How to start investing in index funds at Fidelity

To invest in index funds through Fidelity, you open a brokerage account, fund it with money, and then buy index fund shares through Fidelity's website or app. The process takes about 15 minutes to set up, though funding the account and waiting for the money to settle adds a few business days before you can actually buy anything.

Fidelity offers three main account types for index fund investing: a standard taxable brokerage account (called a Cash Management Account or regular brokerage account), a traditional IRA, or a Roth IRA. Which one you choose depends on whether you want tax advantages now, in retirement, or neither. Most people starting out use a regular brokerage account because there are no contribution limits and no age restrictions.

Once your account is open and funded, you search for the index fund you want by its ticker symbol (for example, FSKAX for Fidelity's S&P 500 index fund), enter the dollar amount or number of shares you want to buy, and confirm the order. The purchase happens when ready during market hours, though the settlement — when the shares officially become yours — takes two business days.

Key Takeaways

  • You can open a Fidelity brokerage account online in about 15 minutes using your Social Security number, address, and employment information.
  • Fidelity's own index funds (ticker symbols starting with F, like FSKAX) have no minimum investment amount, while some other index funds require $1,000 or more to start.
  • You fund your account by linking a bank account and transferring money, which takes one to three business days to arrive and another two days to settle before you can invest.
  • Index funds at Fidelity can be bought in a regular taxable account, a traditional IRA, or a Roth IRA, each with different tax treatment.
  • Once you buy an index fund, you own it until you sell it; Fidelity charges no commission on index fund trades.

Opening a Fidelity brokerage account

Go to Fidelity.com and click "Open an Account" at the top of the page. You will choose between a regular brokerage account, an IRA, or other account types. For most people starting out, a regular brokerage account is the simplest choice because you can invest any amount and withdraw money anytime without penalties.

Fidelity will ask for your full name, date of birth, Social Security number, address, phone number, and employment status. You will also confirm that you are a U.S. citizen or resident alien and agree to their terms. The whole process takes about 10 to 15 minutes. Fidelity may ask you to verify your identity by uploading a photo of your driver's license or passport.

Once your account is approved — usually within a few hours — you will receive a confirmation email with your account number. You do not need to wait for anything physical to arrive in the mail to start using the account online.

Linking your bank account and funding your investment account

After your account opens, you need to add money to it. Log into your Fidelity account, go to the "Accounts & Trade" section, and look for "Transfer Funds" or "Add Money." Fidelity will ask you to link a bank account by entering your bank's routing number and your account number, or by signing in to your bank directly through Fidelity's find connection.

Once your bank account is linked, you can transfer money from your bank to Fidelity. You choose the amount and the date. The money typically arrives in one to three business days. After it arrives, Fidelity holds it in a cash sweep account (usually earning a small amount of interest) for two business days while the transfer settles. Only after settlement can you use that money to buy index funds.

If you want to invest faster, some employers offer direct deposit to Fidelity accounts, which skips the bank transfer step entirely. You can also mail a check to Fidelity, though that takes longer.

Finding and buying an index fund

Once your cash has settled, you are ready to buy. Log into Fidelity and go to the "Trade" or "Invest" section. Search for the index fund you want by its ticker symbol. Fidelity's own index funds are straightforward to spot because their symbols start with F — for example, FSKAX (Fidelity S&P 500 Index Fund), FSTMX (Fidelity Total Stock Market Index Fund), or FXAIX (Fidelity S&P 500 Index Fund in another share class).

Click on the fund name to see its details: the expense ratio (what it costs you per year), the fund's holdings, and its performance history. Then click "Buy" or "Trade." Fidelity will ask whether you want to buy a dollar amount (for example, $500) or a specific number of shares. Most people choose a dollar amount because it is simpler. Enter the amount, review the order, and click "Submit" or "Confirm."

Your 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 market hours or on a weekend, it will execute at the next market open. The shares settle two business days later, but you can see them in your account right away.

Understanding Fidelity's index fund options

Fidelity offers its own index funds with no minimum investment and no commission. These are usually the cheapest option because Fidelity does not charge you to buy or sell them. Common ones include FSKAX (S&P 500), FSTMX (total U.S. stock market), FTIHX (total international stock market), and FXNAX (total bond market).

Fidelity also lets you buy index funds from other companies, like Vanguard or iShares. These funds may have minimum investment amounts (often $1,000 or $2,500 to start) and may charge a commission when you buy or sell them. Unless you have a specific reason to buy a non-Fidelity fund, Fidelity's own index funds are usually the better choice for beginners.

Pay attention to the expense ratio, which is listed as a percentage. Fidelity's index funds typically charge between 0.03% and 0.20% per year, meaning you pay $3 to $20 per year for every $10,000 invested. This is deducted automatically from your fund's value.

Choosing between account types

A regular brokerage account has no contribution limits, no age restrictions, and no penalties for withdrawing money. You pay taxes on any gains when you sell the fund. This is the simplest choice for most people.

A traditional IRA lets you deduct your contributions from your taxes in the year you make them (if you meet income limits), but you pay taxes on withdrawals in retirement. You cannot withdraw money before age 59½ without a penalty, except in specific situations. The contribution limit for 2024 is $7,000 per year (or $8,000 if you are 50 or older).

A Roth IRA does not give you a tax deduction now, but your withdrawals in retirement are tax-free. You can withdraw contributions (not earnings) anytime without penalty. The contribution limit is the same as a traditional IRA. A Roth is often better if you expect to be in a higher tax bracket in retirement.

If you are unsure which account type fits your situation, start with a regular brokerage account. You can always open an IRA later and move money into it through a process called a rollover.

What happens after you buy

Once you own index fund shares, you do not have to do anything. The fund automatically rebalances itself to stay aligned with its index, and you receive any dividends the fund pays (usually quarterly). Fidelity can automatically reinvest those dividends back into the fund, which means you buy more shares without spending extra money.

You can check your account balance anytime through Fidelity's website or app. You can also set up automatic investments: Fidelity will transfer money from your linked bank account on a schedule you choose (weekly, monthly, or quarterly) and buy the index fund automatically. This is called dollar-cost averaging and is a common way to invest steadily over time.

If you want to sell your index fund shares later, you go to the "Trade" section, search for the fund, click "Sell," enter the number of shares or dollar amount, and confirm. The sale executes when ready during market hours, and the money settles in your account two business days later.

Frequently Asked Questions

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

No. Fidelity does not require a minimum balance to open an account. However, some index funds (particularly those from other companies) have minimum investments of $1,000 or more. Fidelity's own index funds have no minimum, so you can start with any amount.

Can I buy index funds in a Fidelity IRA?

Yes. You can open a traditional IRA or Roth IRA at Fidelity and buy the same index funds inside it. The process is identical to a regular brokerage account, except the account type determines the tax treatment of your contributions and withdrawals.

What is the difference between FSKAX and FXAIX?

Both track the S&P 500, but FSKAX is Fidelity's mutual fund version and FXAIX is the exchange-traded fund (ETF) version. For most investors, they perform nearly identically. FSKAX is slightly simpler if you are buying through Fidelity's website because you can invest any dollar amount. FXAIX trades in whole shares only, like a stock.

How long does it take to start investing after I open my account?

Opening the account takes 15 minutes. Funding it takes one to three business days for the money to arrive, plus two more business days for it to settle. So the fastest timeline is about five business days from account opening to your first purchase. If you use direct deposit from your employer, it can be faster.

Does Fidelity charge me to buy or sell index funds?

Fidelity charges no commission on its own index funds or on most other mutual funds and ETFs. Some funds from other companies may have a commission, but Fidelity's index funds are commission-free.