What Fidelity Is and What It Does

Fidelity is a brokerage and financial services company where you can open an investment account, buy and sell stocks and mutual funds, trade options, and hold retirement accounts like IRAs and 401(k)s. You don't have to work for a company that uses Fidelity to open an account there — you can open one on your own as an individual investor.

Fidelity makes money when you trade (though many stock trades now cost nothing), when you hold certain types of investments with them, and when you use their advisory services. The company also acts as a custodian for employer retirement plans and manages money for institutions. For most individual investors, the core experience is the same: you fund an account, place trades through their website or app, and watch your positions.

Fidelity is one of several large brokerages — others include Charles Schwab, E*TRADE, and Interactive Brokers. They all work roughly the same way, though the fees, tools, and account minimums differ.

Key Takeaways

  • You open a Fidelity account online by providing your name, address, Social Security number, and employment information, then link a bank account to fund it.
  • Fidelity holds your cash and securities in your account and lets you buy stocks, mutual funds, ETFs, bonds, and options through their website or mobile app.
  • Most stock trades through Fidelity cost nothing, but mutual funds, ETFs, and options may carry fees depending on the product and whether it is a Fidelity fund.
  • Your account is insured up to $500,000 by the Securities Investor Protection Corporation (SIPC) if Fidelity fails, though this does not protect you from investment losses.
  • You can hold multiple account types at Fidelity — taxable brokerage accounts, IRAs, 401(k)s, and others — each with different tax treatment and withdrawal rules.

Opening a Fidelity Account

To open an account, go to Fidelity's website and click the button to open a new account. You will be asked to choose the account type — a standard taxable brokerage account, an IRA, a 401(k) if you are self-employed, or another type. Each has different tax rules and contribution limits, so pick the one that matches your situation.

Next, you provide your name, date of birth, address, phone number, email, and Social Security number. Fidelity will ask about your employment status and income. This information is required by law so that Fidelity can verify your identity and comply with anti-money-laundering rules.

Once your account is open, you link a bank account so you can transfer money in. Fidelity will ask for your bank's routing number and your account number. You can then move money from your bank to Fidelity (called a deposit) or from Fidelity back to your bank (called a withdrawal). Deposits usually take one to three business days.

How to Buy and Sell Investments

Once you have cash in your Fidelity account, you can place a trade. Log into your account on the website or app, search for the stock or fund you want to buy by its ticker symbol (like AAPL for Apple), and enter the number of shares you want. You then choose the order type — most investors use a "market order," which buys at the current price right away, or a "limit order," which buys only if the price drops to a level you set.

When you place the order, Fidelity sends it to the market and executes it. For stocks, this usually happens in seconds. The shares then appear in your account, and the cash is deducted. To sell, you follow the same steps in reverse: find the holding, enter how many shares to sell, and submit the order.

Fidelity charges no commission on stock trades. However, mutual funds and ETFs may carry fees — some Fidelity funds have no fee, but non-Fidelity funds may charge a transaction fee. Options trades typically cost $0.65 per contract. Always check the fee before you trade.

Understanding Account Types and Tax Treatment

A taxable brokerage account is the simplest. You can deposit and withdraw money whenever you want, buy and sell anything, and there are no contribution limits. However, you pay capital gains tax on profits and dividend tax on income each year, even if you do not withdraw the money.

An IRA (Individual Retirement Account) lets you save for retirement with tax advantages. You can contribute up to a set amount each year (the limit changes annually). With a Traditional IRA, contributions may be tax-deductible, but you pay tax on withdrawals in retirement. With a Roth IRA, contributions are not deductible, but withdrawals in retirement are tax-free. You cannot withdraw money before age 59½ without a penalty, with some exceptions.

A 401(k) is an employer retirement plan, but if you are self-employed, you can open a Solo 401(k) through Fidelity. The contribution limits are much higher than an IRA, and the tax rules are similar to a Traditional IRA.

How Fidelity Keeps Your Money Safe

Fidelity is a registered broker-dealer, which means it is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These agencies set rules about how Fidelity must operate, how it handles customer money, and what it must disclose.

Your account is protected by the Securities Investor Protection Corporation (SIPC), a nonprofit that insures brokerage accounts if the firm fails. SIPC covers up to $500,000 per account, including up to $250,000 in cash. This protection does not cover losses from bad investments — it only covers losses if Fidelity itself goes under and cannot return your securities or cash.

Fidelity also holds customer cash in separate bank accounts and keeps customer securities in segregated accounts. This means your money and investments are kept apart from Fidelity's own money, so if Fidelity has financial trouble, your account is not at risk.

Fees and Costs You Should Know

Stock trades through Fidelity cost nothing. However, other costs exist depending on what you buy and how you trade. Mutual funds may charge an expense ratio — an annual percentage fee that comes out of the fund's value. ETFs also charge expense ratios, usually lower than mutual funds. Fidelity's own funds often have lower expense ratios than competitors' funds.

If you hold a position overnight, you do not pay a daily fee. However, if you buy on margin (borrowing money from Fidelity to invest), you pay interest on the borrowed amount. Options trades cost $0.65 per contract. Some account types, like IRAs, have no annual account fee, though some advisory services do charge.

Fidelity also offers advisory services where a human advisor manages your account for a fee, usually a percentage of assets under management. This is optional — you can manage your own account for free.

Moving Money In and Out

To deposit money, link your bank account and request a transfer from Fidelity's website. The money moves from your bank to Fidelity in one to three business days. You can deposit as much as you want, though Fidelity may ask questions about very large deposits to comply with anti-money-laundering rules.

To withdraw money, request a transfer from your Fidelity account back to your linked bank account. This also takes one to three business days. If you want to withdraw securities instead of cash — for example, to move stocks to another brokerage — you can request a transfer out. Fidelity charges no fee for this, though the receiving brokerage may charge a fee.

If you have a retirement account like an IRA or 401(k), withdrawal rules are stricter. You cannot withdraw before age 59½ without paying a 10% penalty plus income tax, with some exceptions like hardship or disability. Fidelity will explain the rules when you request a withdrawal.

Using Fidelity's Tools and Research

Fidelity provides research tools, stock screeners, and educational content on its website and app. You can read analyst reports, watch videos about investing, and use tools to compare funds. These resources are free for Fidelity account holders.

The Fidelity website and app let you check your account balance, see your holdings, view your transaction history, and set up alerts when a stock price hits a certain level. You can also set up automatic investments — for example, having $500 transferred from your bank and invested in a fund every month.

Fidelity also offers customer service by phone, email, and chat. Account holders can reach support during business hours, and some services are available 24/7.

Frequently Asked Questions

Do I need a minimum amount of money to open a Fidelity account?

No. You can open a Fidelity account with no minimum deposit. However, some specific investments — like certain mutual funds — may have a minimum purchase amount, often $500 or $1,000. You can always start with a small amount and add more later.

Can I have multiple accounts at Fidelity?

Yes. You can open a taxable brokerage account, an IRA, a 401(k), and other account types all under your name at Fidelity. Each account is separate and has its own cash and holdings. This is useful if you want to keep retirement savings separate from taxable investments.

What happens if Fidelity goes out of business?

Your account is insured by SIPC up to $500,000, including up to $250,000 in cash. If Fidelity fails, SIPC will work to return your securities and cash. In practice, this is rare — Fidelity is a large, well-capitalized firm and has not failed.

Can I trade on my phone?

Yes. Fidelity has a mobile app for iPhone and Android where you can check your account, place trades, and transfer money. The app has most of the same features as the website.

How long does it take to buy a stock after I place an order?

For stocks, a market order usually executes in seconds during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after market hours or on a weekend, it will execute when the market opens. Limit orders may take longer or not execute at all if the price never reaches your limit.