How to invest in a Fidelity Roth IRA

To invest in a Fidelity Roth IRA, you first open an account on Fidelity's website or by phone, then transfer or deposit money into it, and finally choose what to buy with that cash. Fidelity holds the account itself; you decide what investments go inside it. The investments available to you include individual stocks, mutual funds, exchange-traded funds (ETFs), bonds, and money market funds — all through the same Fidelity login. You can set up automatic monthly deposits, make one-time contributions, or do both. The money sits in a settlement account (usually a money market fund) until you direct it into a specific investment.

The process differs slightly depending on whether you are opening a new account or adding to an existing one. If you already have a Fidelity Roth IRA, you log in, deposit money, and invest it when ready. If you are starting from scratch, you will create the account first, which takes about 10 minutes online, then fund it, then invest.

Key Takeaways

  • You must open a Fidelity Roth IRA account before you can invest; opening takes about 10 minutes online and requires your Social Security number, date of birth, and address.
  • Money deposited into your Roth IRA sits in a settlement account until you actively choose an investment, so depositing and investing are two separate steps.
  • Fidelity offers stocks, mutual funds, ETFs, bonds, and money market funds; you can hold any combination of these in a single account.
  • You can contribute up to $7,000 per year to a Roth IRA (as of 2024), or $8,000 if you are age 50 or older, and you must have earned income to contribute at all.
  • Contributions can be made any time during the year or up to the tax filing important date of the following year, typically April 15.

Opening a Fidelity Roth IRA account

Go to Fidelity.com and select "Open an account" or call 1-800-343-3548 to open by phone. The online process asks for your name, Social Security number, date of birth, address, employment status, and income. Fidelity will verify your identity, which usually takes a few minutes but can take up to one business day. Once approved, you can log in when ready and see your account number.

You do not need to fund the account on the day you open it. Many people open the account first, then transfer money from their bank later. If you already have a Fidelity brokerage account or a 401(k) with Fidelity, opening a Roth IRA is faster because Fidelity already has your information on file.

Funding your Roth IRA with money to invest

After your account is open, you move money into it from your bank account. Fidelity offers three ways to fund: electronic transfer (also called ACH), wire transfer, or check by mail. Electronic transfer is the most common and usually takes one to three business days. Wire transfer is faster — typically same day — but may have a fee. Check by mail is slowest, taking five to seven business days.

To set up an electronic transfer, log into your Fidelity account, go to "Accounts & Trade," select "Transfers," and choose "Transfer money in." You will enter your bank's routing number and your account number, then the amount. Fidelity will send two small deposits to your bank account to verify you own it; you confirm those amounts back in Fidelity, and the link is permanent. After that, you can transfer money whenever you want.

If you want money to arrive faster, you can link your bank account for wire transfer instead. Wire transfers cost $0 at Fidelity for incoming transfers, so there is no fee to use this method. You will need your bank's wire routing number, which is different from the ACH routing number.

Choosing investments after money arrives

Once money lands in your Roth IRA, it sits in a settlement account (usually Fidelity Government Money Market Fund) and earns a small amount of interest. This is not an investment choice — it is straightforward where cash waits. To actually invest, you log in and place an order to buy a specific investment: a stock, a mutual fund, an ETF, or a bond.

If you are buying a mutual fund or ETF, search for it by name or ticker symbol, enter the dollar amount you want to spend, and confirm. The order executes when ready during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after hours or on a weekend, it executes the next market open. If you are buying individual stocks, the process is identical: search the ticker, enter the number of shares or the dollar amount, and confirm.

Fidelity offers thousands of mutual funds and ETFs, including many with no transaction fee. You can also buy stocks with no commission. Some mutual funds charge a fee if you sell them within a certain time period (called a short-term redemption fee), so read the fund details before you buy if you think you might sell quickly.

Setting up automatic monthly contributions

If you want to invest the same amount every month, you can set up an automatic transfer and automatic investment. First, link your bank account for electronic transfer (described above). Then, in your Fidelity account, go to "Accounts & Trade," select "Transfers," and choose "Set up recurring transfer." Enter the amount and the day of the month you want the transfer to happen.

The transfer brings money into your settlement account, but it does not automatically buy an investment. To make that automatic, you set up a separate instruction called a "systematic investment plan" or SIP. Go to the investment you want to buy (a mutual fund or ETF), select "Buy," and choose "Set up automatic investment." Enter the dollar amount and the frequency — usually monthly on the same day as your transfer. From then on, the money transfers in and when ready buys that investment on the same day each month.

You can set up automatic investments in multiple funds or stocks. For example, you could have $500 transfer in on the 15th of each month, with $300 automatically buying a stock index fund and $200 buying a bond fund. You can change or stop automatic investments at any time without penalty.

Understanding contribution limits and important date

The IRS sets a yearly limit on how much you can contribute to a Roth IRA. For 2024, the limit is $7,000 per year if you are under age 50, or $8,000 if you are 50 or older. This limit is the same whether you contribute all at once or spread it across the year. You cannot contribute more than your earned income for that year — if you earned $4,000, you can only contribute $4,000 to a Roth IRA, even if the limit is higher.

You can contribute for the current year anytime during that year, or up to the tax filing important date of the following year, which is usually April 15. For example, you can make 2024 contributions anytime from January 1, 2024, through April 15, 2025. Fidelity will ask you which tax year the contribution is for when you make it, so you can contribute for 2024 even if you are making the deposit in early 2025.

The contribution limit changes each year based on inflation. The IRS announces the new limit in October or November for the following year. Fidelity will show you your current contribution limit and how much you have already contributed in the current year when you log in.

Monitoring and rebalancing your investments

After you have invested money, you can see your holdings anytime by logging into Fidelity and viewing your account. Fidelity shows you the current value of each investment, how much you paid for it, and your gain or loss. You can also see your total account value and a breakdown by investment type.

Over time, some investments may grow faster than others, which means your account is no longer split the way you intended. For example, if you started with 50% in stocks and 50% in bonds, but stocks grew faster, you might now have 60% stocks and 40% bonds. Rebalancing means selling some of the investments that have grown and buying more of the ones that have not, to get back to your original split. Rebalancing in a Roth IRA has no tax cost, unlike in a regular taxable account, so you can rebalance as often as you want.

To rebalance, log in, sell the investments you want to reduce (the proceeds go to your settlement account), and then buy the investments you want to increase. You can do this manually each time, or you can use Fidelity's "Automatic Rebalancing" feature, which rebalances on a schedule you set — for example, quarterly or annually.

Frequently Asked Questions

Can I invest in individual stocks in a Fidelity Roth IRA?

Yes. Fidelity allows you to buy individual stocks with no commission. Search for the stock by ticker symbol, enter the number of shares or dollar amount you want to buy, and confirm. You can hold any number of individual stocks in a single Roth IRA account alongside mutual funds and ETFs.

What happens if I contribute more than the yearly limit?

The excess contribution is subject to a 6% penalty tax each year it remains in the account. You can remove the excess and the earnings on it before your tax return is due (usually April 15 of the following year) to avoid the penalty. Contact Fidelity or a tax professional if you over-contribute; Fidelity can help you identify and remove the excess.

Can I move money from a 401(k) or traditional IRA into a Fidelity Roth IRA?

You can convert a traditional IRA to a Roth IRA, but the conversion is taxable — you owe income tax on the amount converted. You can also roll over a 401(k) to a Fidelity IRA (traditional or Roth), but a Roth conversion is taxable. Speak with a tax professional before converting, because the tax bill can be substantial.

Do I have to invest the money right away, or can it sit in the settlement account?

The money can sit in the settlement account indefinitely. It earns a small amount of interest, but it is not invested in stocks or bonds. Many people keep some money in the settlement account as an emergency reserve within their Roth IRA, then invest the rest.

Can I buy mutual funds from other companies inside a Fidelity Roth IRA?

Yes, but Fidelity charges a transaction fee for most non-Fidelity mutual funds. Fidelity mutual funds and most ETFs have no transaction fee. Before you buy a mutual fund from another company, check whether Fidelity charges a fee and how much it is.