Investing $100 In Fidelity 2045 Funds: Is It Worth It?

Fidelity Freedom 2045 Fund is a solid option for retirement savers. The fund seeks a high total return until its target retirement date, investing in a combination of underlying Fidelity funds. It has returned 9.52% over the past year, 5.64% over three years, 6.93% over five years, and 6.99% over the past decade. The fund has an expense ratio of 0.75% and above-average fees and risk compared to other funds in the same category. Fidelity offers a range of investment options, including stocks, bonds, mutual funds, ETFs, and cryptocurrencies, with no trading commissions and a large selection of no-transaction-fee mutual funds.

Fidelity Freedom 2045 Fund's performance over the past year

The Fidelity Freedom 2045 Fund has returned 9.52% over the past year, according to US News. This is based on data up to 22 July 2024.

A different source, also from US News, states that the Fidelity Freedom Index 2045 Fund has returned 8.65% over the past year. This data was last updated on 15 August 2024.

The Fidelity Freedom 2045 Fund is an investment that seeks a high total return until its target retirement date. The fund invests in a combination of US equity funds, international equity funds, bond funds, and short-term funds. The asset allocation strategy is adjusted over time until it reaches an allocation similar to that of the Fidelity Freedom Income Fund, 10 to 19 years after the year 2045.

The fund's expense ratio

The Fidelity Freedom 2045 Fund has an expense ratio of 0.75%, which is considered above average compared to other funds in the same category. The category average is 0.43%.

An expense ratio is an annual fee that is charged by mutual funds and exchange-traded funds (ETFs) to cover expenses such as management and administrative fees. The expense ratio is calculated as a percentage of the fund's total assets and is typically deducted daily from the fund's assets, although it is sometimes paid out of the fund's income. This fee is used to compensate the fund's managers, distributors, and advisors, as well as to cover operational costs such as marketing and accounting. The expense ratio is an important factor in determining the overall return on an investment, as higher expense ratios can significantly reduce the net return on an investment over time.

The expense ratio of 0.75% for the Fidelity Freedom 2045 Fund is relatively high compared to other funds in the same category, which have an average expense ratio of 0.43%. This means that investors in this fund are paying a higher percentage of their assets in fees each year compared to similar funds. This could potentially impact the overall return on investment, particularly over a longer period of time.

It is important to note that while expense ratios are an important consideration when evaluating investment options, they should not be the sole factor in making a decision. Other factors such as the fund's performance, risk level, and investment strategy should also be taken into account to determine if the fund is a good fit for an individual's investment goals and risk tolerance.

The fund's risk compared to other funds in the same category

When considering investing in the Fidelity Freedom 2045 Fund, it is important to assess the associated risks and compare them to other funds in the same category. According to Morningstar, the risk associated with this fund is above average compared to its peers. This is due to the fund's investment strategy, which seeks a high total return until its target retirement date. To achieve this, the fund invests in a combination of US and international equity funds, bond funds, and short-term funds.

The fund's volatility measurements, which reflect the uncertainty or risk of change in the value of a security, are also above average. This means that the fund's returns may fluctuate more than other funds in the same category, potentially resulting in higher gains or losses. However, it is important to note that the fund has consistently delivered positive returns over the past one, three, five, and ten years, with an average return of 6.99% over the last decade.

In comparison to other funds in the same category, the Fidelity Freedom 2045 Fund has higher fees and expenses. The fund's expense ratio is 0.75%, while the category average is 0.43%. This means that investors will incur higher costs by investing in this fund, which may impact the overall returns.

Additionally, the fund's modern portfolio theory statistics, which compare the fund's excess returns to its benchmark, show some variability. While the standard index and best fit index values are relatively close, indicating that the fund is largely tracking its benchmark, there are some deviations that investors should be aware of.

Overall, while the Fidelity Freedom 2045 Fund offers the potential for high returns, it also comes with above-average risks and fees compared to other funds in the same category. Investors should carefully consider their risk tolerance, investment goals, and fees before deciding to invest. It is always recommended to diversify your investments and consult with a financial advisor to assess whether this fund aligns with your specific financial situation and objectives.

Pros and cons of investing in Fidelity

Investing in Fidelity comes with a host of benefits, but there are also some drawbacks to consider. Here are the pros and cons of investing in Fidelity:

Pros of Investing in Fidelity:

• Fidelity is one of the most well-rounded brokerages available, offering a wide range of investment options, including stocks, bonds, mutual funds, ETFs, options, forex, and cryptocurrencies.
• Fidelity offers $0 trading commissions on US stocks, ETFs, and options, making it a cost-effective option for investors.
• Fidelity has a strong reputation for its mutual funds, with a large selection of no-transaction-fee funds, including the Fidelity Zero index funds, which have no expense ratio and no minimum investment requirement.
• Fidelity provides top-notch research tools and educational resources for all levels of investors, from beginners to active traders.
• Fidelity offers a user-friendly mobile trading platform that is well-designed and customizable, making it accessible for investors on the go.
• Fidelity has a wide range of account types to choose from, including standard brokerage accounts, IRAs, Roth IRAs, and business accounts, making it suitable for various investment needs.
• Fidelity provides strong customer support with 24/7 phone support, online chat, and a network of over 200 physical branches for in-person advice.
• Fidelity offers high interest rates on uninvested cash, providing a decent return on idle funds.

Cons of Investing in Fidelity:

• Fidelity does not offer futures trading, which may be a drawback for investors looking for a comprehensive range of investment options.
• Some mutual funds offered by Fidelity have high fees, and margin trading can also be expensive.
• The account verification process at Fidelity can take longer compared to some of its competitors.
• Fidelity charges a relatively high options contract fee of $0.65 per contract, while some other brokers offer free options trading.
• The desktop trading platform, Active Trader Pro, can be slow to load when opening new windows or cross-linking to the web-based platform.

How to sign up for a Fidelity account

Signing up for a Fidelity account is a straightforward process. Here is a step-by-step guide on how to do it:

• Go to the Fidelity website and find the "Open an Account" section.
• Choose the type of account you want to open. Fidelity offers various types of accounts, including brokerage accounts, retirement accounts (such as Roth IRA, Traditional IRA, and Rollover IRA), and specialized accounts like the Fidelity Youth Account, 529 Account, and Custodial Account.
• Provide your personal information, such as your name, date of birth, address, and Social Security number.
• Verify your identity. This step is necessary to ensure the security of your account.
• Review and agree to the terms and conditions of opening a Fidelity account. Make sure you understand the fees, investment options, and any potential risks associated with the account.
• Fund your account. You may need to provide your bank account information to transfer funds into your new Fidelity account. The minimum amount required to open an account varies depending on the type of account you choose. For example, the Fidelity Youth Account has no account or subscription fees, while the Fidelity Managed FidFolios® account requires a $5,000 investment minimum.
• Once your account is open, you can start investing according to your financial goals and risk tolerance.

Remember to do your own research and consider seeking professional financial advice before making any investment decisions.

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