We only just started investing on our own in July. Work-based 401k/457b investing was based on limited selections that the employer’s retirement planner had pre-selected, and done automatically on payday, based on an amount we selected a month before.
As we didn’t know which personal investing platform would be the best, we figured we try two different ones so we could try some different ones out - one for her and one for me. During the months while we were saving up our 6 month Emergency Fund, I started researching investing. Fortunately, I found the bogleheads.org forum and the “Jack Bogle” way of investing (Bogle founded Vanguard). The top 3 recommended ones in the US for access to low Expense Ratio (ER) Index Funds are Vanguard, Fidelity and Schwab. Vanguard was started by Jack Bogle therefore my top choice. Fidelity had access to zero-ER Index Funds so it won our our second choice.
One of the things I’ve been taught in both an in-person class and online forums ( bogleheads.org ) is to create your investment plan, and then automate it. Don’t deviate or try to micromanage it or “time the market”. We have a very high risk tolerance, partly because we refuse to deviate from our investment plan. Only annually will we review our investment plan and only at that time, with some deliberate thought, adjust it such that it’ll be the plan for the next year. Does it freak me out when I see we’ve “lost” $20k in a single day? You betcha - but we just leave it alone, knowing it’ll bounce back and continue upwards. We’re up over 30% this crazy year, but there were some crazy dips in there.
Fidelity’s interface to automate investing is both confusing and not friendly for those who are paid anything other than on a date-of-the-month based schedule. It can only automate a with a repeating date-of-the-month (say the 2nd) and then would have to also create a second repeating automation (say for the 16th). This is fine if you’re paid on say just the 1st of the month, or the 1st & 15th. If you are, Fidelity may be just fine for you.
The other confusing thing with Fidelity is that you must schedule two transactions: one transaction to transfer the money from your bank to their “core position” (basically a money market, holding account) and then a second to purchase equities or bonds. With Vanguard, this is a single automated transaction to purchase the equities or bonds from money in your bank account.
I’m paid every 2 weeks (26 times a year), so date-of-the-month scheduling doesn’t match up to my payperiods. So each year I’ll be looking at the calendar to find the closest sets of repeating dates that match my paydays. For Fidelity starting in Sept until the end of the year, this looked like setting up 3 repeating transactions for the 8th, 19th, and 30th on certain months (but not all):
Sep 8, Oct 8
Sep 19, Oct 19, Nov 19, Dec 19
Aug 30, Oct 30, Nov 30, Dec 30
Our payday money is sitting in our bank account after payday for a day or two or four, not invested while waiting for one of these dates above to occur. And Fidelity requires any automated transaction to be at least 2 or more transactions, so you can’t just pick a single date that follows each Friday payday (hopefully the logistics of a paid-every-other-Friday vs. date-of-the-month makes sense.
Additionally, it is delayed when investing with Fidelity vs. Vanguard. For Fidelity, if I tell it to schedule a transfer and investing on a given day, then there is a day or two delay from when the monies leave my bank until the fund purchase actually takes place. For Vanguard, it is the opposite: if I schedule the purchase for that day, it will be purchased that day, and the funds will be withdrawn from my account the following day and settle at Vanguard the day after. So with Vanguard my transaction is made while the money “floats” vs. Fidelity and/or the bank gets to “float” my money while I don’t have it invested. This isn’t really a big deal, but I just don’t like that for 26 times a year my money isn’t working for me for a day or two, plus the existing 1-4 day delays with the whole date-of-the-month thing, can easily add up to a couple months each year that my money is sitting in my bank after payday and not invested.
This Christmas holiday when we sit down to review and possibly revise our investment plans (asset allocation, fund and bond selections, etc.) we may consider putting less into Fidelity’s platform and perhaps opening an account with Schwab. I want something, like Vanguard, where I can set it and forget it for 364 days until it’s time to review again, and I want to be able to do it in a very short amount of time and not take an hour or so to do the calendar math to figure out how to best “automate” 52 transactions (a minimum of 26 bank transfers and 26 investments). If we end up liking Schwab, we’ll probably just sell everything at Fidelity and transfer the retirement account monies over - if if we don’t like Schwab, we’ll just have her open a Vanguard account.
One advantage Fidelity has over Vanguard is that you can start your investment automation right away. With Vanguard, you can only automate buying a Mutual Fund you already own. Vanguard has a minimum of $3,000 to purchase a Mutual Fund, so this took us a few months to get into the account. In the meantime, we manually bought ETFs that matched the MFs we wanted to buy. The purchase of Vanguard ETFs cannot be automated. However, once we had $3,000 invested in an ETF, we then could sell that ETF and purchase the MF we wanted. Now that we owned a MF, we could automate future purchases of that MF. As we presently only have one MF (VTSAX) with my personal Vanguard account, this isn’t a big deal, but if someone wanted to own many MFs, this could cause a delay in being able to automate purchases. On the other hand, Fidelity has no minimum to purchase a MF and once you own a position in a MF, future purchases can be automated.
What I really wish is that these institutions let a person open a “dummy account” just to try out the interface.