Fidelity Investments: A Comprehensive Review

Founded in 1946, Fidelity Investments is based in Boston and is one of the largest asset managers in the world, managing $5.3 trillion as of March 2024. In this review, we will describe how Fidelity Investments has managed to garner such high ratings by financial experts and compare it with its competitors: Vanguard and Schwab.

Key Features

1. Free trades on stocks, ETFs, mutual funds, and options.
2. No minimum deposit requirement.
3. Various account types available (401(k), 529, IRA, HSA, etc.)
4. Strong educational resources and research tools.
5. Competitive fee structure and order execution.

Who Should Use Fidelity?

Fidelity is great for the following types of investors:

1. Beginners, due to excellent educational resources
2. Investors with little money to start with since there isn’t a minimum investment requirement
3. Fundamental investors with excellent research tools
4. Swing traders who need solid order execution
5. Investors who are saving for retirement

Strengths

1. Fees — Since it charges no commissions and has eliminated most other account-related fees, investors can keep more of their money.
2. Order execution – FDLM enables price improvement.
3. Investor education – excellent for all types of investors
4. Research – options to sift and sort through investments
5. Perks – Fidelity Zero funds, rewards credit card, brick and mortar locations, seminars

Weaknesses

1. Fund pricing range, compared to others in the industry – If you are an active day trader or into cryptocurrencies, this might not be the best option for you.
2. Cash management account interest—Fidelity pays competitive rates, but they are still far below high-yield savings accounts.
3. Platform complexity—Too many platforms for too many different types of investors may be overwhelming.
4. Allowing Bitcoin in retirement accounts—While this can be seen as a positive, some financial experts are concerned that Bitcoin is just too speculative, even for most alternative investment lovers.

Fidelity Zero Index Funds

Fidelity’s four zero-fee index funds have no minimum investment:

1. Large Cap Index Fund (FNILX)
2. Total Market Index Fund (FZROX)
3. International Index Fund (FZILX)
4. Extended Market Index Fund (FZIPX)

Things to think about with the Zero funds:

1. The tax consequences if you put these in a non-retirement account
2. Overall fund offerings compared to industry competitors
3. The whole picture and possibly transferring investments for a price

Additional Benefits:

1. Rewards Visa Signature Card
2. Up to 2% cashback on everything with no annual fee
3. Cash back can be invested directly in your
4. Fidelity accounts Poorer benefits if redeemed into other types of Fidelity accounts

Investor Education

There are hundreds of resources located in Fidelity’s Learning Center:

1. Articles, podcasts, videos, and webinars
2. In-person assistance and third-party publishing
3. Tailored content for various investor types
4. Regular webinars and on-demand learning tools

Other Features:

1. 216 physical locations across 38 states and Washington D.C.
2. Robo-Advisor: Priced to compete and with no underlying expense ratios
3. Financial Advisors: Fiduciary advisors are available, with enhanced services for the high net worth
4. Target Date Funds: We only used the “index” versions
5. Cash Management Account: Bank account available with competitive terms

Frequently Asked Questions

Q: Can I use Fidelity as my bank?

A: Fidelity does have cash management accounts that include free checking, ATM access, and up to $5 million in FDIC insurance.

Q: What types of financial advisors does Fidelity offer?

A: Fidelity offers fiduciary advisors, including premium services with higher asset levels. However, some feel better about the hybrid robo-advisor offerings at Vanguard and Schwab.

Q: What’s the right target date fund for me?

A: Consider Fidelity Freedom Index funds, as the expense ratios are much lower in comparison to their non-indexed editions.

Conclusion

In summary, if you are looking for a top-of-the-line brokerage services platform, then Fidelity Investments is the way to go. It has a unique added value offer to every investor, from young and old! To that effect, Fidelity also offers a collection of educational resources and research tools within reasonable pricing.

Just like all other similar platforms, there could be room for improvements at Fidelity. But that being said, Fidelity’s overall platform is hard to beat. The firm is best in class for commission-free trades, account types, and innovation with its Fidelity Zero funds. Moreover, the new Visa Signature Card from Fidelity Rewards throws in something extra for investors who are willing to turn cash back around and reinvest it directly into Fidelity accounts.

While specialized investors, such as day traders or those interested in cryptocurrencies, may find more accurately tailored platforms elsewhere, the general appeal of Fidelity and its lack of any big weaknesses make it one of the best all-purpose brokerages in the U.S. Whether you are beginning your investment journey or already have a diverse portfolio, Fidelity Investments is very unique in placing targeted tools, resources, and services, at your disposal, to help you succeed and reach your financial goals.

Acknowledgment: This article was inspired by and includes information from "Fidelity Investments Review: Pros & Cons" published on Clark.com. For more detailed insights, you can read the full article here.