FMR LLC, which does business as Fidelity, provides a range of financial services, including investment management, brokerage, financial planning, and wealth management services. The company, which was founded as Fidelity Management & Research in 1946, serves individual and institutional clients globally.
Fidelity has about $14.1 trillion in assets under administration (AUA), $5.5 trillion over which the company has discretionary control, as of June 30, 2024. The company’s family of funds includes hundreds of mutual funds and exchange-traded funds (ETFs).
Fidelity, as part of its activities, is a full-service broker that earns commissions for providing investment management, research, and analysis services to clients. The company also offers discount brokerage services, including commission-free trading for online U.S. stock, ETF, and option trades.
Investors in the United States have access to several tax-advantaged saving plans, including401(k)s, individual retirement accounts (IRAs), andRoth IRAs. The maindifference between a Roth IRA and a traditional IRAis that the former is funded with after-tax dollars, meaning that contributions are not tax-deductible, as they are with the latter. But unlike atraditional IRAwhere withdrawn funds are taxed, a Roth IRA allows investors to withdraw funds tax-free.
Below, we take a closer look at one of Fidelity’s broad-based stock funds and one of its broad-based bond funds.
Key Takeaways
- Fidelity was founded in 1946, has hundreds of its own mutual funds and exchange-traded funds (ETFs) available, and has about $14.1 trillion of assets under administration (AUA), as of June 30, 2024.
- When making a retirement account, a broad stock fund and a broad bond fund provide a good foundation, either as the sole foundation for investing or to build upon with more complex investments.
- Roth IRAs allow investors to avoid paying taxes on investment returns by investing after-tax income now.
- The Fidelity Total Market Index Fund (FSKAX) and the Fidelity U.S. Bond Index Fund (FXNAX) are two options to consider when looking for Roth IRA investments from Fidelity.
Fidelity Total Market Index Fund (FSKAX)
- Expense Ratio: 0.015%
- Assets Under Management: $96.75 billion (as of July 31, 2024)
- One-Year Trailing Total Return: 28.12% (as of August 24, 2024)
- 12-Month Trailing (TTM) Yield: 1.25% (as of August 24, 2024)
- Inception Date: Nov. 5, 1997
FSKAX is a mutual fund that seeks to replicate the performance of a broad range of U.S. stocks, as represented by its index: the Dow Jones U.S. Total Stock Market Index. The fund invests at least 80% of its assets in common stocks included in the index. The fund’s 3,860holdings as of July 31, 2024, include both value and growth stocks of large-cap companies primarily based in the U.S.
A broad-based equity fund like FSKAX carries a certain degree of risk, but it also provides investors with fairly strong growth opportunities. For many investors, this mutual fund may act as the foundation of a well-diversified investment portfolio. However, for those with very lowrisk toleranceor who are approaching retirement, a more income-oriented portfolio may be a better option.
Fidelity U.S. Bond Index Fund (FXNAX)
- Expense Ratio: 0.025%
- Assets Under Management: $57.69 billion (as of July 31, 2024)
- One-Year Trailing Total Return: 8.67% (as of August 24, 2024)
- 12-Month Trailing (TTM) Yield: 3.18% (as of August 24, 2024)
- Inception Date: March 8, 1990
FXNAX is a mutual fund that seeks to track the performance of the Bloomberg U.S. Aggregate Bond Index, which is composed of U.S. investment grade bonds and other debt securities. The fund invests at least 80% of its assets in the securities included in the index.
Of the fund’s 9,382 holdings as of July 31, 2024, 41.77% are U.S. Treasuries, 26.34% are corporate bonds, 25.94% are pass-through mortgage-backed securities (MBS), and the remaining holdings include government-related, domestic, and international debt securities, commercial MBS, and asset-backed securities (ABS). Essentially all of the fund’s holdings are rated investment grade with a BBB rating or higher.
A broad-based bond or fixed-income fund like FXNAX is generally less risky than an equity fund. However, bond funds don’t provide the same growth potential as equity funds, which means generally lower returns.
They can be useful investment tools both for risk-averse investors and as part of a portfoliodiversificationstrategy. Consistent withmodern portfolio theory, risk-averse investors will find that investing in a bond fund like FXNAX in combination with a broad-based equity fund provides a degree of diversification that maximizes the returns of the investor’s portfolio while minimizing its risks.
Is Fidelity a Good Roth Individual Retirement Account (Roth IRA)?
Fidelity provides investors with a broad range of low-cost investment options to choose from for their Roth individual retirement account (Roth IRA). Investors have the option to have their accounts managed by professionals at Fidelity or manage their own investments.
Fidelity offers investors access to more than 10,000 mutual funds from the company’s family of funds and other fund companies. The company also offers online trading of exchange-traded funds (ETFs), U.S. stocks, and options with zero commission fees.
Does a Fidelity Roth IRA Have Fees?
There is no cost to opening a Fidelity Roth IRA and no annual fee. However, the investments held in the account may be subject to other fees, such as management, low balance, and short-term trading fees. Also, online U.S. stock, ETF, and option trades are commission-free.
How Much Money Do You Have to Have to Open a Fidelity Roth IRA?
There is no minimum investment required to open either a Fidelity retail Roth IRA or a professionally managed Fidelity Go Roth IRA. However, an investor needs to have an account balance of at least $10 in a Fidelity Go Roth IRA for Fidelity to invest money according to the investor’s chosen investment strategy.
The Bottom Line
A Roth IRA, including the kind offered by Fidelity, gives investors certain tax advantages, just like 401(k)s and traditional IRAs. Roth IRAs are unique in that they are funded with after-tax dollars and are not taxed when the funds are withdrawn at a later date. Thus, the returns generated from investing in a Roth IRA are tax-free.
After opening a Roth IRA, the types of investments chosen will depend on the individual investor’s risk tolerance and the amount of time and energy that the investor wants to put into researching various investment options. For those without much time or energy, it’s not unreasonable to go with just a few large and diversified funds,allocating some portion of funds to a broad-based stock fund and another portion to a broad-based bond fund.
But large, diversified funds such as these may also act as a solid foundation for investors who do have extra time and energy toanalyze and evaluate other, perhaps risker, investment options, such as bets on individual companies or investments in niche corners of the markets, such assmall-cap stocks.
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