Fidelity Investment Strategies: A Beginner's Guide To Success

Investing can be a daunting prospect, but it doesn't have to be overly complicated. Fidelity offers a range of investment options, from brokerage accounts to retirement plans, and provides tools to help you reach your goals. You can open an account with no fees or minimums and start investing with just $1.

Fidelity's brokerage account, The Fidelity Account®, is a low-cost, multi-feature trading and investing account that allows you to select from a broad range of investment choices. There is no minimum to open an account, and you can invest with as little as $1.

If you're looking for a more hands-off approach, Fidelity Go® is a robo-advisor that makes investing quick, simple, and affordable. With no minimum to open an account and only $10 to start investing, it's a great option for both new and experienced investors.

For retirement planning, Fidelity offers traditional and Roth IRAs, as well as rollover IRA options. These accounts have no account fees or minimums to open and provide potential tax benefits for your savings.

With a range of investment choices, educational resources, and low-cost options, Fidelity can help you take control of your financial future.

Choose an account type

When choosing an account type, it's important to consider your goals and what you're investing for. Fidelity offers a range of account types, each with its own pros, cons, and considerations. Here are some options to choose from:

Brokerage Account

A brokerage account is a standard-issue investment account that offers flexibility. Anyone aged 18 or older can open one, and you can add as much money as you want whenever you want. This type of account provides access to a wide range of investment options, and you generally have the ability to withdraw cash at any time. However, it's important to note that brokerage accounts are taxable, which means you may have to pay taxes on any realised investment profits. Brokerage accounts are commonly used for investing and trading a full range of investment options, whether for specific goals or wealth accumulation.

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A 401(k) is an employer-sponsored plan designed for retirement investing. It offers tax-advantaged investment growth potential and relatively high contribution limits. Contributions to a traditional 401(k) can reduce your taxable income for the year, and you only pay income taxes when you make withdrawals. Some employers may even match your contributions, providing an added incentive. However, there are rules and restrictions on contributions and withdrawals, and you may be limited in the types of investments you can make.

Individual Retirement Account (IRA)

An IRA is a retirement account that you can open and invest in on your own. Traditional IRAs offer similar tax benefits to 401(k)s, and you may be able to get a tax deduction for the year of your contribution. IRAs often provide more flexibility and control than 401(k)s, allowing you to contribute whenever you like and make contributions for the previous calendar year up to the tax filing deadline. You may also have more investment choices, including the ability to trade individual stocks. However, there are rules and restrictions on who is eligible for tax deductions, contribution limits, and withdrawals.

Roth IRA

A Roth IRA is a specific type of IRA that offers potential tax-free growth and withdrawals. You can withdraw your contributions at any time for any reason, tax-free and penalty-free, as long as you meet the income limits. With a Roth IRA, you contribute after-tax money, and qualified withdrawals of earnings are generally income tax-free. This type of account may be a good choice for investors at the beginning of their careers when their income and tax bracket are typically lower.

Open the account and put money in it

Now that you have a goal in mind and have chosen an account type, it's time to open the account and put money in it. The nuts and bolts of this step aren't too complicated, but you do still have some decisions to make.

If you're opening a 401(k), this part is easy: you'll open it through your employer, with whatever company is handling your workplace's 401(k). With an IRA or brokerage account, you'll need to choose a financial institution to open your account with. For example, you can open an account with Fidelity, which offers no fees or minimums for opening or maintaining a brokerage account.

Once your account is open, it's time to fund it. You can transfer money anytime or set up automatic deposits. With a 401(k), you contribute through payroll deductions, meaning the money is taken out of your paycheck automatically. You decide how much of your pay to contribute. If your employer offers matching contributions, consider investing at least enough to capture the full amount of the match. For example, if your employer offers a dollar-for-dollar match up to 3%, you would contribute 3% to take full advantage.

If you're opening an IRA or brokerage account, you can start by depositing a chunk of money, and then add to that when you're ready. If it’s possible to make regular, recurring contributions, you can take advantage of dollar-cost averaging. That’s a strategy where you invest your money in equal portions, at regular intervals. Your investments occur regardless of the changes in price for the stock or other investment, potentially helping reduce the impact of volatility on the overall purchase. There are no minimums to open an IRA or brokerage account with Fidelity.

There's no one magic number for how much you need to start investing, or how much you should add each month, because the right number varies depending on your income, budget, and what other financial priorities you're juggling. But if you're getting stuck on this step, remember that starting small is better than not starting at all. Investing a little bit every month and gradually increasing that amount over time, as you get more comfortable, is a fine way to go. Fidelity suggests eventually aiming to save an amount equal to 15% of your income toward retirement each year (including any employer match). If you decide to invest in a brokerage account or IRA, consider setting up automatic contributions so you keep investing every month.

Pick investments

Picking Investments

Now that you've opened an account and put money in it, it's time to pick your investments. This is the step that tends to trip people up. It can feel like other people know some secret to picking investments – like there's a trick that can help you choose only the best ones. But the truth is, there isn't.

Investing is actually a lot like creating a healthy diet. Most people should focus on getting a broad range of common-sense investment types rather than placing all their bets on a small number of "high-promise" investments.

There are three basic methods to picking investments:

• Individual stocks and bonds: This is the most complicated and labor-intensive way, but it's what many people think of when they hear "investing." If you want to go this route, you'll need to learn about researching stocks, building a diversified portfolio, and more. It's doable, but it can take a lot of time to build your portfolio.
• Mutual funds or ETFs: Mutual funds and ETFs pool together money from many investors to purchase a collection of stocks, bonds, or other securities. You can use them like building blocks, putting a few together to create a portfolio. Or, you can buy an all-in-one fund, which is an easy-to-manage diversified portfolio in a single fund.
• Hire a professional manager: If you're getting stuck, consider getting help. While this may sound like it's only an option for the wealthy, there are low-cost options that can meet your needs too. For example, robo advisors like Fidelity Go® can offer low-to-no-cost professional management because the day-to-day money management is handled by computers rather than live humans.

Of course, plenty of people end up deciding to use some mix of those options. There's nothing wrong with mixing and matching. Whatever options you're considering, just be sure also to consider any fees, expenses, or commissions.

Buy the investments

Now that you have chosen your investments, it's time to buy them. For stocks, mutual funds, and ETFs, you will generally need to look up the investment's ticker symbol. This is a string of 1 to 5 letters that is unique to that investment. Then, you can decide on a dollar amount or number of shares to buy.

If you are investing in a 401(k), it is often easiest to set up your investment choices when setting your regular contribution amount. Your money will then be invested in the choices you've selected automatically, corresponding with your pay cycle.

If you are using a robo-advisor, you may be able to skip the look-up part of the process, depending on the account type.

If you are investing in a brokerage account or IRA, consider setting up automatic contributions so you keep investing every month.

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Relax and keep tabs on your investments

Now that you've made your investments, it's time to relax! But that doesn't mean you should forget about them.

It's normal for investments to fluctuate in the short term, so don't be alarmed if you notice some short-term blips. Try to keep your eyes on the bigger picture, like your long-term investing goals and your total portfolio's performance.

Over time, you'll want to periodically check in on your plan. Here are some questions to ask yourself:

• Are your investments diversified? Diversification can help manage your risk. It's a good idea to have a mix of stocks, bonds, and other investments, and to diversify within those different types of investments.
• Is your level of risk appropriate for you? For example, if you are 40 years away from retirement, you may want a different level of risk than if you are 1 year away.
• Have any of your goals changed? If something new has happened in your life, or you simply want something different, you might want to adjust your investing strategy.
• Is choosing and managing your investments not quite your thing? If you have more complex needs, you might want to consider getting a professional to manage your investments for you.

You don't have to do it alone. There are plenty of options to choose from if you feel like you could use some guidance.

Frequently asked questions