab US Broad Market ETF (SCHB): 0.03% expense ratio
• Schwab US Large-Cap ETF (SCHX): 0.03% expense ratio
• Schwab International Equity ETF (SCHF): 0.06% expense ratio

Vanguard’s Cost Structure

Vanguard built its reputation on low costs, and they continue to deliver:

• Vanguard Total Stock Market ETF (VTI): 0.03% expense ratio
• Vanguard S&P 500 ETF (VOO): 0.03% expense ratio
• Vanguard Total International Stock ETF (VXUS): 0.08% expense ratio

The difference? Often just 0.01-0.02%, which is basically pennies on the dollar. However, over decades of investing, even these tiny differences can compound.

Fund Selection and Variety

When choosing between brokers, selection matters. Let’s see how they stack up:

Schwab’s ETF Lineup

Schwab offers a solid lineup of ETFs but has fewer options than Vanguard. They excel at offering:

• Core market ETFs covering major indexes
• Several factor-based ETFs (like fundamental index funds)
• Specialized sector ETFs

The good news is Schwab clients can trade any ETF commission-free, even competitors’ funds.

Vanguard’s ETF Lineup

Vanguard boasts a broader range of ETF offerings:

• Comprehensive coverage of nearly every major index
• More international options
• More specialized bond ETFs
• Factor ETFs and ESG (environmental, social, governance) options

If you’re looking for niche exposure, Vanguard might have more options that fit your specific needs.

Trading Platform Differences

The experience of actually buying and selling these ETFs matters, especially if you’re not just a set-it-and-forget-it investor.

Schwab’s Trading Experience

Schwab really shines here. Their platform offers:

• The robust thinkorswim platform (from their TD Ameritrade acquisition)
• Customizable layouts
• Advanced technical studies
• In-platform news
• Mobile, desktop, and web versions

It’s clear Schwab has invested heavily in creating a trader-friendly environment.

Vanguard’s Trading Experience

Vanguard’s platform is… well, functional but basic. Their interface is:

• Simple and no-frills
• Focused on basic order execution
• Not designed for active trading
• Less intuitive for beginners

As the comparison on Bankrate notes, “Vanguard has a simple, no-frills order interface. You know what you want to trade, you’re looking to place an order, and you get it done.” It’s built for buy-and-hold investors, not active traders.

Fractional Shares: A Key Difference

For newer investors or those investing smaller amounts, fractional shares can be game-changing.

Schwab’s Stock Slices

Schwab offers “Stock Slices” which allow you to:

• Buy fractional shares of any S&P 500 stock
• Start with as little as $5
• Reinvest dividends as fractional shares

Vanguard’s Fractional Shares

Vanguard’s fractional share offering is more limited:

• Only available for Vanguard ETFs (not stocks or non-Vanguard ETFs)
• Dividends from stocks and ETFs can be reinvested as fractional shares

This is a clear advantage for Schwab if you’re starting with smaller amounts or want to invest in high-priced stocks.

ETF Performance: The Bottom Line

Let’s address the elephant in the room – performance. Here’s what I’ve observed when comparing similar ETFs from both providers:

1. Similar indexes show similar performance – When tracking the same index (like the S&P 500), performance differences are minimal
2. Tracking error is low for both – Both companies are excellent at minimizing tracking error
3. Tax efficiency – Both providers manage their ETFs to be tax-efficient

The truth is, for comparable index ETFs, the performance difference is often negligible. The slight edge in expense ratios might give Schwab a tiny advantage in some cases, but we’re talking about extremely small margins.

Customer Support: An Important Consideration

If you need help with your ETF investments, the quality of customer service matters.

Schwab’s Customer Support

Schwab offers:

• 24/7 phone support
• Live chat
• Email support
• ~400 physical branch locations
• Consistently high-rated customer service

Vanguard’s Customer Support

Vanguard provides:

• Phone support 8am-8pm Eastern (weekdays only)
• Email support
• No physical branches
• Generally helpful but more limited hours

This is an area where Schwab clearly outshines Vanguard. If having someone to talk to about your investments is important to you, Schwab offers more accessibility.

Who Should Choose Schwab ETFs?

Based on my research and personal experience, Schwab ETFs might be better for:

• Active traders who value a robust trading platform
• Newer investors who might benefit from better customer support
• Small-dollar investors who want to use fractional shares on a wider range of securities
• All-in-one customers who want banking, trading, and other financial services in one place
• People who value in-person support through Schwab’s branch network

Who Should Choose Vanguard ETFs?

Vanguard ETFs might be the better choice for:

• Pure buy-and-hold investors who don’t need fancy trading tools
• Vanguard fund enthusiasts who want access to the complete lineup of Vanguard products
• Those who prioritize a wider selection of specialized ETFs
• Investors who appreciate Vanguard’s ownership structure (Vanguard is owned by its funds, which are owned by shareholders)

My Personal Take

After spending countless hours comparing these two ETF providers, I’ve gotta say – there’s no clear “winner” for everyone. It really depends on your personal investing style and what features matter most to you.

For what it’s worth, I personally use both! I have some core positions in Vanguard ETFs that I’ve held for years, but I also appreciate Schwab’s platform for more active parts of my portfolio.

If you’re just starting out and want the absolute simplest way to build a diversified portfolio with rock-bottom costs, either provider will serve you well. The differences in expense ratios are so tiny that other factors—like user experience, customer service, and additional features—might matter more to your investing success.

Final Thoughts: It’s About More Than Just the ETFs

When deciding between Schwab and Vanguard, remember that you’re not just choosing ETFs—you’re choosing a brokerage relationship that might last decades.

Consider these final points:

• Account types – Both offer a full range of account types (individual, joint, IRAs, small business retirement plans, etc.)
• Robo-advisors – Both offer automated investing services if you want a hands-off approach
• Fund minimums – Neither requires minimums to open an account
• Future needs – Think about what other services you might need as your financial life grows more complex

In the end, the question “Are Schwab ETFs better than Vanguard?” doesn’t have a one-size-fits-all answer. Both offer excellent, low-cost ETF options that will serve most investors well.

What’s your experience been with either provider? I’d love to hear your thoughts in the comments below!

Quick Decision Guide

Still undecided? Here’s my super-simplified recommendation:

• Choose Schwab if: You value a better trading experience, might trade somewhat actively, want fractional shares of S&P 500 stocks, or would benefit from 24/7 customer support.
• Choose Vanguard if: You’re a committed buy-and-hold investor, want the widest selection of Vanguard funds, or prefer Vanguard’s unique ownership structure.

Either way, you’ll be investing with a top-tier provider whose ETFs will help you build wealth over time with minimal costs. And that’s what really matters!

Warren Buffett recommends that most investors purchase a low-cost S&P 500 index fund ETF, with the Vanguard S&P 500 ETF (VOO) being the one he has specifically recommended.

Yes, Charles Schwab is good for ETFs due to its low-cost, commission-free trading on Schwab ETFs, a wide selection of Schwab ETFs, and tools like screeners and portfolio builders.