With the rise of robo-advisors and automation in investing, more investors are looking to set up automatic investments to grow their wealth passively over time. Fidelity offers a range of tools to help investors automate their investment plans and take the hassle out of manually contributing to investment accounts. In this comprehensive guide, we will walk through the step-by-step process for how to set up automatic investments with Fidelity across various account types.
By taking advantage of Fidelity’s automated investing capabilities, you can put your investment strategy on autopilot and reap the benefits of dollar cost averaging, automatic rebalancing, and hassle-free contributions. Consistent automatic investing helps remove emotion from the equation and keeps you invested throughout market ups and downs. This hands-off approach is ideal for beginning investors or those seeking simplicity in their investment strategy. Let’s explore the specifics of getting started with automated investing at Fidelity.
Determine your investment goals and risk tolerance for automated investing
The first step in setting up an automated investment plan is gaining clarity on your financial goals, time horizon, and risk tolerance. Consider questions like: What are you investing for? (e.g. retirement, education funds, etc) What is your target investment timeframe? How much risk are you comfortable taking on? Your answers will help guide critical decisions like which Fidelity accounts to invest in, your target asset allocation and funds to invest in. Those new to investing should start by taking Fidelity’s risk tolerance questionnaire online to gain insights on their risk profile. It’s important to choose a risk level you can stick with through market ups and downs when investing automatically for the long haul.
Decide on which Fidelity accounts to use for automated investing
Fidelity offers automated investing options across their range of brokerage accounts and retirement accounts like IRAs. The right account will depend on your goals, time horizon and tax considerations. Here is a brief overview:
– Fidelity Go accounts: Fidelity’s robo-advisor offers automated investing and rebalancing tailored to your goals. Ideal for hands-off investors.
– Individual brokerage: Allows automatic investments in stocks, ETFs, mutual funds. Best for medium or long term goals. Offers flexibility but no tax advantages.
– Traditional IRA: Tax deferred growth and automated retirement investing. Best for retirement goals.
– Roth IRA: Tax free growth and automated retirement investing. Best for retirement goals if eligible to contribute.
For long term retirement investing, IRAs can be advantageous due to tax deferred or tax free growth. For other medium term goals, individual brokerage accounts offer more flexibility. Fidelity Go is best for beginners seeking totally automated investing.
Select your target asset allocation and funds for automated investing
Once you decide on the right Fidelity account(s), it’s time to select your target asset allocation across stocks, bonds and other asset classes. This will depend on your risk tolerance and goals. Common starting points are a 60/40, 70/30 or 80/20 stock/bond allocation. Fidelity provides guidance on model portfolios for your risk level.
Next, choose low cost Fidelity mutual funds and ETFs to fulfill your asset allocation. For hands-off investors, target date index funds or Fidelity Go’s pre-built portfolios are great options requiring no maintenance. More involved investors can build a custom portfolio with specific funds for each asset class like US stocks, international stocks, bonds and alternatives.
Set up automatic contributions from your bank account
Now for the most important step – setting up automated contributions from your bank account to your Fidelity investment account(s). You can decide the amount, frequency (weekly, monthly etc) and which day of the month. Consistent contributions allow you to efficiently dollar cost average into the market over time.
Log in to your Fidelity account online and navigate to the ‘Move Money’ section. Follow the steps to link your bank account. Then set up automatic withdrawals to your investment account on your desired schedule. Be sure to ‘Invest Using Model’ to enable automated investing based on your allocation.
By following this step-by-step process, you can take the guesswork and hassle out of investing for the long run. Automatic investing with Fidelity allows you to put your investment plan on autopilot. You reap the benefits of consistent investing, dollar cost averaging and automatic rebalancing tailored to your goals over time. Remove emotion and stay the course through up and down markets.