I am not and do not pretend to be a financial advisor. I am a financial enthusiast and all information contained in this article is not to be taken as advice but as an opinion. The article contains affiliate links marked as (AF). All opinions are my own and are free of external influence.
Time to start compounding your wealth! I’m sure you’ve heard it 1000 times but which broker should you pick Trading 212 or Vanguard? What’s the difference is one better than the other and will your path to financial security change depending on your choice?
Whether you chose Trading 212 or Vanguard doesn’t matter. At the end of the day, the important thing is to start investing! The first pound/dollar is always scary but once you get the ball rolling it can truly change your life.
But before I go on a rant about the amazing thing that is compound interest (find out more here) let’s focus on the subject at hand. Should you go with Trading 212 or Vanguard?
To answer this in the best way possible we will explore what each service offers, what investing profile fits each best, and how to get the most out of both!
What are Trading 212 and Vanguard?
Let’s start with the newer product! Trading 212 is a fee-free broker that allows you to trade in real shares and CFDs. You are also able to invest in fractional shares! No need to save for an entire share. Do you want to own $1 in TSLA well it’s possible! Unfortunately, they aren’t available in the USA or Canada. If you live in either of these countries you should check out M1 Finance as they offer a similar product for the American market.
Let’s get back to Trading 212, the system is built with 3 separate accounts:
ISA accounts are tax-free accounts for the UK market. If you want to learn more about them feel free to read my article “What are ISAs”. CFD and Invest account being separated ensure that you will not trade options accidentally. Something that can easily happen with eToro for example.
From company stocks like Microsoft to Index funds for the likes of the S&P 500 Trading 212 has everything you can wish for. Provided you have the time to pick and choose your shares T212 is amazing!
Additionally, Trading212 allows you to rebalance your investment pies automatically when you add, remove, or change the weight of a stock. If you are unfamiliar with rebalancing why not give The Banker On Wheels’ latest article a read? “The only skill you need – Portfolio Rebalancing”
The website also allows you to have a demo account and practice trading with up to 50000. It’s a great way to get familiar with trading and more accepting of numbers both in the red and the green!
If you want to get started with Trading 212 use my link and with the first £1/$1 invested you will get a free stock worth up to £100/$100. (AF)
Vanguard is a more traditional asset manager. They offer a wide array of ETFs and Index Funds that are traded either on the NYSE (New York Stock Exchange) or in the UK. It means you have the opportunity to open an account with them as your broker or trade them through other brokers.
In short, you can trade Vanguard stocks on Trading 212 but not the other way!
For more details on what Vanguard offers, I already wrote an introductory guide to their product in my article: “How to invest with Vanguard”.
What kind of Investor are you?
So we covered the basics both brokers allow you to trade and invest in the long run… is one better than the other? Well first of all if you are not a UK, US, or Canadian investor Vanguard’s platform won’t be accessible to you. That was easy, wasn’t it!
On the other hand, their funds will still be accessible to you! So this part is still relevant to you. Why does your personality have an impact on the broker or approach you should take?
Well depending on your risk aversion, time at disposal, and interests, you might prefer different brokers.
I’ll be separating investing profiles into 4 different archetypes:
- Risk-averse and Hands-off: The Sleeper
- Risk-averse and Hands-on: The Judge
- Risk-insensitive and Hands-off: The Sheriff
- Risk-insensitive and Hands-on: The Cow-Boy
You want your wealth to grow but you want minimal risk and do not want to touch your account. First of all sorry to tell you this but no risk doesn’t exist when it comes to investing. Low risk does but there is no such thing as 100% guaranteed returns.
The good news is Vanguard has the perfect products for you. If you are based in the UK I would go with one of their LifeStrategy funds as they allow you to blend equity and bonds to your liking. All you have to do is set up your direct debit and every month your money will be invested and diversified for you!
The Lifestrategy 60% equity and 40% bond which has returned 54.75% over the last 5 years is diversified as follows:
If you are based elsewhere and want to build a safe portfolio you can forget about it’s easy to do with Trading 212. They give you the chance to create your investment pie and give you an idea of your annualized returns based on the last 5 years. Why not build a pie with a similar mixture of index funds and fixed income funds.
Set them up and come and check on them 2 or 3 times a year they should lead to consistent growth!
You want returns but you are ready to get a little less as long as your nest egg is safe. But on the other hand, you like being in control. You want to know what companies you hold and how they are performing at all times.
I find myself in this category at times. Although Vanguard would once again be great for you. You would rather pick and choose your companies as you want only solid stocks. You might dabble in a few funds for security but overall you want to build a company portfolio.
Therefore, I think you should pick up Trading 212 if in the UK don’t forget to open an ISA and top that up before a general investment account. But honestly, you will get more out of this broker.
Once again to make sure you are invested in the “safest” stocks and funds possible, having the opportunity to rebalance your pie will make your life much easier!
Resources to get started:(AF)
You’re in it because you want to win. The more you can maximize your return the happier you are! The Sheriff is willing to take on a little more risk as long as he gets to reap more rewards. Your focus is equity as that’s where the growth is! The Sheriff doesn’t want to put too much effort into his investing though.
As for any passive trader, Vanguard would be perfect for you! Whether it’s them All Cap Accumulation Fund, VUSA/VOO (S&P 500 index fund), or the Lifestrategy 100% you are all in. Of course like any sensitive trader you have set up your direct debits and invest the same sum regardless of the state of the market.
What would your diversification and portfolio look like if you went with Vanguard’s Lifestrategy 100%?
You want it all the control, the returns, victory! You are willing to risk more to get more. But be careful there’s a reason Cowboys were commonly poor. The Investing Cow-Boy often takes too much risk. Remember you cannot know everything and predict the market.
Although I cannot recommend this approach unless you know exactly what you are doing or have a lot of time on hand. But if you stand here you should focus on Trading 212 as it allows you to invest and buy as much as you want every day and with no fees.
Their categories and the option to sort by “big winners”, “big losers”, or “growth stocks” will make your life easier. But remember to always do your own research and remain consistent with your criteria!
More importantly never invest more than you can afford!
Trading 212 or Vanguard conclusion
You might feel like you don’t fit into any category. That’s very likely as we are adaptable animals. Personally, I stand between the Sheriff and the Judge. I invest 80% of my savings into the Lifestrategy 80% and the FTSE Global All Cap Fund held by Vanguard.
Every month without fault a direct debit for £400 is sent straight to my Stocks & Shares ISA. The 20% that remain go to my Trading 212 UK dividend pie. Every Tuesday I buy in £25 worth of fractional shares. It also means that ¼ of my monthly investments are easily rebalanceable. Additionally, I save another £500 in high-yield savings account as a fund for a first Real Estate Investment!
At the end of the day, the broker doesn’t make your wealth your decisions do! So if you invest regularly or are getting started, tell me in the comments what type of investor you are?