Fidelity's Best Investment Opportunities: Where To Start?

Investing can be a complicated process, but it doesn't have to be. Fidelity is one of the most well-rounded brokerages available, offering $0 trading commissions, a selection of more than 3,300 no-transaction-fee mutual funds, top-notch research tools, and a mobile platform.

Fidelity offers a range of investment options, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, forex, and cryptocurrencies. It also provides investors with access to international markets and the ability to purchase fractional shares.

When deciding where to invest, it's important to consider your risk tolerance and investment goals. Fidelity offers resources to help investors make these decisions, including educational content for both beginner and advanced investors.

With its low costs, excellent customer support, and wide range of investment options, Fidelity is a great choice for anyone looking to start investing.

Brokerage accounts

However, brokerage accounts are taxable accounts, meaning you have to pay taxes on any realised investment profits every year. For this reason, it may make more sense to start with a 401(k) or IRA account if you're investing for retirement.

Fidelity offers a range of investment options for brokerage accounts, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). You can also buy over 100,000 individual bonds, including corporate, municipal, and government bonds.

Fidelity also offers a substantial selection of mutual funds, including target date funds, index funds, and thematic funds.

401(k) plans

One of the significant advantages of 401(k) plans is the potential for "free money" from your employer. Many employers will match your contributions up to a certain amount, providing an incentive to participate in the plan. Additionally, contributing to a traditional 401(k) can lower your taxable income for the year, resulting in potential tax savings.

It's important to note that 401(k) plans come with rules and restrictions. There are limits on how much you can contribute, and there are strict guidelines on when and how you can withdraw your money. The investment options available to you may also be limited, and you might not be able to buy specific stocks.

When considering a 401(k) plan, it's essential to weigh the benefits against the drawbacks. For most people, the tax advantages and potential for employer matching contributions make 401(k) plans a worthwhile investment choice. However, it's always a good idea to review your investment options and choose the ones that align with your financial goals and risk tolerance.

Individual retirement accounts (IRAs)

There are different types of IRAs, including traditional IRAs, Roth IRAs, and rollover IRAs. Traditional IRAs offer similar tax benefits to 401(k)s, with the difference being that you may get a tax deduction for the year your contribution is made rather than contributing pre-tax. This means that you can contribute whenever you like and 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 each year, and how and when you can withdraw money.

Roth IRAs may be a good choice for investors at the beginning of their careers when their income and tax bracket are typically lower. With a Roth IRA, you contribute after-tax, and qualified withdrawals of earnings are generally tax-free.

When choosing investments for your IRA, it is important to consider your risk tolerance and investment timeframe. Stocks, bonds, mutual funds, and exchange-traded funds (ETFs) are common investment options. Stocks can be rewarding but are considered riskier, while bonds are typically lower-risk and offer regular interest payments. Mutual funds and ETFs are groups of stocks, bonds, and/or other investments created by professionals, offering diversification and a lower-risk option.

Fidelity offers resources to help you choose and manage your investments, including tools to analyse your portfolio and find ideas for creating an appropriate investment strategy.

Stocks, bonds, and other securities

• Stocks: Stocks let investors own a tiny slice of a public company. You can pick stocks yourself, use a robo-advisor, or work with a financial professional. When choosing stocks, consider your investment goals, risk tolerance, time horizon, and tax situation. Diversification is key—spreading your money across different types of stocks and other investments to weather market ups and downs. You can buy stocks through a brokerage account, which offers flexibility but also comes with taxes on any profits. Alternatively, you can invest through a tax-advantaged retirement account like a 401(k) or an Individual Retirement Account (IRA).
• Bonds: Bonds are a type of fixed-income investment that can provide income, diversification, tax efficiency, and protection from stock market volatility. You can buy individual bonds, which offer greater control and transparency but require more time and financial resources, or invest in bond funds, which provide diversification with a lower dollar commitment. When investing in bonds, consider the level of research and oversight required, income frequency, minimum investment amount, liquidity needs, and the impact of rising or falling interest rates.
• Other Securities: In addition to stocks and bonds, you can also invest in other securities such as mutual funds, exchange-traded funds (ETFs), options, and fixed-income investments like certificates of deposit (CDs) and annuities. Mutual funds and ETFs pool money from multiple investors to purchase a collection of stocks, bonds, or other securities, providing instant diversification. Options are a type of derivative that give you the right to buy or sell a security at a specific price, while fixed-income investments provide regular income and capital preservation.

Remember to do your research, understand the risks, and diversify your portfolio to balance potential gains and losses.

Risk tolerance and goals

When choosing investments, consider your risk tolerance and your goal's time horizon. For example, stocks are typically considered a riskier option as their prices fluctuate depending on various factors, including company performance and news. On the other hand, bonds are often considered lower-risk as they are like giving out loans to companies or governments that agree to pay you back with interest. Mutual funds and ETFs are also good options as they provide diversification, reducing risk.

As your life changes, so can your risk tolerance and goals. Therefore, it is important to review your investments regularly and adjust your investment plan as necessary. Additionally, when investing for retirement, consider your age and how much time you have until retirement. Generally, the younger you are, the heavier your investment mix can tilt towards stocks, as you have more time to recover from any market downturns. However, as you get closer to retirement, you may want to adjust your allocation and reduce the percentage of stocks in your portfolio while increasing investments in bonds and short-term investments.

Frequently asked questions