Invest In Fidelity's Free Index Funds: A Step-By-Step Guide

Index funds are a great way to build wealth over time, and Fidelity offers a range of index funds with some of the lowest prices in the industry. Here's a step-by-step guide to investing in index funds with Fidelity:

Step 1: Understand Your Investment Goals

Before investing in index funds, it's important to know your financial goals. Are you saving for retirement, your child's education, or something else? Different goals may require different types of accounts, such as an employer-sponsored retirement plan, an Individual Retirement Account (IRA), or a Health Savings Account (HSA).

Step 2: Choose an Investment Type

Once you've selected your account type, you need to choose an investment type. There are various types of indexes and index funds available, such as broad market funds, sector funds, domestic funds, international funds, and bond funds. Your investment objectives will determine which type of index fund is best for you.

Step 3: Determine Your Level of Involvement

You can invest in index funds through a brokerage account, either by actively buying and selling them yourself or by working with a financial professional who can guide you and handle the transactions for you.

Step 4: Calculate Your Investment Amount

Consider how much you can comfortably invest while covering your essential expenses and building an emergency fund. Keep in mind that some funds have investment minimums, while others don't. Also, factor in any fees and expenses associated with maintaining the fund over time.

Step 5: Research and Select Specific Index Funds

When choosing specific index funds to invest in, compare the expenses, taxes, and investment minimums of different funds. Fidelity offers a range of index funds with low expense ratios, including the Fidelity ZERO Large Cap Index Fund (FNILX) and the Fidelity ZERO Total Market Index Fund (FZROX), which have a 0% expense ratio and no minimum investment requirements.

Step 6: Purchase Your Index Funds

You can purchase index funds directly from Fidelity or through a brokerage. If you already have an account with Fidelity, you can use their Mutual Funds Research Page or ETF Screener to research potential investments and select the Buy option.

Step 7: Monitor Your Investments

Periodically check on your index funds to ensure they are performing as expected. Rebalance your portfolio as needed to stay aligned with your financial goals. Also, consider the potential tax implications when planning to sell your index funds.

Fidelity ZERO Large Cap Index Fund (FNILX)

Index funds are a type of investment that aims to match the performance of a specific market index, like the S&P 500. They hold all or a representative sample of the securities in that index, allowing investors to invest in a broad range of stocks or bonds with just one fund, often at a lower cost.

The fund had a Net Asset Value (NAV) of 20.68 as of October 9, 2024, and a one-day return of +0.73%. It has a low distribution fee and a Morningstar rating as of August 31, 2024.

To invest in the Fidelity ZERO Large Cap Index Fund (FNILX), you can open an account with Fidelity and purchase shares of the fund directly through their website or app. You can also work with a financial professional who can guide you through the process and handle the buying and monitoring of the fund for you.

Fidelity ZERO Extended Market Index Fund (FZIPX)

The Fidelity ZERO Extended Market Index Fund (FZIPX) is one of the Fidelity ZERO Index Funds, which are available to individual retail investors who purchase their shares through a Fidelity brokerage account. The FZIPX fund seeks to provide investment results that correspond to the total return of stocks of mid to small capitalisation US companies. It invests in stocks included in the Fidelity US Extended Investable Market Index, float-adjusted market cap-weighted and designed to reflect the performance of US mid and small- cap stocks.

The FZIPX fund has a 0% expense ratio and no minimum investment amount. This means that there are no account fees and investors can buy in without a minimum investment amount. The 52-week range for the fund is 10.10-12.40, and the total net assets are $1.384 billion. The 52-week average return is 17.80%.

Fidelity has been managing index funds for almost 30 years and offers a wide range of choices. They have 24/7 customer service and were named Barron's Best Online Broker in 2016, 2017, and 2018.

To invest in the FZIPX fund, you will need to open a brokerage account with Fidelity. You can then research the fund using Fidelity's Mutual Funds Research Page and select "Buy" on the individual security's research page.

Fidelity ZERO Total Market Index Fund (FZROX)

FZROX is a large blend fund with a Morningstar Medalist Rating of Gold. As of August 31, 2024, the fund had total assets of 23.8 billion USD and a 1-day return of -0.95%. The fund's top holdings include Meta Platforms Inc Class A, Alphabet Inc Class A and C, and Berkshire Hathaway Inc Class B.

FZROX, like other index funds, aims to mirror the performance of a market index, such as the S&P 500. This means that the fund invests in a broad range of stocks or bonds, providing investors with diversification within an asset class. Index funds are typically associated with lower costs and maintenance, making them a compelling option for investors.

When considering an investment in FZROX or any other index fund, it is essential to evaluate your investment goals, risk tolerance, and the fund's return characteristics and volatility. Additionally, remember to assess the fees associated with maintaining the fund over time, as these can impact your long-term returns.

Fidelity ZERO International Index Fund (FZILX)

The Fidelity ZERO International Index Fund (FZILX) is an international fund that invests in foreign developed and emerging stocks. The fund aims to provide investment results that match the total return of its benchmark, the Fidelity Global ex U.S. Index. This index is a float-adjusted market capitalization-weighted index designed to reflect the performance of non-U.S. large- and mid-cap stocks.

FZILX normally invests a minimum of 80% of its assets in securities included in the Fidelity Global ex U.S. Index and in depositary receipts representing securities included in the index. The fund has returned 13.03% over the past year, 3.49% over the past three years, and 3.89% over the past five years.

FZILX has a Morningstar Medalist Rating of Gold, thanks to its sensible and clearly defined investment process and strong management team. It also has a sizable cost advantage over competitors, with a 0% expense ratio and no minimum investment requirements.

FZILX can be a good choice for investors seeking international diversification and exposure to foreign developed and emerging markets. It offers a low-cost and low-maintenance way to potentially grow your savings, with the convenience of no account minimums and zero account fees.

Fidelity 500 Index Fund (FXAIX)

The Fidelity 500 Index Fund (FXAIX) is an index fund that tracks the S&P 500 index, a benchmark for US stocks. The fund aims to provide investment results that correspond to the performance of common stocks publicly traded in the US. As of November 27, 2023, the fund had assets of almost $407.60 billion invested in 508 different holdings. The fund has a history of strong returns, with a 10.14% return over the past year, 10.35% over three years, 11.00% over five years, and 11.17% over the past decade.

The FXAIX fund has an expense ratio of 0.02%, significantly lower than the category average of 0.85%. This means that the fund has lower costs associated with managing the fund, which can result in higher returns for investors.

The fund is passively managed, which means it aims to replicate the performance of the S&P 500 index. This type of fund offers broad diversification across all sectors, reducing the risk associated with focusing on a single industry. Index funds like the FXAIX are a low-maintenance way to potentially grow your savings over the long term.

Fidelity, the parent company of the FXAIX fund, is one of the oldest mutual fund providers and offers a wide range of investment products and services. The FXAIX fund is managed by Geode Capital Management, led by a team of five managers.

To invest in the FXAIX fund, you can follow these steps:

• Decide on your investing goals: Understand your investment goals and choose an account type that aligns with those goals, such as a brokerage account, IRA, or 401(k).
• Figure out your investment type: Determine the types of index funds you want to invest in, such as broad market funds, sector funds, domestic funds, or international funds.
• Determine your investment approach: Decide how actively you want to manage your investments, whether you prefer a DIY approach or working with a financial professional.
• Calculate your investment amount: Consider how much you can comfortably afford to invest based on your financial situation and the investment minimums required by the fund.
• Select your investment: Choose the specific index fund you want to invest in, in this case, the FXAIX fund.
• Place your order: Use a brokerage account or the Fidelity app to place your order and purchase the FXAIX fund.

Frequently asked questions