Choosing Us Investments: Fidelity's Top Tips For Success

Investing with Fidelity is a great way to grow your money, but it can be challenging to know where to start. Fidelity offers a wide range of investment options, including stocks, bonds, ETFs, mutual funds, and more. The best investment strategy for you will depend on your financial goals, risk tolerance, and time horizon.

- Account type: Fidelity offers various account types, such as brokerage accounts, 401(k)s, and IRAs. Each type has its own pros, cons, and tax implications, so it's important to understand which one aligns best with your goals.

- Risk and reward: Different investments carry different levels of risk. Stocks, for example, are typically riskier but can offer higher rewards, while bonds are considered lower-risk. It's important to understand your risk tolerance and choose investments that match it.

- Diversification: Diversifying your investments across different asset classes and sectors can help reduce risk. Mutual funds and ETFs, for instance, pool money from multiple investors to invest in a collection of stocks, bonds, or other securities.

- Costs: Consider the costs associated with each investment, such as expense ratios, transaction fees, and ongoing fees. These can eat into your returns over time.

- Performance: While past performance doesn't guarantee future results, it's still worth considering a fund's long-term performance and ratings when making your decision.

- Research: Take the time to research and understand the investments you're considering. Look into the company's financials, news, and industry trends to make informed decisions.

Stocks, bonds, and other investment options

When it comes to investing, there are a variety of options available to individuals looking to grow their money. Here are some of the most common investment options offered by Fidelity:

• Stocks: Stocks represent a piece of ownership, or a share, in a public company. Stock prices fluctuate depending on various factors, including company performance and news. Investing in stocks can be rewarding but is considered riskier compared to other options. It is recommended to research and diversify your stock portfolio to mitigate risk.
• Bonds: Investing in bonds is like lending money to companies or governments that agree to pay you back with interest. Bonds are typically considered lower risk than stocks and are assigned grades to help you understand the risk of the issuer defaulting on their promise to repay.
• Exchange-Traded Funds (ETFs): ETFs allow you to invest in a group of securities (e.g. stocks or bonds) at once, providing diversification. They are often created to follow a specific theme or category, such as a sector or market index. ETFs are considered less risky than buying individual stocks.
• Mutual Funds: Mutual funds pool money from multiple investors to purchase a collection of stocks, bonds, or other investments. They are actively managed by professionals and provide diversification across different investments. Mutual funds, unlike ETFs and stocks, trade only once a day at the end of the day.
• Index Funds: These funds aim to match the performance of a specific market index, like the S&P 500. Index funds offer a way to invest in a broad range of stocks or bonds with just one fund, often at a lower cost. You can purchase them in various account types, such as brokerage accounts, IRAs, health savings accounts (HSAs), or 401(k)s.

When choosing among these investment options, it is essential to consider your financial goals, risk tolerance, and time horizon. Additionally, remember to review your investments regularly as your life circumstances change.

Risk tolerance and time horizon

Risk tolerance refers to how much risk you are willing and able to take on. All investing involves some level of risk, and it's important to understand your own risk tolerance before making any investment decisions. Market ups and downs are normal, and knowing your risk tolerance can help you stick to your investing plan and achieve your financial goals. Generally, the longer you invest, the more time your money has to grow and recover from any dips in the market, so you may be able to take on more risk.

Time horizon refers to how long you plan to stay invested. This is an important consideration as it can impact the types of investments you choose. For example, if you are investing for the long term, such as for retirement, you may be able to take on more risk and choose investments that have the potential for higher returns over time. On the other hand, if you are investing for a shorter time period, you may want to choose more conservative investments to protect your capital.

It's important to regularly review your investments as your life changes, as your risk tolerance and time horizon may also change. Adjusting your investment plan as needed can help ensure that your investments continue to align with your financial goals.

Investment account types

Fidelity offers a variety of investment accounts to help you reach your financial goals. Here are some of the most common types:

• Brokerage Account: This is a general investment account that allows you to buy various investments such as stocks, bonds, mutual funds, and ETFs. Brokerage accounts have no contribution or income limits, and anyone can open one. However, they do not offer tax advantages, and you may have to pay trading fees.
• Individual Retirement Account (IRA): An IRA is a tax-advantaged account designed for retirement savings. There are two main types: Traditional IRAs, where you contribute pre-tax dollars and pay taxes upon withdrawal, and Roth IRAs, where you contribute after-tax dollars and can make tax-free withdrawals in retirement.
• Health Savings Account (HSA): This is a tax-advantaged account designed for saving for qualified medical expenses. Contributions are tax-deductible, withdrawals for qualified medical expenses are tax-free, and any investment growth is also tax-free.
• 529 Plan: This is a tax-advantaged investment plan designed for saving for future education expenses, including K-12 and college tuition, room and board, books, and technology. Withdrawals for qualified education expenses are tax-free.
• Cash Management Account: This type of account combines the features of a bank checking or savings account with the flexibility of a brokerage account. It offers competitive rates, low or no fees, and higher FDIC protection limits compared to traditional banks. However, it does not offer tax advantages.
• SEP IRA: This is a retirement plan designed for self-employed individuals and small business owners, offering tax benefits, easy setup, high contribution limits, and flexibility. However, there are no catch-up contributions allowed, and withdrawals before age 59½ may be subject to taxes and penalties.
• Solo 401(k): This is a retirement account for self-employed individuals or small business owners with no employees (except their spouses). It offers tax benefits, high contribution limits, and a wide range of investment options. However, it is limited to businesses with no employees, and there are restrictions on withdrawals.
• SIMPLE IRA: This is a retirement savings account for self-employed individuals or small businesses with fewer than 100 employees. It offers tax benefits, easy setup, a wide range of investment options, and low cost. However, there are early withdrawal penalties, and it offers less creditor protection compared to other retirement plans.

Costs and fees

When choosing an investment, it is important to consider how it fits into your overall investment strategy. Factor in the cost and look for investment options that have potential. Costs are an important consideration when selecting a fund.

Fidelity's service fee is charged for administering your accounts, with flexible options for amounts less than £25,000. Here are the service fees for different investment values:

• Less than £25,000 with a regular savings plan: 0.35% (roughly £3.50 per year for every £1,000 invested)
• Less than £25,000 without a regular savings plan: £7.50 flat fee per month (£90 a year)
• £25,000 or more but less than £250,000: 0.35% of the total value of your investments
• £250,000 or more but less than £1 million: 0.20% reduced fee (you'll also qualify for Fidelity's Wealth Management Service benefits)
• £1 million or more: 0.20% a year for the first £1 million. No charge for investments over £1 million

The maximum service fee you will pay for all your personal accounts per year is £2,000.

Fidelity does not charge a service fee for junior accounts or for exchange-traded investments held in an Investment Account, or on cash held in your accounts.

Fidelity's share dealing charges are as follows:

• Share deals as part of a regular savings or withdrawal plan, or for a reinvestment of income or a dividend: £1.50
• Share deals placed online: £7.50
• Share deals placed by phone: £30.00

Stamp Duty (a tax on share purchases and transfers) is charged at 0.5% for UK shares and 1.0% for Irish shares.

Levies may apply on UK share deals over £10,000 and on Irish share deals over €12,500.

Financial transaction tax may apply on the purchases of some exchange-traded instruments, including in some European countries.

Foreign exchange (FX) charges are applied when dealing in offshore funds that are not in sterling and when dealing in international shares.

The ongoing fund charges for the funds available through Fidelity start from as low as 0.05%. Some funds may also have additional fees and charges, such as a bid-offer spread or a fund manager buy or sell charge.

Fidelity's Adviser Fees service allows you to apply different fees to separate accounts held by one client and amend them at any time in agreement with your client.

Robo advisors and other professional help

Robo advisors are a great way to automate your investments. They are a digital financial service that uses technology to manage your investments on your behalf. Fidelity's robo advisor is called Fidelity Go. It uses a strategy built around your goals and preferences to manage your investments.

Fidelity Go offers tiered pricing based on your account balance. You won't pay any advisory fees for a balance under $25,000, but you will pay 0.35% per year for any balances of $25,000 or more. There are no trading fees, transaction fees, or rebalancing fees.

Here's how it works:

• You answer a few questions about yourself and your financial goals.
• Fidelity Go suggests an investment strategy for your account.
• You add money to your account. Once your account balance reaches $10, Fidelity Go will start investing for you.
• Fidelity Go will manage your money in accordance with your goals, helping you track your progress.
• You will have access to online planning tools and, once your account reaches a balance of $25,000, you'll have access to unlimited coaching sessions with trained advisors.

A hybrid robo advisor combines a robo advisor with live, personalized financial coaching. This gives you the opportunity to ask questions, exchange ideas, and discuss your goals with a real person. Fidelity Go offers hybrid robo advisory services for a fee of 0.35% per year for those with balances of $25,000 or more.

Robo advisors are typically a more affordable option than traditional investment management, but it's important to research different robo advisors to see what types of investments they offer and whether those come with any additional fees.

If you're looking for more comprehensive investment management solutions, Fidelity offers Portfolio Advisory Services Accounts and Separately Managed Accounts. If you're interested in working 1-on-1 with a Fidelity advisor, consider Fidelity Wealth Management. Investment minimums apply for these services.

Frequently asked questions