Fidelity Investments: A Comprehensive Guide To Buying And Owning Mutual Funds

Investing in Fidelity is a simple process, but it requires some due diligence. First, you need to decide what type of account you want to open, such as a brokerage account, a 401(k), or an individual retirement account (IRA). Each account type has its own pros and cons in terms of flexibility, taxes, and rules and restrictions. Once you've chosen an account type, you can open and fund the account. After that, you can start investing in various financial instruments, such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs). It's important to do your research and understand the risks involved before investing. You can also seek help from a robo advisor or a financial professional. Finally, remember to regularly check in on your investments and rebalance your portfolio as needed.

Choose an account type

The account type you choose will depend on your investing goals and your personal circumstances. Here are some of the account types offered by Fidelity:

• Brokerage account: This is a standard-issue investment account that offers flexibility. Anyone over the age of 18 can open one, and you can add as much money as you want, whenever you want. You also have access to a wide range of investment options. However, a brokerage account is typically the most expensive when it comes to taxes, as you generally have to pay taxes on any investment profits.
• 401(k): This is an employer-sponsored retirement account. It offers tax benefits and, in some cases, free money from your employer in the form of matching contributions. However, there are rules and restrictions on when and how you can contribute and withdraw money.
• Individual retirement account (IRA): This is a retirement account that you can open and invest in on your own, i.e., not through your employer. It offers tax benefits similar to a 401(k) and often gives you more flexibility and control over your investments. However, there are rules and restrictions on who can contribute, how much can be contributed, and when and how you can withdraw money.
• Fidelity Cash Management Account: This account offers the features of a traditional checking account but with more competitive rates on your cash. There are no account fees or minimums, and you get global reimbursement on ATM withdrawals, a free debit card, check writing, and Bill Pay. You also have the option of having your cash balances FDIC-insured.
• Fidelity Go: This is a robo-advisor service offered by Fidelity that makes investing quick, simple, and affordable. There is no minimum amount required to open an account; you only need $10 to start investing. The fee is $0 for under $25,000 and 0.35%/year for balances of $25,000 or more.
• Fidelity Youth Account: This account is designed for teenagers aged 13 to 17, who can learn to save and invest under parental oversight. There are no account or subscription fees, and teens can start investing with as little as $1.
• 529 Account: This is a flexible, tax-advantaged account designed for education savings. You can use the funds for qualified educational expenses at schools nationwide, and there are no account minimums or annual fees.
• Trust Account: A trust account can help you protect your legacy and give you greater control over how your wealth is distributed. There is no investment minimum.
• Roth IRA: This account lets you grow your retirement savings with after-tax dollars, and you can withdraw the money tax-free when you need it. With a Roth IRA, your potential earnings can grow tax-free.
• Rollover IRA: This account is for someone who is changing or leaving a job and wants to roll over their old 401(k) or workplace retirement account into a new account without paying taxes or penalties.
• Traditional IRA: This account is similar to a Roth IRA but offers tax-deferred growth, meaning you may be able to deduct your contributions and only pay taxes when you withdraw the money.

Open the account and put money in it

Step 3: Open the account and put money in it

Opening a Fidelity account is a simple process that can be completed in about five minutes. Here's a step-by-step guide to help you get started:

Step 1: Choose a Fidelity account

The first step is to decide which type of Fidelity account you want to open. There are several options available, including:

• Brokerage account: This is a standard taxable brokerage account with no withdrawal limits and the flexibility to contribute as much as you want. However, it does not have the tax benefits offered by IRAs or 401(k)s, and you will owe capital gains taxes when you sell securities for a profit.
• Traditional IRA: A retirement account that offers tax deferral benefits, allowing you to postpone paying taxes until you withdraw the money. This is a good option if you expect to be in a lower tax bracket in retirement.
• Roth IRA: Another type of retirement account with tax benefits. You fund this account with after-tax dollars, and the money can grow tax-free. Withdrawals in retirement are typically income tax-free.

Step 2: Provide personal information

Once you've decided on the type of account you want to open, go to Fidelity's website and click on "Open an account." You will be asked if you are an existing customer. If not, you will need to create an account by providing basic personal information such as your email address, street address, and Social Security number. You will also need to create security questions as a fraud prevention measure.

Step 3: Provide employment information

The next step is to provide your employment information, if applicable. You will also be asked to estimate how often you plan to trade. Additionally, you will be asked about any associations with financial regulatory organisations or publicly held companies.

Step 4: Set account settings

You will then decide if you want the account to be jointly owned or individual. If you choose joint ownership, you will need to provide the same personal information for your spouse or partner.

Step 5: Review and confirm

Review your personal information, account type, employment details, and general account settings. Read through the customer agreement, terms and conditions, electronic delivery agreement, and other relevant documents before confirming.

Step 6: Fund the account

After opening the account, you will need to link your bank and fund your brokerage account. It usually takes about two business days for electronic transfers to be available for trading. You can then use this money to invest in stocks, funds, or other securities.

Additional considerations

It's important to note that while Fidelity offers $0 commission for online US stock and ETF trades, there are options contract fees for trading platforms. Additionally, Fidelity does not support currency or commodity trading.

Pick investments

Picking your investments

Once you've opened an investment account and funded it, the next step is to pick your investments. Some options include individual stocks and bonds, ETFs, and mutual funds. Choose what's right for you according to your risk tolerance and your goal's time horizon.

Create a game plan

Investing works best with a plan. Begin creating yours by asking yourself two questions:

• How long do I plan on staying invested? This is known as your time horizon. Generally, the longer you invest, the more time your money has to potentially grow (and recover from dips in the market)—meaning you may be able to take on more risk.
• How much risk am I willing to take? This is also called your risk tolerance, or how comfortable you are with the idea of losing money. Market ups and downs are normal, and all investing involves some risk. So there's no right answer. Knowing both your willingness and ability to accept risk can make it easier to stick with your investing plan in order to hit your goals.

Choose your investments

With your time horizon and risk tolerance in mind, it's time to look at your investment options. Here are some of the most common:

• Stocks: Stocks represent a piece of ownership, or a share, in a public company. Stock prices go up and down all the time, depending on a number of factors, including company performance and the news. So while investing in stocks can be very rewarding, they're also considered a riskier option. Before buying individual stocks, do your research, and avoid putting all your eggs in one basket.
• Bonds: Investing in bonds is like giving out loans to companies or governments that agree to pay you back with interest. Bonds are typically considered lower risk compared to stocks and are assigned grades, so you can better understand the risk that the issuer will default on their promise to repay you.
• ETFs: Buying an exchange-traded fund (ETF) means that you're investing in a group of securities, such as stocks or bonds, at once. They're like an investment bundle and are often created to follow a theme or category—such as a sector or market index (for example, the S&P 500© Index or Nasdaq composite index). Thanks to this diversification, ETFs are considered less risky than buying individual stocks.
• Mutual funds: Mutual funds pool money from many investors to buy a collection of stocks, bonds, or other investments. Like ETFs, mutual funds spread out your money across a mix of investments and can be categorized according to the underlying investments. Often, mutual funds are actively managed by a team of pros. Also, unlike ETFs and stocks—which can be bought or sold throughout the trading day—mutual funds trade only once a day, at the end of the day. So you'll see the prices change only after the market closes.

Buy your investments

After deciding what to invest in, make sure to buy those investments. Use your cash (or the money in your default money market account) to purchase the investment option.

As your life changes, your risk tolerance, time horizon, and goals probably will too. Don't be afraid to adjust your investment plan when necessary.

Buy the investments

Now that you've done your research and chosen your investments, it's time to buy them. Here are the steps to follow:

• Select an account to trade in: Choose the specific account in which you want to make the trade. This could be a brokerage account, IRA, or another type of account.
• Choose an investment: Decide on the investment you want to buy. This could be stocks, bonds, mutual funds, ETFs, or other types of securities.
• Select an order type: Determine the type of order you want to place, such as a market order, limit order, or stop order. Each order type has different characteristics and conditions.
• Choose how long your order is active: Specify the duration for your order, such as day, good 'til canceled (GTC), fill or kill, immediate or cancel, etc.
• Pick a quantity: Decide on the amount you want to invest, whether it's a dollar amount, a certain number of shares, or a fraction of a share.
• Select an action: Choose between buying or selling the investment. "Buying" refers to investing in the security, while "selling" means exiting the position.

Once you've made these selections, you can proceed with placing the trade through your chosen brokerage platform or app. Remember to review your orders carefully before execution and ensure that they align with your investment goals and risk tolerance.

Monitor your investments

Monitoring your investments is an important part of investing with Fidelity. Here are some ways to monitor your investments and stay on top of your financial goals:

Regular Portfolio Check-ups:

Fidelity recommends checking your investment plan periodically, especially if your goals or situation change, or after sharp market moves. This ensures your investments remain aligned with your risk tolerance, financial situation, and time horizon. Evaluate your asset mix of stocks, bonds, mutual funds, and exchange-traded funds (ETFs) to ensure they match your risk appetite and goals.

Utilize Fidelity's Tools:

Fidelity offers a range of tools to help you monitor your investments, such as the Full View® feature, which provides a simplified and modern experience to track your financial information across all your devices. You can also set price alerts and use the Learning Center to educate yourself about different investment strategies.

Review and Analyze:

Regularly review your investment strategy and rebalance your portfolio if needed. Compare your portfolio's performance to benchmark indexes like the Dow Jones US Total Stock Market Index or the Barclays Capital US Aggregate Bond Index. This will help you understand if your investments are meeting your goals and performing as expected.

Stay Informed:

Fidelity offers a wealth of educational resources, news, and research to keep you informed about market trends and investment options. Utilize their stock screener, mutual fund screener, and third-party research reports to make informed decisions.

Seek Professional Guidance:

Fidelity provides access to dedicated advisors who can offer customized plans to help grow and protect your wealth. They can guide you through retirement planning, investment strategies, and provide tools to manage your investments.

Remember, investing involves risk, and the value of your investments may fluctuate. By regularly monitoring your investments and staying informed, you can make strategic decisions to work towards your financial goals.

Frequently asked questions