Fidelity Roth IRA fund options
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FMR LLC, doing business as Fidelity, provides a range of financial services, including investment management, brokerage, financial planning and wealth management. The company, which was founded as Fidelity Management & Research in 1946, serves individual and institutional clients worldwide. Fidelity has approximately $11.1 trillion in assets under administration (AAU), $4.2 trillion over which the company has discretionary control, as of September 30, 2021. The company’s family of funds includes hundreds of mutual funds and exchange-traded funds (ETFs).
Fidelity, as part of its business, is a full-service brokerage firm that earns commissions for providing investment management, research and analysis services to its clients. The company also offers discount brokerage services, including commission-free trading for online US stocks, ETFs and options trading.
Investors in the United States have access to several tax-efficient savings plans, including 401(k), Individual Retirement Accounts (IRAs), and Roth IRAs. The main difference between a Roth IRA and a traditional IRA is that the former is funded with after-tax dollars, which means contributions are not tax deductible as they are with the latter. But unlike a traditional IRA where funds withdrawn are taxed, a Roth IRA allows investors to withdraw funds tax-free.
Key points to remember
- Fidelity was founded in 1946, has hundreds of its own mutual funds and ETFs available, and has approximately $11.1 trillion in assets under administration.
- When setting up a retirement account, a large stock fund and a large bond fund are a good foundation, either as a single base to invest in or to build on to more complex investments.
- Roth IRAs allow investors to avoid paying taxes on investment returns by investing the after-tax income now.
- Fidelity Total Market Index Fund (FSKAX) and Fidelity US Bond Index Fund (FXNAX) are two options to consider when looking for Fidelity Roth IRA investments.
Below, we take a closer look at one of Fidelity’s broad-based equity funds and one of its broad-based bond funds. Data is as of March 1, 2022, except for holdings data which is as of January 1, 2022.
- Expense ratio: 0.015%
- Assets under management: $1.3 billion
- Total return over 1 year: 7.5%
- Rolling 12-month yield (TTM): 1.25%
- Date of creation: November 5, 1997
FSKAX is a mutual fund that seeks to replicate the performance of a wide range of US stocks, as represented by its index, the Dow Jones US Total Stock Market Index. The fund, which invests at least 80% of its assets in common stocks included in the index, is managed by Deane Gyllenhaal, Louis Bottari, Peter Matthew, Robert Regan and Payal Gupta. Their terms in the fund range from 2.6 to 13.1 years. The fund’s 3,964 holdings include both value and growth stocks of large-cap US-based companies.
A broad-based equity fund like FSKAX carries a certain degree of risk, but it also offers investors some pretty strong growth opportunities. For many investors, this mutual fund can serve as the foundation for a well-diversified investment portfolio. However, for those with a very low tolerance for risk or nearing retirement, a more income-oriented portfolio may be a better option.
- Expense ratio: 0.025%
- Assets under management: $57.7 billion
- Total return over 1 year: -2.0%
- Rolling 12-month yield (TTM): 1.86%
- Date of creation: March 8, 1990
FXNAX is a mutual fund that seeks to track the performance of the Bloomberg Barclays US Aggregate Bond Index, which is comprised of investment grade US bonds and other debt securities. The fund, which invests at least 80% of its assets in the securities included in the index, is managed by Brandon C. Bettencourt and Richard Munclinger. Their tenure on the fund ranges from 1.3 to 7.7 years. Of the fund’s 8,317 holdings, 39.5% are US Treasuries, 26.7% are pass-through mortgage-backed securities (MBS), 25.2% are corporate bonds and other 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 rating of BBB or better.
A broad based bond or fixed income fund like FXNAX is generally less risky than an equity fund. However, bond funds do not offer the same growth potential as equity funds, which generally means lower returns. They can be useful investment tools both for medium-risk investors and as part of a portfolio diversification strategy. Consistent with modern portfolio theory, risk-averse investors will find that investing in a bond fund such as FXNAX in combination with a broad-based equity fund provides a degree of diversification that maximizes the investor’s portfolio returns while while minimizing its risks.
Is Fidelity a good Roth IRA?
Fidelity offers investors a wide range of low-cost investment options to choose from for their Roth IRA. Investors have the option of having their accounts managed by Fidelity professionals or managing 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 ETFs, US stocks and options without commission fees.
Does Fidelity Roth IRA have fees?
Opening a Fidelity Roth IRA is free and there are no annual fees. However, a $50 fee may apply to close an account. Investments held in the Account may be subject to other fees, such as management, low balance and short-term trading fees. Plus, online trading in US stocks, ETFs, and options is commission-free.
How much money do you need to have to open a Fidelity Roth IRA?
No minimum investment is required to open a Fidelity retail Roth IRA or a professionally managed Fidelity Go Roth IRA. However, an investor must have an account balance of at least $10 in a Fidelity Go Roth IRA for Fidelity to invest money in accordance with the investor’s chosen investment strategy. In order to be eligible for personalized planning and advice from Fidelity Roth IRA, an investor must invest and maintain a minimum of $25,000 in total across all of these accounts.
The essential
A Roth IRA, including the type offered by Fidelity, offers 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 by investing in a Roth IRA are tax-exempt. After opening a Roth IRA, the types of investments chosen will depend on the individual investor’s risk tolerance and the time and energy the investor wishes to spend researching various investment options. . For those who don’t have a lot of time or energy, it’s not unreasonable to use only a few large and diversified funds, allocating part of the funds to a broad-based equity fund and another party to a broad based bond fund. But large, diversified funds like these can also provide a solid foundation for investors who have more time and energy to analyze and evaluate other, perhaps riskier, investment options such as bets. on individual companies or investments in market niches. markets such as small cap stocks.