Maximizing Fidelity Benefits: Smart Investment Strategies

Fidelity is a well-rounded brokerage with a range of investment options, including stocks, bonds, mutual funds, ETFs, options, forex, and cryptocurrencies. It offers $0 trading commissions, a selection of over 3,300 no-transaction-fee mutual funds, and top-notch research tools.

Fidelity has two trading platforms, Fidelity.com and Active Trader Pro, which are free for all customers. The platforms offer advanced screeners, research and strategy-testing tools, and customisability.

Fidelity also provides educational resources for both beginner and advanced investors, including articles, webinars, and videos.

1. Figure out what you're investing for: This could be for retirement, a dream vacation, or any other financial goal.

2. Choose an account type: Options include a brokerage account, 401(k), or an individual retirement account (IRA).

3. Open the account and put money in it: Decide where to open your account and how much money to invest.

4. Pick investments: Consider individual stocks and bonds, mutual funds or ETFs, or hiring a professional manager.

5. Buy the investments: Look up the investment's ticker symbol and decide on a dollar amount or number of shares to buy.

6. Relax and keep tabs on your investments: Remember that it's normal for investments to fluctuate in the short term.

Fidelity offers a range of investment accounts, including brokerage accounts, IRAs, and 401(k)s. It provides accessible and knowledgeable customer service, with 24/7 support and a network of over 200 branches for in-person advice.

With its range of investment options, educational resources, and user-friendly platforms, Fidelity is a great choice for beginners and experienced investors alike.

Brokerage accounts: the simplest to open and use, but taxable

Brokerage accounts are a type of investment account that allows you to buy a wide range of investments, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). They are the simplest to open and start using, and anyone over the age of 18 can open one. You can open a brokerage account through an online or traditional brokerage firm.

While brokerage accounts are straightforward to open and use, they are taxable accounts. This means that you generally have to pay taxes on any realised investment profits every year (for example, if you've sold investments for a gain or received dividends or interest).

• Wide range of investments: Brokerage accounts offer access to a diverse range of investments, such as stocks, bonds, mutual funds, ETFs, and more. This makes them a flexible option for investors.
• No contribution limits: Unlike other types of investment accounts, brokerage accounts do not have annual contribution limits set by the IRS or state governments. You can add as much money as you want to the account whenever you want.
• No early withdrawal penalties: With brokerage accounts, you can withdraw your money at any time without incurring early withdrawal fees. However, any earnings or gains from selling investments are usually taxed.
• No income restrictions: There are no income requirements to open and fund a brokerage account, although some brokerages may require a minimum investment.
• Tax strategies: While brokerage accounts don't offer the same tax advantages as some other types of investment accounts, they still present opportunities for tax-aware strategies, such as tax-loss harvesting.
• Potential risk: Brokerage accounts carry some inherent risk. While they offer SIPC (Securities Investor Protection Corporation) coverage of up to $500,000 in securities, individual investments may lose value. Diversification can help manage this risk.
• Ease of opening: You can open a brokerage account in just a few minutes by completing an application with a brokerage firm, either online or in person.

401(k)s: employer-sponsored, tax-advantaged, with high contribution limits

A 401(k) is an employer-sponsored retirement plan, which is a great way to start investing. It is one of the most readily available investment accounts, and if your employer offers one, they will likely provide you with all the information you need and may even help with enrollment. 401(k) plans offer tax-advantaged investment growth potential with relatively high contribution limits. This means that you can contribute to the account pre-tax, and you generally don't pay any taxes while your money is sitting in the account and growing. Instead, you only pay income taxes when you take withdrawals. Contributing to a traditional 401(k) account can also lower your taxable income for the year the contribution is made, so you can save for the future and potentially lower your tax bill.

There are a few different types of 401(k) plans available to employers: traditional 401(k) plans, safe harbor 401(k) plans, and SIMPLE 401(k) plans. Each has different rules, so it's important for employers to be familiar with the specific type of plan they offer. In a traditional 401(k) plan, employers have the option of making contributions on behalf of all participants, making matching contributions based on employees' elective deferrals, or both. These employer contributions can be subject to a vesting schedule, which means that an employee's right to employer contributions becomes non-forfeitable only after a certain period of time or be immediately vested.

The contribution limits for 401(k) plans are higher than some other types of retirement accounts. For 2024, the limit on employee elective deferrals (for traditional and safe harbor plans) is $23,000. This amount is subject to cost-of-living adjustments and has increased over the years. For example, in 2023, the limit was $22,500, and in 2022, it was $20,500. It's important to note that there are rules and restrictions on 401(k) plans regarding how much you can contribute and when and how you can take money out. Additionally, you may be limited in what investments you can make and may not be able to buy specific stocks.

Overall, 401(k) plans are a great option for those looking to start investing for retirement, especially if their employer offers one. The tax benefits and high contribution limits make it an attractive choice, and many people start investing for the first time in these accounts.

Individual retirement accounts (IRAs): tax benefits, flexibility, but rules and restrictions apply

Individual retirement accounts (IRAs) offer tax benefits and flexibility, but there are rules and restrictions to be aware of. IRAs are retirement savings accounts that you can open and manage independently of any employer-sponsored retirement plan. IRAs offer significant tax advantages, and financial experts generally recommend using them to save for retirement.

There are two main types of IRAs: traditional IRAs and Roth IRAs. Traditional IRAs offer tax-deductible contributions, meaning you may be able to deduct some or all of your contributions from your taxable income. Any amounts in your traditional IRA, including earnings, are generally not taxed until they are distributed to you. However, there are rules and restrictions on who is eligible to receive a tax deduction, how much you can contribute each year, and how and when you can make withdrawals. Additionally, you may have to pay a 10% additional tax on early withdrawals before reaching the age of 59 1/2.

On the other hand, Roth IRAs offer tax-free withdrawals, but contributions are not tax-deductible. With a Roth IRA, you contribute after-tax money, and qualified withdrawals of earnings are generally tax-free. There are also rules and restrictions on income limits, contribution amounts, and eligibility for tax-free withdrawals.

IRAs provide flexibility in terms of contribution timing and investment choices. You can contribute to a traditional IRA whenever you feel like it, and contributions for the previous calendar year can be made up until the tax filing deadline. You may also have more investment choices with an IRA, including the ability to trade individual stocks. However, certain investments, such as life insurance and collectibles, are not allowed in an IRA.

When deciding between a traditional IRA and a Roth IRA, consider your current and expected future tax brackets. If you expect to be in a lower tax bracket during retirement, a traditional IRA may be more advantageous. On the other hand, if you are at the beginning of your career and expect your income and tax bracket to increase in the future, a Roth IRA may be a better choice due to the potential for tax-free compounding over time.

Mutual funds: a range of no-transaction-fee funds, including zero-expense-ratio index funds

Fidelity offers a range of no-transaction-fee mutual funds, including zero-expense-ratio index funds. These funds are a great option for investors looking to keep costs low, as they do not charge any fees for buying or selling, and some have zero expense ratios. This means that investors can effectively invest for free, without having to worry about fees eating into their returns.

Fidelity's mutual funds provide exposure to various asset classes, including stocks, bonds, and real estate, and cover different geographic regions, such as the US and international markets. For example, the Fidelity ZERO Large Cap Index Fund (FNILX) seeks to provide investment results that correspond to the total return of a broad range of large-capitalization US companies, while the Fidelity Real Estate Index Fund (FSRNX) focuses on the US real estate sector.

In addition to its zero-expense-ratio funds, Fidelity also offers a range of low-cost mutual funds with competitive fees. For instance, the Fidelity NASDAQ Composite Index Fund (FNCMX) has a net expense ratio of 0.29%, which is considered low relative to other funds tracking the NASDAQ Composite Index.

Fidelity's mutual funds also have no minimum investment requirements, making them accessible to new and young investors. This feature, combined with the absence of transaction fees and low expense ratios, makes Fidelity's mutual funds an attractive option for cost-conscious investors.

When investing in mutual funds with Fidelity, it is important to consider factors such as investment goals, risk tolerance, time horizon, and tax situation. Diversification is also key to managing risk and balancing your portfolio. Fidelity offers resources and tools to help investors make informed decisions, including a mutual fund evaluator tool and an ETF portfolio builder.

Robo advisors: low-cost professional management, suitable for beginners

Robo advisors are a digital financial service that uses technology to automate investing. They are a more affordable option than traditional investment management and are suitable for beginners.

Robo advisors use algorithms to select investments for you based on factors such as your risk tolerance, financial situation, and goals. They can help you diversify your portfolio by spreading your money across different investments, monitor the market, and automatically rebalance your portfolio when needed.

Fidelity Go is a robo-advisor service offered by Fidelity that provides low-cost professional money management. It offers a hybrid robo advisory service, combining digital investment advice with access to live, personalized financial coaching by phone. Fidelity Go charges no advisory fees on account balances of less than $25,000, and there is no minimum to open an account and only $10 to start investing.

Robo advisors are a good option for those who want a professional to manage their money, want to start investing safely, or prefer a low-cost alternative to a human advisor. They are also suitable for those who don't want to spend much time on investments, don't understand the markets, or want a diversified portfolio for retirement.

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