Trading 212 vs Vanguard – Battle of the best!

I’m so often asked why I have my ISA with Vanguard when I use Trading 212 and all the products I invest in with Vanguard are available on Trading 212.

It’s a good question, and at first glance it would appear I am leaving money on the table – simply down to the fact that Vanguard charge a platform fee and Trading 212 do not.

So I’m going to go down the rabbit hole and give you the full lowdown on the differences between Vanguard and Trading 212 as I see it, and even though it might be more expensive to invest with Vanguard, basic cost isn’t everything.

Are you thinking about the best stocks and shares ISA for you for 2023/24? You might want to check out my special feature post here to help you decide!

Humble beginnings.

Vanguard was my first investment platform I used in a serious way. I had heard so many good things about the platform and when I actually tried it out, it was incredibly easy to use their website and their low fees got a big thumbs up from me. I was happy. I was investing in solid products and pleased with my choices.

Nothing stands still, of course and soon phone apps like Trading 212 and FreeTrade were on the scene offering commission free trading of mainstream stocks and shares all in a handy phone app. I was intrigued. I tried them both and found Trading 212 to suit me better. It is more mature than FreeTrade and also has a full web application for something a bit bigger than your phone app.

Trading 212 was a fairly good experience for me as I began investing in various products not available on Vanguard.

You see Vanguard only offers it’s own products – it’s index funds and ETFs, but Trading 212 offers all manner of individual stocks and shares and ETFs of other platforms too. There is a huge amount of choice.

Seeds of doubt

Of course I like to put my investment videos on my YouTube channel and I was getting plenty of comments asking why I use Vanguard when all the investments I have in Vanguard are available on Trading 212.

You see I don’t use Vanguard’s Lifestrategy funds or retirement funds or anything like that. I have an S&P 500 ETF, Developed World ETF, and smaller holdings in High Dividend Yield ETF and emerging markets.

All these ETFs trade on the open market and are available on Trading 212.

Matters of tax?

My ISA is with Vanguard and my account with Trading 212 is not, so clearly I would be taxed on profits from Trading 212. So if everything I invest in my ISA is available on Trading 212, why not move my ISA to Trading 212, wrap the whole lot in an ISA and never pay a penny of tax on it again?

Certainly seemed interesting so I investigated just why I should pay a fee of 0.15% on my investments for the pleasure of using Vanguard.

Security of funds

Suffice to say both are regulated by the Finance Conduct Authority here in the UK and both covered by the Financial Services Compenstation Scheme, which protects your investments up to £85,000 per institution and up to £170,000 for joint accounts.

That’s probably enough to say about that.

Business models

Vanguard have been in business since 1975 and manage 30 million accounts worth a combined $6.2 trillion, and is a Which? Recommended Provider. Decent credentials! In the UK they make their money from charging for the use of their plaform (0.15%) capped at £375/year – which would be accounts in excess of £250,000. It’s a stable business model and is covered by the FSCS.

Trading 212 offer a free share up the the value of £100 on signup, and use of the the Invest and Invest ISA parts of the app are completely free. So how do they make money? Well the CFD portion is where they make their money on the spreads of different products and since….

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Trading 212 Website

… then their free options appear to be available off the back of the money some people are losing trading CFDs.

I guess Trading 212 might be hoping you move from simply investing into trading and swell their coffers yet further. Otherwise, I can’t understand why they would give away free shares as sweeteners to new customers.

Trading 212 also backed by the FSCS so no difference there and it’s fair to say that their operation is profitable.

However the sheer size and reputation in the industry of Vanguard really makes me much more comfortable investing with them than a business that is relying on people losing money overall, to continue to be able to offer the fee free lifestyle they currently have going.

But since, as I say, both are covered by the same FSCS guarantee, your investments are equally protected, even if one is more likely to struggle than the other.

In fact when I asked the question of Trading 212 of exactly what happens if they go bankrupt they replied:

Thank you for contacting us!

I would like to point out that should we file for bankruptcy, your shares will be sold and turned into free funds. They will be sold at the last available market price and the value up to 85 000 GBP will be reimbursed by the FSCS. 

Trading 212

So that’s pretty clear.

Service and availability

Vanguard’s website is great. It’s clear, it’s got stacks of info and it’s speedy. It’s got lots of cool info on how your investments are going and customer service is great. I have never attempted buying ETFs in real time on the site so I can’t comment there, but orders have always been fulfilled when scheduled and they have never let me down.

As mentioned above Vanguard platform only offers Vanguard products. They are very good products and great for long term investors with all kinds of risk appetites but they do lack as wide a range of options as competitors. This could be considered a good thing as it helps prevent that analysis paralysis, and very often the simplest investing methods are the best.

Trading 212 have been having outages of late, with complete service unavailability, which is being put down to enormous user demand. In fairness they are very transparent with their communication and respond promptly to queries.

Since I am very much a buy and hold investor, short periods of downtime don’t necessarily affect me much, but I can understand the frustration when this sort of thing happens, in particular if it is a frequent occurence.

However, it’s not a good look, and I feel trading platforms should really be able to scale seamlessly with demand.

Summary

So it’s pretty close!

I think both are excellent platforms for investors here in the UK.

• Both regulated by the FCA and covered by FSCS
• Trading 212 offers most of Vanguard’s products but notably not the Life Strategy Funds which are very popular.
  Vanguard only offers Vanguard products
• Trading 212 offers individual stocks as well as a broad range of other ETFs.
• I feel Vanguard has a more robust business model – incorporating a 0.15% platform fee to cover it’s costs.
• Vanguard probably shades it for me in terms of customer service and reliability

So as ever, what you want to invest in and whether you want to use your ISA allowance to do that might determine which platform you go for.

Personally, I’m starting to lean towards Trading 212 not just to save the 0.15%, but to wrap all my other investments in an ISA along with my Vanguard ETFs.

Watch this space!

P.s. if you are interested in InvestEngine vs Vanguard I have a post about that too!

How about Lightyear vs Trading 212?