What Fidelity Investments is and what it does

Fidelity Investments is a brokerage firm where you can open an account to buy and sell stocks, bonds, mutual funds, and exchange-traded funds (ETFs). You deposit money into your account, and Fidelity holds that money and executes your trades — buying or selling securities at your instruction. Fidelity also offers retirement accounts like IRAs and 401(k) rollovers, taxable brokerage accounts for general investing, and cash management accounts that work like checking accounts.

Fidelity makes money through commissions on certain trades, account fees for some services, and interest earned on cash you hold in your account. Most stock and ETF trades through Fidelity carry no commission, but some mutual funds and bonds may have fees attached. You pay these fees directly or they are deducted from your account balance.

The company is privately held and has been operating since 1946. It is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the same bodies that oversee all brokerages. Your account is also protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 per account if Fidelity fails — though this does not protect you against losses from bad investment choices.

Key Takeaways

  • Fidelity is a brokerage where you deposit money and trade securities like stocks and ETFs, with most stock trades carrying no commission.
  • You can open a taxable brokerage account, retirement account (IRA or 401(k) rollover), or cash management account depending on your goal.
  • Fidelity charges account maintenance fees for some account types and transaction fees for certain mutual funds and bonds, but these vary by account and holding.
  • Your account is insured by SIPC up to $500,000 if the firm fails, and Fidelity is regulated by the SEC and FINRA like all brokerages.
  • You can trade online through Fidelity's website or mobile app, or call a representative to place trades by phone.

Types of accounts Fidelity offers

Fidelity offers several account structures, each with different tax treatment and withdrawal rules. A taxable brokerage account has no contribution limits and no restrictions on when you withdraw money, but you pay income tax on dividends and capital gains each year. This is the most flexible option if you are saving outside retirement.

A Traditional IRA lets you contribute up to $7,000 per year (or $8,000 if you are 50 or older as of 2024, though this limit changes annually). You may deduct contributions from your taxable income in the year you make them, and you do not pay tax on gains until you withdraw money after age 59½. A Roth IRA works the opposite way: contributions are not deductible, but withdrawals in retirement are tax-free.

If you have a 401(k) from a former employer, you can roll it into a Fidelity IRA to consolidate your retirement savings and often gain access to lower-cost investment options. Fidelity also lets you open a SEP IRA if you are self-employed, which allows much higher annual contributions than a regular IRA.

A cash management account through Fidelity works like a checking account — you can deposit money, write checks, use a debit card, and earn interest on your balance. This is useful if you want to keep your cash and investments in one place but do not want to invest all your money when ready.

How to open an account and fund it

You open a Fidelity account online by providing your name, address, Social Security number, employment information, and investment experience. Fidelity asks these questions to understand your situation and to comply with federal anti-money-laundering rules. The process takes about 10 minutes, and your account is usually active the same day.

To fund your account, you can link a bank account and transfer money electronically, mail a check to Fidelity, or wire money from your bank. Electronic transfers typically take one to three business days. Once money is in your account, it sits in a cash position (earning a small amount of interest) until you place a trade.

If you are rolling over a 401(k) from a previous employer, Fidelity can contact your old plan administrator and request a direct rollover, which moves the money straight from the old plan to your new Fidelity IRA without you touching it. This avoids tax withholding and penalties. You can also request a check from your old plan and deposit it yourself, though you then have 60 days to complete the rollover or face taxes and penalties.

Trading and investment options

Once your account is funded, you can place trades through Fidelity's website or mobile app. You search for a security by ticker symbol (for example, AAPL for Apple), enter the number of shares you want to buy or sell, and confirm the order. Most stock and ETF orders execute when ready during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). Orders placed outside market hours are queued and execute when the market opens.

Fidelity offers stocks from all major U.S. exchanges, international stocks, bonds, mutual funds (both Fidelity's own and those from other companies), ETFs, options, and futures. You can also set up automatic investments — for example, $500 per month into a specific fund — which removes the need to remember to trade manually.

Fidelity's research tools include stock screeners, analyst reports, and educational articles. You can also speak with a representative by phone or video call to discuss your holdings or get information about specific securities, though this is informational only and not personalized investment information.

Fees and costs

Fidelity charges no commission on U.S. stock trades, ETF trades, or options trades. However, some mutual funds carry a transaction fee if you buy them through Fidelity (typically $49.95 per transaction), and some bonds have a markup built into the price you pay. You can see these fees before you complete a trade.

Most Fidelity accounts have no monthly or annual maintenance fee. However, if your account balance falls below certain thresholds or you do not meet activity requirements for some specialized accounts, Fidelity may charge a fee — check the specific account terms when you open it.

If you hold mutual funds or ETFs, you also pay the fund's internal expense ratio, which is a percentage of your holdings charged annually. For example, a fund with a 0.05% expense ratio costs $5 per year for every $10,000 you hold in it. Fidelity's own index funds tend to have low expense ratios, often below 0.10%.

How your money is protected

Fidelity is a member of SIPC, which protects your account up to $500,000 if the brokerage fails or goes out of business. This protection covers the value of your securities and cash, but it does not protect you if your investments lose value due to market conditions or poor performance.

Your account is also protected by Fidelity's own insurance beyond SIPC coverage. Fidelity maintains additional insurance through private carriers that covers up to $1.5 million per account in some cases, though the exact amount depends on your account type. You can view Fidelity's full insurance details on their website.

Fidelity is regulated by the SEC, which sets rules for how brokerages must operate, and by FINRA, which enforces conduct standards and handles customer complaints. If you have a dispute with Fidelity that you cannot resolve directly, you can file a complaint with FINRA's arbitration process or with the SEC.

Comparing Fidelity to other brokerages

Fidelity competes with other large brokerages like Charles Schwab, E*TRADE, and Vanguard. All of these offer commission-free stock and ETF trading, so the main differences are in account minimums, research tools, customer service, and the range of investment options available.

Fidelity has no account minimum for most brokerage accounts, though some specialized accounts (like managed portfolios) may require a minimum deposit. Charles Schwab and Vanguard also have low or no minimums for most accounts. E*TRADE similarly has no minimum for standard brokerage accounts.

Fidelity is known for its research tools and educational content, particularly for self-directed investors. If you prefer a brokerage that also offers financial advisory services, Fidelity offers managed accounts and robo-advisor options (automated portfolio management) at various price points. Vanguard and Schwab offer similar services. If you want a brokerage with the lowest possible fees, Vanguard's index funds and ETFs are often cheaper than Fidelity's, though the difference is usually small.

Frequently Asked Questions

Can I lose more than I invest with Fidelity?

With stocks and ETFs, no — you can only lose what you put in. If you trade options or use margin (borrowing money to invest), you can lose more than your initial investment. Most new investors should avoid these strategies until they understand the risks.

Does Fidelity report my trades to the IRS?

Yes. Fidelity reports all sales of stocks, ETFs, and mutual funds to the IRS on Form 1099-B, which shows your proceeds and cost basis. You use this information to calculate capital gains or losses on your tax return. Fidelity also reports dividends on Form 1099-DIV and interest on Form 1099-INT.

What happens to my account if I do not log in for a long time?

Your account remains open and your investments continue to be held. However, if your account is dormant (no activity) for a very long time and has a low balance, some states may require Fidelity to turn the money over to the state as unclaimed property. You can reclaim it, but the process takes time. Logging in occasionally or setting up automatic investments prevents this.

Can I transfer my investments to another brokerage?

Yes. You can request an ACAT (Automated Customer Account Transfer) from your new brokerage, which moves your securities and cash to the new firm. The transfer usually takes five to seven business days. You do not have to sell your investments — they move as-is to the new account.

Does Fidelity offer investment information?

Fidelity offers educational resources and information through its website and phone representatives, but this is not personalized information. If you want a financial advisor to manage your account or create a plan, Fidelity offers advisory services for a fee, typically ranging from 0.35% to 1% of your account balance annually depending on the service level.