Fidelity Investments: New Innovations, Better Opportunities

Fidelity Investments is one of the largest financial services corporations in the world, offering brokerage, wealth management, retirement planning, and other services. In recent years, the company has expanded its offerings to include cryptoasset custody and cryptocurrency trading. With a history dating back to 1946, Fidelity has established itself as a leader in the industry, known for its robust selection of trading tools, brokerage accounts, and advanced trading features. The company's recent ventures into the world of digital assets and its commitment to innovation position it as a forward-thinking and dynamic player in the financial services space.

Zero-expense-ratio mutual funds

Fidelity Investments has introduced zero-expense-ratio mutual funds, which means that investors pay no fees for investing in these funds. This is part of Fidelity's commitment to providing value to its customers. The following zero-expense-ratio mutual funds are available:

• Fidelity® ZERO Large Cap Index Fund (FNILX)
• Fidelity® ZERO Extended Market Index Fund (FZIPX)
• Fidelity® ZERO Total Market Index Fund (FZROX)
• Fidelity® ZERO International Index Fund (FZILX)

These funds seek to provide investment results that correspond to the total return of a broad range of companies, from large-capitalization U.S. companies to foreign developed and emerging stocks. There are no minimum investments required for these funds, meaning that anyone can invest in them.

In addition to the zero-expense-ratio funds, Fidelity also offers a range of other low-expense-ratio mutual funds, such as the Fidelity® 500 Index Fund (FXAIX) and the Fidelity® Total Market Index Fund (FSKAX). These funds have expense ratios of 0.015% and 0.016%, respectively, as of December 31, 2023.

Fidelity's zero-expense-ratio mutual funds are a great option for investors looking to minimize fees and maximize their returns. The company's commitment to value is further demonstrated by its low or zero account minimums, commission-free trades, and robust selection of trading tools and platforms.

Cryptoasset custody and cryptocurrency trading

Fidelity Investments has been researching Bitcoin and blockchain technology since 2014, and in October 2018, it announced the launch of a separate company, Fidelity Digital Asset Services (now known as Fidelity Digital Assets), to handle cryptocurrency custody and trade execution for institutional investors. This made it the first Wall Street incumbent to officially provide cryptocurrency solutions such as custody.

Fidelity Digital Assets provides a custody and trading platform for digital assets, including Bitcoin (BTC), Ethereum, and Litecoin. The platform offers integrated custody and trading, as well as managed investment products that enable investors to seamlessly access digital assets in their portfolios.

Fidelity Crypto®, offered by Fidelity Digital Assets, allows individual investors to buy and sell digital assets through the Fidelity Investments® App. It provides commission-free trades, institution-level security, and services that have been offered since 2018. Fidelity Crypto is built into the award-winning Fidelity® mobile app, allowing users to manage both their traditional and crypto investments in one place.

Fidelity Digital Assets also offers an integrated trading experience with a fully integrated trading platform that offers access and choice for clients' evolving needs. It provides live, 24/7 support for clients' unique business needs, robust custody controls, and audited operational controls.

In terms of security, Fidelity Digital Assets enforces rigorous physical, cyber, and security controls to protect assets and mitigate risk. It offers vaulted "cold storage," which involves taking the cryptocurrency offline, and multilevel physical and cyber controls, among other security protocols leveraging Fidelity's security principles.

Fidelity's cryptocurrency trading capabilities include buying and selling Bitcoin, Ethereum, and Litecoin in the same app where users trade stocks, with a minimum investment of just $1. It also offers crypto ETPs, such as the Fidelity Wise Origin Bitcoin Fund (FBTC) and the Fidelity Ethereum Fund (FETH), which aim to track the performance of Bitcoin and Ethereum.

Fidelity Digital Assets caters to institutional investors, while Fidelity Crypto is designed for individual investors.

Micro-investing

• Lower minimum investments: Micro-investing platforms allow users to start investing with just a few dollars, whereas traditional investments such as mutual funds often require a minimum investment of a few thousand dollars.
• Diversification: Micro-investing platforms enable users to invest in low-cost ETFs tied to broad market indexes, allowing for a diversified portfolio with a small monthly investment.
• Small amounts add up: Consistently contributing small amounts to an investment account can accumulate over time, potentially turning into tens of thousands of dollars over decades.
• Automatic investing: Micro-investing automates the investment process, making it easier for individuals to stick to their financial plans.
• Encouraging a saving habit: Micro-investing helps individuals develop a habit of saving early on, even if they can only save a small amount.

However, there are also some disadvantages to micro-investing:

• Insufficient for retirement goals: While micro-investing is a great way to start investing, particularly for young people, it is unlikely to generate enough savings for a comfortable retirement. Individuals will need to save more through retirement plans and contribute to tax-advantaged accounts.
• Need to save beyond spare change: Most experts recommend saving between 10% and 20% of income for retirement and emergency funds. Therefore, if an individual can only save a few dollars each month through micro-investing, they may need to re-evaluate their budget.
• Fees: Micro-investing platforms typically charge monthly fees, which can eat into the returns, especially for those contributing smaller amounts.

Robo-advisor services

Fidelity Investments is one of the largest and best brokerage and robo-advisor platforms, offering a wide range of investment tools and services. Here is an overview of their robo-advisor services:

Fidelity Go

Fidelity Go is the brokerage's robo-advisor service, providing investors with access to low-cost diversification strategies, online planning tools, and a dedicated advisor for accounts exceeding $25,000. This service is ideal for beginners looking to access the market with a small investment, as there is no account minimum and a low fee of $10 to start investing. Fidelity Go does charge an annual advisory fee of 0.35% for accounts with balances of $25,000 or more, which is something passive investors with high account balances may want to consider when choosing a robo-advisor. Additionally, Fidelity Go does not offer tax-loss harvesting, which may be a consideration for some investors.

Fidelity Wealth Services and Fidelity Strategic Disciplines

These are Fidelity's managed accounts that provide investors with access to human advisors. Fidelity Wealth Services offers immediate access to a financial advisor for personalized investment management, with a minimum investment of $2 million and a gross advisory fee ranging from 0.20% to 1.04%. Fidelity Strategic Disciplines, on the other hand, provides investors with access to a team of Fidelity experts who employ a tax-smart investment strategy. This service has a lower minimum investment of $5,000 but charges a higher annual fee of 0.70%.

Fidelity Youth Account

Fidelity was one of the first brokerages to offer a DIY investing account for minors, known as the Youth Account. This account is free to set up and designed for teenagers aged 13 to 17, allowing them to invest in a limited selection of US stocks, ETFs, fractional shares, and Fidelity mutual funds. Parents or guardians can monitor their child's account activity through the Fidelity mobile app. Once the child turns 18, the account transitions to a standard brokerage account.

Fidelity Retirement Accounts

Fidelity offers a range of retirement accounts, including small business retirement plans, IRAs, and 401(k) plans. They provide various calculators and tools to help individuals plan for their retirement, such as the guaranteed income estimator, IRA contribution calculator, and retirement strategies tax estimator.

Fidelity Crypto Accounts

Fidelity also offers commission-free crypto accounts, allowing individuals to buy and sell Bitcoin, Ethereum, and Litecoin. This service suits beginners or casual crypto investors due to its limited cryptocurrency selection. Additionally, Fidelity offers crypto exchange-traded funds (ETFs) for those seeking more diverse investment options.

Retirement planning

Estimate Your Retirement Income Needs:

Start by estimating how much money you will need during retirement. Fidelity's rule of thumb suggests saving 10 times your salary by age 67. This is just a starting point, and you should also consider factors like your age, financial situation, and risk tolerance.

Create a Clear Plan:

Develop a flexible retirement plan that can adjust to life changes. Fidelity offers a free personalized plan to help you save and invest smartly for the future. This includes a roadmap to guide your saving and investing decisions.

Take Advantage of Tax-Advantaged Accounts:

Utilize tax-advantaged accounts, such as a Roth IRA, to keep more of your earnings. With a Roth IRA, you can enjoy tax-free growth and withdrawals in retirement. Additionally, consider a rollover IRA to consolidate savings from former employers into a single account without tax penalties.

Estimate Monthly Income and Expenses:

It's important to have an idea of how much monthly income you'll need during retirement. This includes estimating Social Security benefits, pensions, or annuities. Also, plan for essential expenses like housing and healthcare, as well as discretionary spending on travel and hobbies.

Understand Required Minimum Distributions (RMDs):

Learn about RMDs to avoid penalties. Starting at age 72, you must take a minimum amount from your IRA each year (but not from Roth IRAs). Fidelity provides a checklist to help you prepare for RMDs.

Consider Health Care Costs:

Don't underestimate the cost of healthcare in retirement. According to the 2024 Fidelity Retiree Health Care Cost Estimate, a 65-year-old may need $165,000 in after-tax savings for healthcare. Look into options like long-term care insurance and high-deductible health plans (HDHPs) with health savings accounts (HSAs) to manage these expenses.

Invest Strategically:

Fidelity's Planning & Guidance Center can help you build and monitor your investment strategy. Consider an asset allocation strategy that aligns with your age, such as Fidelity's Managed Retirement Funds, which become more conservative as you get older.

Remember, retirement planning is a journey, and it's never too early (or too late) to start. By following these steps and seeking guidance from financial professionals, you can work towards a secure and fulfilling retirement.

Frequently asked questions