Beginners Guide To Investing: Opening an Account With Fidelity
Opening up a Fidelity brokerage account was a simple process. As a beginner investor or someone who wants to invest on a low income, finding a brokerage account that offers fractional shares will make your life a lot easier.
A fractional share is when you buy a portion of one whole share.
For example, if company X cost $100 for ONE share, you would be able to buy $10 of company X. Instead of owning ONE whole share, you would now be the owner of 0.10 shares. This concept is why beginner investors, who do not make much money, are still able to take advantage of using the stock market.
But why is it important to have fractional shares offered by a brokerage account?
It's because of the confidence boost and room to exercise what you're learning about investing.
It's discouraging and overwhelming to have to wait until you have the full price of a share before purchasing it. If you wanted to buy a full share of Amazon (AMZN) you would have to save up $3,305.70**.
Versus if you invest through Fidelity, Robinhood, M1 Finance, or Charles Schwab you will be able to purchase fractional shares for single digit amounts.
Use my referral link for Robinhood for a FREE stock!
Having the option to purchase fractional shares is one of the biggest pros of opening a Fidelity taxable brokerage account along with easy access to customer service and a 5 star mobile app. It’s user-friendly interface made buying shares simple and adding money to the account a breeze.
By the end of this blog post you will learn how to open a Fidelity taxable brokerage account and learn the answers to a few FAQ questions
What's ahead: Guide for opening an account with Fidelity
Note: I will revisit this post periodically and update as needed.
**This was Amazons closing stock value as of August 24th 2021
Is a Fidelity brokerage account good for beginners?
The best part about opening a Fidelity brokerage account is that it is beginner friendly.
In addition to it being super easy to create your actual account, it offers a tutorial to show you how to use the platform, has a good customer service hotline, and like many other platforms, offers a research tab.
You can learn and invest without having to click a million menu options.
One aspect that should be noted when it comes to opening a Fidelity taxable brokerage account is that you will need to use a specific menu option when attempting to place an order for fractional shares.
Without clicking "Simplified Ticket, you will not be able to place an order for fractional shares.
You’ll see the Fidelity fractional shares option towards the end of the post.
Does Fidelity charge a monthly fee?
Fidelity does not charge a monthly fee for opening a taxable brokerage account with them.
One of the bright sides of opening an account with Fidelity is that they offer commission free trades. In addition the investing platform has a $10 minimum for making account transfers.
If you have $10 you can begin to invest today with Fidelity.
What is the minimum amount needed to open a Fidelity account
There isn’t a minimum amount required to open this type of account with Fidelity.
When you sign up with Fidelity, their taxable brokerage accounts will not require that you link a bank account and make a transfer right away.
Not having a minimum account makes this great for beginner investors who are unable to drop large sums of money into the market right away. Or want to open the account and make a plan for their money before they start transferring funds.
Simply having $10, can jump start your buying of Fidelity fractional shares as well as your overall portfolio.
Compare this to M1 finance which has a $100 minimum to open an account with them.
Investing for beginners: How to open a Fidelity account (H1)
What you need to get started (H1)
To open a taxable brokerage account with Fidelity you will need your social security number, employer information, and your home address.
Step one: Click open an account
Opening an account with Fidelity begins on the main page of the login screen. Click the large open an account option.
Step Two: Choose the type of account you want to open
For this how to open an account post - we will only be discussing the taxable brokerage account option offered by Fidelity.
However, because retirement is important when it comes to basic financial literacy, I want to briefly mention the IRA options you can see on the screen.
A Roth IRA or Traditional IRA are vehicles for saving for retirement on your own without an employer or organization managing it.
Whether you’re looking to pay taxes on your gains (the profit you would have if you sold the stock right now) upon withdrawal will determine whether you open a Roth IRA or a Traditional IRA.
A Roth IRA uses post-taxed dollars and a traditional IRA uses pre-taxed dollars
If you are taking a 401k or 403b (or any other employer retirement account) and placing it elsewhere, this would be in the form of a rollover IRA.
Opening a retirement account on your own with Fidelity means you have three different IRA options; Roth IRA, Traditional IRA, and Roll over IRA.
To open a taxable brokerage account so that you can simply trade as you wish with less penalties and restrictions we will be selecting brokerage account. Keep in mind that taxable brokerage accounts will be reported to the IRS each year that you sell some of your holdings or receive dividends.
Step three - Select who will own this account
When opening a new taxable brokerage account you can decide if this account is only yours or if you will share it with another person.
Since only I will be contributing to this account I will select individual.
This means that within this taxable brokerage account only I will be buying and selling shares and I am responsible for reporting any gains/losses to the IRS.
Step four - Fill in your information
If you already have a different account with Fidelity you will likely be asked to login and not have to enter all of your information.
The Fidelity form asks for basic information such as your name, email, address, and social security number.
Step 5 - Verify your identity
Once you finish plugging in your information on the next screen you will be asked to verify your identity.
Identity verification will include a few questions (no more than 3) that you would know the answer too.
In my experience, 2 of the questions were truthful and based on relatives/my life and the other question was false. The correct answers are needed in order to proceed to step 6 of opening a taxable brokerage account with Fidelity.
Step six - Enter employer information
Select your employee status and whether or not you or a relative are a member of FINRA, for the majority of us the answer to the last two questions will be no.
At this point you are halfway through setting up your taxable brokerage account.
Step 7- Select your core positions and email preferences
Your core position is a sophisticated way of asking where your uninvested cash should be stored.
Once you transfer funds into your account and don’t invest them they will be stored in one of three ways
Fidelity Government money market fund - The money is stored in a mutual (actively managed) fund and you earn dividends (money given to you) monthly
Fidelity Treasure Money Market Fund - Another mutual fund where you are paid a monthly dividend
-Fidelity Interest Bearing Option - Cash is held at Fidelity and you earn daily interest.
Each option has a monthly payout. After doing some research on the Fidelity account opening steps prior to joining, a few things stuck out to me
Your money is in a taxable brokerage account to be invested - A long term plan for how you will earn monthly interest on money not invested is not needed.
Each option results in a payout - No matter which Fidelity core option you chose the money not invested will still generate a profit.
If you invest transferred cash the option you pick will not be utilized - The goal is to invest our money not use this account as a savings vehicle.
I chose the Fidelity Interest Bearing Option just because it sounded the most liquid (easily accessible) and I don’t plan on transferring funds into my account and not using them. Choose the option that best suits your needs and financial goals.
Step 8 - Transfer funds into your account
Next you will see a confirmation message letting you know your account has been created successfully at Fidelity.
On the next screen you can set up your username and password.
Now you’re one step closer to making your first trade and investing in Fidelity fractional shares. The process up to this point took me about 10 minutes.
Once you set up your username and password you can begin to transfer funds into your new Fidelity taxable brokerage account!
For security purposes you will need to have your phone near you. Either a phone call or text will be sent to you to verify your identity.
Grab your account number and routing number so that you can begin to add funds to your new Fidelity account. Keep in mind linking an account is not mandatory to create an account.
The key to successful long term investing is setting up recurring transfers. Automation makes saving easier and helps it to become a habit.
Once you enter your bank account information you can then decide if you want to do a one time transfer or set up reoccurring transfers.
A reoccurring transfer will send a certain amount of funds to your taxable brokerage account automatically.
If you decide to transfer money today the next screen will confirm that your transfer was successfully submitted.
Remember you only need to $10 in order to make a transfer into your Fidelity taxable brokerage account.
Once you transfer the money it will take 1-2 business days to arrive and then you can begin to buy stocks!
Buying Fractional Shares
Once you have your taxable brokerage account open select Accounts and Trade (highlighted in light green) from the menu and scroll down to Trade.
The next screen should give you the option to pick the stock you want to invest in and select the account you'll be using.
You will also be able to decide how much you want to buy and whether this trade will be bought right away during market hours (market order).
If you want to buy the stock when it hits a certain price this will be a limit order.
Note: This screen shot is before market hours (prior to 9:30am).
Select the symbol of the stock or fund you are investing choose "View simplified ticket". This will allow you to enter a dollar amount and not quantity.
Now the Fidelity Taxable brokerage page should look like this
Notice how it gives you the options to put in an amount of dollars or choose shares.
You may select "Buy"or "sell" in the case we are selecting buy. Then by selecting dollars you can insert how much you want to buy of the stock or fund.
And lastly you can decide if it's a market order or a limit order. Market orders will be bought right away as long as the market is open.
The amount of money in your account that is available for trade must match how much you plan to buy.
Notice how the screen shot below says I have $0.07 available for trading, if I were to try to purchase $1 of ABNB it could lead to an error message or cause issues with my account if the trade did go through.
Dollar cost averaging
Beginner investors may see the need to start small and continuously buy more shares of stocks. You'll buy the stock when it's high and when it's low. This will remove the emotion from buying stocks and allow you to simply choose the best long term plan for your money.
Your 0.1 share of Company X will eventually turn into 5, 10, 100+ shares and you can watch the growth as compound interest kick in.
Time in the market allows you to take advantage of compound interest.
Reoccurring transfers also makes dollar cost averaging easier to do. Every $100 you transfer into your account can be placed into one fund or stock or it can be split amongst multiple companies.
Key Take Aways
Opening an account with Fidelity will not take that long. The option to invest in fractional shares makes using Fidelity a good choice for college students, working adults, and people who do not have large lump sums of money to drop into the stock market.
Even if you did have a lot of money to spend at one time, you can still take advantage of the user-friendly experience offered by Fidelity.
Investing is one form of self care that is ignored or made to seem stressful. Take the hassle out of investing and make it work for your budget!
Drop a comment about how you plant to start investing!
