A Beginner's Guide To Investing With Fidelity

Investing can be a great way to make your money work for you and give it the potential to grow. There are many ways to invest, from stocks and bonds to mutual funds and exchange-traded funds (ETFs). When starting to invest, it's important to first figure out what you're investing for, whether that be retirement, a big purchase, or something else. Then, you can choose an account type, such as a brokerage account, 401(k), or individual retirement account (IRA). Once you've opened and funded your account, you can choose and purchase your investments, keeping in mind your risk tolerance and goals. Remember to review your investments regularly as your life changes.

Choosing an account type

The account type you choose depends on your investment goals. Here are some of the account types offered by Fidelity:

Brokerage account

A brokerage account is a standard-issue investment account that offers flexibility. Anyone aged 18 or older can open one and add money to it whenever they want. It also offers a wide range of investment options, and you can generally withdraw cash whenever you want. However, it is a taxable account, which means you have to pay taxes on any realised investment profits. Fidelity charges $0 account fees and has no minimums for opening or maintaining a brokerage account.

K)

This is an employer-sponsored plan for investing for retirement. It offers tax-advantaged investment growth potential with relatively high contribution limits. You can contribute pre-tax, and you generally don't pay any taxes while your money grows in the account. You only pay income taxes when you make withdrawals. Many employers will also match your contributions, encouraging you to invest.

Individual retirement account (IRA)

An IRA is an account for retirement that you can open and invest in independently. Traditional IRAs offer similar tax benefits to 401(k)s. You may get a tax deduction for the year your contribution is made, and you have more flexibility and control over your investments. However, there are rules and restrictions on who is eligible for a tax deduction, how much you can contribute, and when and how you can withdraw money.

Roth IRA

A Roth IRA is an individual retirement savings account with different tax advantages than a traditional IRA. You contribute money you've already paid taxes on, which can then be invested and potentially grow federally tax-free. You can withdraw this money tax-free once you reach 59½ years old and meet the 5-year aging requirement. There are no required minimum distributions at any age. However, there are income and contribution limits, and you can't deduct contributions from your federal income taxes.

Cash management account

A cash management account combines most features of a bank checking or savings account with the flexibility of a brokerage account. It gives you the ability to save, spend, and invest, possibly all from one account. Fidelity's cash management account offers checkwriting, bill pay, a debit card, and a choice of a money market mutual fund or an FDIC-insured deposit sweep option for uninvested cash. It also allows customers to buy and sell certain investments within the account.

Funding the account

Funding your Fidelity account is a crucial step in achieving your investment goals and building a robust financial portfolio. Here's a comprehensive guide to help you navigate the process of funding your Fidelity account:

Online Transfer from External Bank Account

One of the most popular methods to fund your Fidelity account is through online transfers from your external bank account. This option offers a seamless and quick way to deposit funds into your brokerage account, enabling efficient management of your investments. To get started, link your external bank account to your Fidelity account by logging into Fidelity.com and accessing the "Linked accounts and banks" section. After verifying your identity, you can securely link your bank using Plaid or manually enter your routing and account numbers. This approach eliminates the need for physical checks or bank visits, making it a convenient and reliable way to fund your investments.

Direct Deposit from Employer

Setting up direct deposits from your employer is another convenient option to fund your Fidelity account. By doing so, you can ensure a regular and consistent flow of funds into your account, making it easier to maintain your investment strategy. Direct deposits eliminate manual transfers or physical checks, streamlining the process and saving you time. Additionally, you can set up automatic deposits to make recurring contributions to your account, helping you stay disciplined with your investment plan.

Mobile Check Deposit

Mobile check deposit offers a convenient way to add funds to your Fidelity account while on the go. With this method, you can simply use your mobile device to capture an image of your endorsed check. The Fidelity mobile app provides clear instructions and allows you to verify the image quality before submitting, ensuring a seamless transaction. This feature eliminates the need to visit a bank branch or ATM, providing added flexibility and convenience to your financial transactions.

Deposit by Mail

If you prefer a more traditional approach, you can fund your Fidelity account by depositing a check via mail. To do this, complete a deposit slip with your account number and the amount you wish to deposit. Enclose the deposit slip and a physical check issued to Fidelity Investments in an envelope and mail it to the designated address provided by Fidelity. This method adheres to strict security protocols to ensure the safety and prompt processing of your funds.

Wire Transfer

Another option for funding your Fidelity account is through a wire transfer from your bank or a third-party account. While this method may involve initiating the transfer from your current financial institution, it offers the advantage of same-day processing, making the funds immediately available for trading at Fidelity. Although your bank may charge a fee for sending a wire transfer, Fidelity does not charge a fee for receiving it.

Electronic Funds Transfer (EFT)

You can also transfer funds to your Fidelity account electronically using an EFT. This method provides a convenient and secure way to move funds between accounts. Before initiating an EFT, remember to link your bank account to your Fidelity account to ensure a smooth transfer process.

Third-Party Payment Apps

Fidelity also allows you to connect your accounts or cards to popular payment apps such as PayPal, Venmo, Apple Pay Cash, and Square Cash. These apps offer a secure and private way to transfer money into your Fidelity account or to send and receive funds from friends, family, or businesses.

Remember to review the specific instructions and requirements for each funding method on the Fidelity website. Additionally, always prioritize the security of your financial information by using strong passwords, enabling two-factor authentication, and avoiding public Wi-Fi networks when accessing your account.

Picking investments

Create a game plan

Firstly, you need to decide how long you plan on staying invested. This is known as your time horizon. Generally, the longer you invest, the more time your money has to grow. Next, you need to determine your risk tolerance, or how comfortable you are with the idea of losing money. Knowing your willingness and ability to accept risk can make it easier to stick with your investing plan.

Choose your investments

With your time horizon and risk tolerance in mind, you can start looking at your investment options. Here are some of the most common:

• Stocks: Stocks represent a piece of ownership in a public company. Stock prices fluctuate depending on various factors, including company performance and news. Investing in stocks can be rewarding, but they are also considered a riskier option.
• Bonds: Investing in bonds is like giving a loan to a company or government that agrees to pay you back with interest. Bonds are typically considered lower risk than stocks.
• ETFs (Exchange-Traded Funds): Buying an ETF means investing in a group of securities, such as stocks or bonds, at once. ETFs are often created to follow a theme or category, such as a sector or market index. Due to this diversification, ETFs are considered less risky than buying individual stocks.
• Mutual Funds: Mutual funds pool money from multiple investors to buy a collection of stocks, bonds, or other investments. Like ETFs, mutual funds spread out your money across a mix of investments.

Buy your investments

After deciding what to invest in, use your cash to purchase the investment option. Remember that as your life changes, your risk tolerance, time horizon, and goals will likely change too. Don't be afraid to adjust your investment plan when necessary.

Review your investments regularly

It is important to review your investments periodically to ensure they align with your goals and risk tolerance. As your life circumstances change, so might your financial goals and risk appetite.

Diversify your portfolio

It is recommended to have a mix of stocks, bonds, and other investments to help manage your risk. Diversifying your investments can help spread out the risk and potentially maximize returns.

Consider your risk tolerance

Your level of risk should be appropriate for your circumstances. For example, if you are close to retirement, you may want a more conservative investment strategy compared to someone who is earlier in their career.

Monitor your goals

Review your investment strategy regularly to ensure it aligns with your goals. If your goals or circumstances change, you may need to adjust your investment approach.

Seek professional help if needed

If choosing and managing your investments is not your forte, or if you have complex needs, consider seeking advice from a financial professional. Fidelity offers a wide range of professionally-managed options, including accounts with $0 advisory fees and no minimum balances.

Buying investments

After opening an investment account and funding it, the next step is to select and buy your investments. If you don't, your money will sit in cash or a default money market account, and won't have the opportunity to grow as much as it could.

• Create a game plan: Investing works best with a plan. Ask yourself: How long do I plan on staying invested? (your time horizon) and how much risk am I willing to take? (your risk tolerance).
• Choose your investments: With your time horizon and risk tolerance in mind, look at your investment options. These may include individual stocks and bonds, ETFs, and mutual funds.
• Buy your 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 will too. Don't be afraid to adjust your investment plan when necessary.

How to Trade Stocks and ETFs

• Select the account you want to trade in.
• Enter the trading symbol.
• Select 'Buy' or 'Sell'.
• Choose between 'Dollars' and 'Shares', then enter an amount.
• Choose an order type: 'Market' or 'Limit'.
• For limit orders, decide how long the order will stay open: 'Day' or 'Good 'til Cancelled (GTC)'.

After you've entered these details, preview your order and, if everything looks good, click 'Place Order'.

Reviewing investments

Reviewing your investments is an important part of managing your portfolio and ensuring you are on track to meet your financial goals. Here are some key steps and considerations for reviewing your investments using Fidelity:

Set Clear Investment Goals:

Clearly define your investment objectives and time horizon. Are you investing for the short-term or long-term? What are your risk tolerance and expected returns? Having a clear understanding of your goals will help you evaluate your investments effectively.

Review Performance:

Assess the performance of your investments over time. Compare the returns of your investments against relevant benchmarks and evaluate how they have performed relative to the market and your expectations. Consider using Fidelity's tools, such as the Fidelity Retirement Score, to track your progress toward your retirement goals.

Diversification and Asset Allocation:

Review the diversification of your portfolio across different asset classes, sectors, and geographic regions. Ensure that your asset allocation aligns with your risk tolerance, investment goals, and time horizon. Diversification can help reduce risk and improve long-term returns.

Evaluate Individual Investments:

Analyze the performance of individual investments within your portfolio. Identify investments that are consistently underperforming or no longer align with your investment strategy. Consider factors such as price movements, earnings reports, news, and analyst ratings when evaluating each investment.

Risk Management:

Assess the risk associated with your investments. Review the volatility of your portfolio and consider whether it matches your risk tolerance. Evaluate the potential impact of market downturns or economic events on your investments. Use tools like Fidelity's Trade Armor to manage risk and develop entry and exit trading strategies.

Costs and Fees:

Consider the costs associated with your investments, including management fees, transaction fees, and expense ratios. Evaluate whether the fees are aligned with the level of service and performance you are receiving. Fidelity offers a range of low-cost and commission-free investment options.

Rebalancing:

Periodically review your portfolio to ensure it remains aligned with your desired asset allocation. Over time, certain investments may outperform others, causing your portfolio to become unbalanced. Rebalancing involves adjusting your holdings to return your portfolio to its target allocation.

Tax Implications:

Consider the tax implications of your investments. Evaluate the impact of capital gains taxes, dividend taxes, and any other relevant taxes on your overall returns. Fidelity offers tax-advantaged accounts, such as IRAs and Health Savings Accounts (HSAs), which can help minimize taxes.

Consult Fidelity's Resources:

Fidelity provides a wealth of educational resources, research tools, and investment insights to help you make informed decisions. Utilize their online learning centre, research reports, and trading platforms to enhance your investment review process.

Seek Professional Guidance:

If you feel overwhelmed or need personalized advice, consider consulting a financial advisor or a Fidelity investment professional. They can provide tailored recommendations and help you navigate the complexities of investing.

Frequently asked questions