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Fidelity offers a range of investment accounts to suit different needs and goals.
You can choose from a traditional brokerage account, an IRA, or a Roth IRA, each with its own tax benefits and contribution limits. The traditional brokerage account allows you to buy and sell securities, but you'll pay taxes on any gains.
Fidelity also offers a 529 college savings plan, which helps families save for higher education expenses while potentially reducing taxes.
Investing in a Fidelity account can be a great way to grow your wealth over time, as the company offers competitive pricing and a wide range of investment options.
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Account Types
Fidelity offers a variety of investment accounts to suit different needs and goals.
The Fidelity Individual Retirement Account (IRA) allows tax-deferred growth of investments, meaning you won't pay taxes until withdrawal.
Brokerage accounts, on the other hand, don't have contribution limits and allow you to withdraw your money at any time.
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Custodial
A custodial account is a type of account that allows a custodian to invest on behalf of a minor child. This account type is also known as a Uniform Gifts to Minors Act Account (UGMA) or Uniform Transfers to Minors Act Account (UTMA), depending on your state.
This account type is designed to help parents or guardians save for their child's future. The custodian has control over the account until the child reaches the age of majority, which varies by state.
The custodian's control allows them to make investment decisions and manage the account's assets. This can be beneficial for minors who don't have the financial knowledge or experience to manage their own assets.
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Donor-Advised Fund
Fidelity Charitable is the first commercial Donor-Advised Fund (DAF) provider, launched in 1991.
A Donor-Advised Fund allows you to make a charitable donation and then recommend grants to your favorite charities over time.
Fidelity Charitable is a type of DAF that you can use to manage your charitable giving.
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Managed
A managed account is a great option for those who want professional investment guidance. It comes with investment management from a human investment advisor or a robo-advisor.
A robo-advisor is a low-cost alternative to hiring a human investment manager, using computer programs to choose and manage your investments based on your goals and timeline.
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Services
Fidelity Investments offers a range of services to its clients, including brokerage clearing and back office support.
Through its subsidiary, National Financial Services LLC, the company provides a suite of software products for financial services firms.
National Financial was the custodian for over $443 billion in assets, in 4.3 million accounts as of September 30, 2010.
By 2023, the firm had over 45 million brokerage accounts with over $4.5 Trillion in AUM and nearly $12 Trillion in AUA.
Fidelity Investments operates a major brokerage firm with investor centers in over 140 locations throughout the U.S.
The company's services cater to a wide range of clients, including correspondent broker-dealers, institutional investment firms, banks and trusts, family offices, and registered investment advisors.
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Investment Options
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Fidelity offers a range of investment options to suit different needs and goals.
You can choose from equity mutual funds, which have been a cornerstone of Fidelity's investment offerings for decades. The company's largest equity mutual fund is Fidelity Contrafund, with $107.4 billion in assets, making it the largest non-indexed fund in the U.S.
Fidelity also offers zero-expense-ratio mutual funds, a relatively new addition to their lineup. These funds have grown rapidly, with Fidelity's first two zero-expense-ratio funds, ZERO Total Market Index Fund and ZERO International Index Fund, reaching over $1 billion in assets.
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Mutual Funds
Mutual funds can be a great way to diversify your investment portfolio, and Fidelity Investments is a well-established player in this space.
Fidelity has three fund divisions: Equity, High-Income, and Fixed-Income, with the Equity division being the largest.
The company's largest equity mutual fund is Fidelity Contrafund, which has a whopping $107.4 billion in assets, making it the largest non-indexed fund in the U.S.
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Fidelity Contrafund has been managed by William Danoff since 1990, a testament to the fund's stability and consistency.
Another large equity fund offered by Fidelity is the Magellan Fund, which has $15.5 billion in assets.
Under the leadership of Peter Lynch, the Magellan Fund averaged 29% a year, more than doubling the growth rate of the benchmark S&P 500.
Fidelity has also introduced a new line of zero-expense-ratio mutual funds for individual investors, which have grown to more than $1 billion in assets.
These zero-expense funds, including the ZERO Total Market Index Fund and ZERO International Index Fund, provide market exposure to more than two-thirds of industry index assets.
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View By
When you're considering your investment options, you might want to take a closer look at how you can view your accounts. This can help you make the most of your money and stay organized.
You can view your accounts by type, which makes it easy to compare and manage different types of investments. For example, you might want to view your cash management account, which allows you to manage your cash and investments together without any minimum balance requirements.
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Some account types, like the Fidelity Cash Management Account, offer features like no-cost management and no minimum balance requirements. This can be a huge benefit for people who are just starting out with their investments.
You can also view your accounts by individual retirement account (IRA), which is a great option for people who are saving for retirement. IRAs often come with features like tax benefits and flexibility in investment options.
If you're saving for college, you might want to consider a 529 college savings account. These accounts often come with features like tax benefits and flexibility in investment options, making them a great choice for families.
Ultimately, the key is to find an account type that works for you and your financial goals. By viewing your accounts by type, you can make informed decisions and stay on track with your investments.
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Benefits and Taxes
To minimize taxes, it's essential to be a long-term investor. Holding onto your investments for over a year can help you capture the most favorable tax bracket, which is 0%, 15%, or 20% depending on your income and filing status.
Here are some key tax tips to keep in mind:
- Buy stock through a brokerage account and hold onto it for over a year to avoid short-term capital gains tax.
- Sell a stock a year or less after buying it, and you may have to pay short-term capital gains tax.
- Use losses to offset gains and reduce your capital gains tax burden.
- Paying dividends on your investments means you'll have to pay taxes, even if you reinvest them.
- You only pay capital gains taxes when you've earned income on your investments.
If you're looking for a tax-deferred option, consider a traditional IRA. With this type of account, you can contribute pre-tax dollars, and the investment growth is tax-deferred until withdrawal. Just keep in mind that you'll have to pay taxes when you withdraw your savings.
Benefits and Taxes
With retirement savings, taxes can be a complex issue. You can contribute to a Roth IRA with taxable contributions, but all earnings are tax-free upon withdrawal if certain requirements are met.
Having a Roth IRA can be a great way to save for retirement, as you also have penalty-free access to your contributions at any time. It's essential to note that you must have compensation and meet Adjusted Gross Income limits to be eligible to contribute.
Traditional IRAs offer tax-deferred contributions and investment growth, which can compound more quickly than those in a comparable taxable account. This means your savings can grow faster over time.
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However, with a Traditional IRA, you'll have to pay taxes on your withdrawals, which can be a drawback. To be eligible to contribute, you still need to have compensation and meet Adjusted Gross Income limits.
It's worth considering your individual financial situation and goals before deciding between a Roth IRA and a Traditional IRA.
Key Benefits
Having a brokerage account offers several key benefits that make it an attractive option for investors.
You can invest as much or as little as you want, with no contribution limits.
One of the most significant advantages is the freedom to pull money out of the account at any time, with no penalties from the IRS.
However, keep in mind that selling investments may have tax implications.
The investment selection available within a brokerage account is typically broader than what you'd find in other investment accounts.
Here are some of the key benefits of a brokerage account at a glance:
- No contribution limits
- No restrictions on distributions
- Large investment selection
Taxes
You'll need to pay capital gains taxes if you sell a stock for a profit through a brokerage account. This is a normal part of investing.
Brokerage accounts are considered taxable accounts, which means you'll have to pay taxes on investment income. This includes profits from selling your investments.
The good news is that you can minimize your capital gains taxes by holding onto your investments for over a year. This will put you in a more favorable tax bracket.
The long-term capital gains tax rate is 0%, 15%, or 20%, depending on your taxable income and filing status. This is a significant advantage over short-term capital gains taxes.
If you sell a stock within a year of buying it, you'll have to pay short-term capital gains taxes at your ordinary income tax rate. This is usually higher than the long-term capital gains rate.
You can use losses from selling investments to offset gains and reduce your capital gains tax burden. This is a smart move if you've had investments that didn't pan out.
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Here are the key tax tips to keep in mind:
- Paying capital gains taxes on profits from selling investments is normal.
- Short-term capital gains taxes are usually higher than long-term capital gains taxes.
- Use losses to offset gains and reduce capital gains tax burden.
- Pay taxes on dividend income, even if you reinvest it.
- Capital gains taxes are a sign that your investments are earning a return.
Reimbursement Schedule
Reimbursement Schedule is an important aspect of managing your finances. If you have a Fidelity Cash Management Account, you're in luck - all ATM charges are reimbursed.
You can also enjoy this benefit if you're a Premium, Active Trader VIP, Private Client Group, Wealth Management, or former Youth account owner with Fidelity. These account types also receive reimbursement for all ATM charges.
However, if you have a Fidelity Account - all other account owners, you won't receive reimbursement for ATM charges.
On the other hand, Fidelity Youth Account owners can rest easy, knowing that all ATM charges are reimbursed.
Here's a breakdown of the reimbursement schedule:
Frequently Asked Questions
What are the levels of Fidelity accounts?
Fidelity offers three account levels: Fidelity Advisory Services Team, Fidelity Wealth Management, and Fidelity Private Wealth Management, each with unique features and requirements. Learn more about the fees and benefits of each level to find the best fit for your financial needs.
Does it cost money to have a Fidelity brokerage account?
No, Fidelity brokerage accounts do not have account fees or minimums. You can open and maintain a brokerage account with Fidelity without incurring any costs.
Sources
- https://www.folioinstitutional.com/advisorfeatures/account-types.jsp
- https://www.nerdwallet.com/article/investing/what-is-how-to-open-brokerage-account
- https://en.wikipedia.org/wiki/Fidelity_Investments
- https://www.fidelity.com/viewpoints/personal-finance/how-to-start-investing
- https://www.fidelity.com/spend-save/features-by-account
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