HomeFidelity-FaqHow-To-Set-Up-Automatic-Investments-On-Fidelity

How to Set Up Automatic Investments

Question: How To Set Up Automatic Investments On Fidelity

Setting up automatic investments is a smart financial strategy that can help you grow your wealth over time without having to constantly monitor your accounts. Whether you're saving for retirement, a down payment, or any other financial goal, Fidelity offers a seamless way to automate this process, allowing you to consistently build your investment portfolio. In this guide, we'll explore how you can set up automatic investments on Fidelity, breaking down the process into simple steps while addressing common questions and misconceptions along the way.

Understanding Automatic Investments

Automatic investing is a process whereby you instruct a financial institution to regularly invest a fixed amount of money into a specified security, such as a mutual fund, ETF, or stock. This strategy is often referred to as "dollar-cost averaging," where you purchase more shares when prices are low and fewer when prices are high, potentially reducing the average cost per share over time.

Benefits of Automatic Investments

  • Consistency: It ensures you are regularly contributing to your investment account, which can help you stay on track with your financial goals.
  • Convenience: Reduces the need for active portfolio management and regular market monitoring.
  • Emotional Buffer: Minimizes emotional investing by replacing impulsive decisions with steady, disciplined investments.

Setting Up Automatic Investments on Fidelity

Step-by-Step Guide

  1. Create a Fidelity Account

    To begin, you need to have a Fidelity brokerage account. If you don't already have one, follow these steps:

    • Visit the Fidelity website and select "Open an Account."
    • Choose the type of account you wish to open (e.g., individual brokerage account, retirement account).
    • Provide your personal details, including your name, address, Social Security Number, and employment information.
    • Review the agreements and submit your application. Fidelity might ask for additional verification documents.

  2. Log into Your Fidelity Account

    • Go to the Fidelity homepage and click on "Log In."
    • Enter your username and password to access your account.
    • Navigate to the main dashboard once you're logged in.

  3. Access the Automatic Investment Plan (AIP) Option

    • On your account dashboard, locate the "Accounts & Trade" tab.
    • From the dropdown menu, select "Account Features."
    • Look for "Automatic Investing" or "Automatic Investment Plans" from the list of features.

  4. Set Up Your Investment Preferences

    • Select the account for which you want to set up automatic investments.
    • Choose the mutual fund(s) or other investment vehicles into which you'd like to automate your contributions.
    • Specify the amount you want to invest in each transaction.

  5. Schedule Your Investments

    • Decide on the frequency of your investments, such as weekly, bi-weekly, or monthly.
    • Set the start date for your investments. It’s often advisable to align this date shortly after your payday.
    • Confirm if you want to reinvest dividends, which can further compound your investment growth over time.

  6. Review and Confirm

    • Double-check all the details, including the account, investment vehicle, amount, and schedule.
    • Review the terms and conditions associated with automatic investments in your selected funds.
    • Click “Submit” to finalize the setup.

  7. Monitor Your Investments

    • Regularly review your investment plan to ensure it aligns with your financial goals.
    • Adjust the settings if necessary, whether that's changing the investment amount, changing the funds, or altering the investment schedule.

Important Considerations

  • Funds Availability: Ensure that you have sufficient funds in your bank account on the scheduled investment date to prevent overdrafts or missed contributions.
  • Investment Choice: Research and select funds that align with your risk tolerance and investment objectives. Fidelity provides detailed fund performance reports and ratings to assist in your decision-making process.
  • Minimum Investment Requirements: Be aware of any minimum investment amounts required for the funds you choose.

Frequently Asked Questions (FAQs)

How can I change or cancel my automatic investments?

To modify or cancel your automatic investment plan, log in to your Fidelity account, access the "Account Features" section, and navigate to "Automatic Investments." There, you can update your preferences or discontinue the service as needed.

Are there fees associated with automatic investments?

Fidelity does not charge additional fees for setting up automatic investments. However, you should be aware of any management fees or expense ratios associated with the mutual funds or ETFs you select.

Can I set up automatic investments for multiple funds?

Yes, you can set up separate automatic investment plans for multiple mutual funds within the same account. This flexibility allows you to diversify your portfolio by automating contributions to different asset classes or sectors.

What happens if my bank balance is insufficient on the investment date?

If there are insufficient funds in your bank account on the scheduled date, Fidelity will not process the transaction. It's essential to maintain a sufficient balance to avoid missing a scheduled investment.

How does automatic investing affect my taxes?

Automatic investing itself doesn't have direct tax implications. However, you'll need to report investment income, such as dividends and capital gains, on your tax return. Consult a tax professional for personalized advice regarding investments and taxes.

Real-World Context

Many investors find automatic investments beneficial for building wealth over the long term. For example, a young professional might set up a monthly automatic investment into a diversified index fund. Over time, this strategy can capitalize on the compounding growth of investments, turning modest, regular contributions into substantial wealth. It's a strategy employed by many to mitigate market volatility impacts and align their financial strategies with their long-term goals.

Additional Resources

If you're interested in learning more about investing or need help formulating an investment strategy, Fidelity offers a wealth of resources and educational content. Consider exploring the following:

  • Fidelity Learning Center: Offers articles, webinars, and courses on diverse financial topics.
  • Fidelity Investor Centers: Physical locations where you can meet with a financial advisor for personalized guidance.
  • Fidelity Planning & Guidance Center: Online tools and calculators to help plan financial goals.

With these resources at your disposal, Fidelity makes it easier than ever to take control of your financial future by integrating automatic investments into your wealth-building strategy.

Remember that investing involves risk, including the loss of principal, and you should consider your individual circumstances and risk tolerance before making an investment decision. Investing consistently through automatic investments doesn't guarantee a profit or protect against a loss in declining markets, but it can be an effective tool in building long-term financial security. Take advantage of these tools and start your automatic investment journey with confidence.