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Fidelity Index Funds for Beginner

Fidelity Index Funds Tips

We are talking about Fidelity index funds. I know it's been a long time since I've talked about Fidelity index funds, so I'm generally a vanguard kind of guy, especially when it comes to their exchange-traded funds. But as we've talked about in previous videos, you know, Fidelity is a real major player in the indexed mutual fund space, and in this article, I want to break down for the complete beginner out there, you're just starting to invest you're ready to put your money To work and have your money work for you and you want to pick a Fidelity index, you want to pick Fidelity index funds. How do you do it? Well, I'm going to go through it for you here comprehensively in this article.

Fidelity Index Funds Tips

So if you're brand new to investing you're brand new to Fidelity you're even better you're brand new to indexed index funds, then make sure you stick around all the way. To the end of this video guys, it's gonna be comprehensive. We'Re gonna walk through Fidelity's website, look at the options for investing, and if you guys, have any questions or concerns throughout throwing them in the comments below, and I will make sure to answer every single question before we get started here on the computer screen guys. I just want to make sure everyone is clear about what a mutual fund actually is. So a mutual fund is an investment product from an investment company like Fidelity, Vanguard, Schwab, many of them out there, and what they do is allow and many investors to pool their money together.

The average joes out there, along with people who have a lot of money they allow them to pool their money together to purchase a set type of investment, could be stocks, could be bonded could be many different types of things. It could be a combination of them. Actually, and what that does, when you pool large amounts of investors and money together, it allows for diversification and lower costs and lower fees, and then and many times you can pair that with a money manager to help make informed decisions on behalf of the investors. That'S your average mutual fund. The problem with a mutual fund, though, is that many mutual funds have really high expense ratios or how much money that the investment company charges investors to manage it on their behalf and mutual funds can still make you money to be clear, but there's an easier way to do it and that is called index funds.

So an index fund is to be clear, a type of mutual fund, but it doesn't have an active, an aggressive money manager instead of trying, instead of having somebody being paid to not only manage the funds but also to you know strategically pick stocks, they think Are going to do well, instead, with an index fund, you have a very clear objective to match a specific index and when I say index, what I mean is a group of stocks. For example, the s p 500 is an index of the 500 largest u.s companies. Then you've got the NASDAQ composite index. You'Ve got the dow jones.

Fidelity Index Funds Tips

Industrial averages are all indexes of a specific set of stocks, so, instead of trying to beat the s p 500, instead of trying to beat the dow jones set of stocks instead with an index fund you're trying to match the index, just invest your money in exactly Whatever is in the index, and then you match that performance as well, and when you do this with index funds, you're able to then achieve your goals and objectives much more simplistically, much more steadily, and it costs a lot less money with respect to the expense ratios. You know oftentimes with actively managed funds or when you have a money manager, that's trying to make buy and sell decisions to beat the index. Those expense ratios can be north of 0.5, 1, sometimes even as high as 1.5 or 2 percent every single year.

Based on how much money you've invested, however, with an index fund, especially with indexed mutual funds from Fidelity and others, you can invest and the expense ratio is one five percent point zero, two percent, which is such a small amount of money. I mean we're talking at a point: zero one: five percent expense ratio, we're talking 15 cents for every thousand dollars invested. You just can't beat that level of expense ratio. Well, technically, you can, you can do it with zero percent expense ratios we'll get there in a second with indexed mutual funds. You have the ability to invest at a really low cost and still meet your financial objectives because you're just matching the market, and we know that the market over the long term is going to go up over time.

You know it might bounce around a little bit. Go up a little bit down up, but over the long term, when you smooth it out, it goes up. So how does this all tie into Fidelity and specifically Fidelity index funds? I'm glad you asked without further delay here. Let'S go ahead and jump onto my computer screen.

Let me show you how to navigate the Fidelity website and, more importantly, how to pick Fidelity index funds to help you meet your investing and your financial objectives, all right guys. So we're here on my computer screen, we're on the Fidelity website, uh and what I want to show you guys is when you have your own Fidelity brokerage account or ira or Roth ira account, you have the ability to do quite a bit of research and have A variety of options when it comes to Fidelity index funds and again when I say index, I'm talking about indexed mutual funds now so we're here on the Fidelity website, and what you can do here is we can pop over to news and research. Okay and we can go over to mutual funds, and this is going to give us access to the mutual funds' research page. Now it's really easy to get overwhelmed here. So another way to take care of it is.

Instead, you can go to fund strategies. The second tab over they has their zero minimum investment funds. They have top-rated funds, category leaders, sectors, income generation, high-rated funds and there are a few things I want to talk about here. First off, I want to talk about the index funds tab here. So you click on index funds and that's going to lead you down to 407 different indexed mutual funds, not just Fidelity here.

So if we just scroll down here, you'll see that you've got some Fidelity options up here and then we've got all these other ones down. Here now, the reason why they're coded a little bit different here is that Fidelity doesn't necessarily like you, as their customer, to go and buy indexed mutual funds from another company. Another, a big competitor for Fidelity is vanguard so just for an example here, if I scroll down here to vanguard, let's see here the vanguard growth index fund. Okay, so you click on that one you're going to notice that it does have an expense ratio, 0.05 percent, but you'll also notice.

Oh, look at that sucker right there, a 75 transaction fee to buy indexed mutual funds from a company other than Fidelity, and the good news for you is that with Fidelity, you're gonna be able to meet all your objectives and you would not you don't get Charged any type of transaction fee like that to buy Fidel defines as long as you're a Fidelity customer. Now, if you really really really want to buy a non-Fidelity index fund, you can actually do it for free by purchasing an exchange-traded fund from another company such as vanguard or Schwab, or any other company like that. But we don't have to do that here. We'Re talking about indexed mutual funds, specifically right now, we've got options here by clicking on index funds, which you can also do you see, there are 407 different funds, but really when we want to exclude those transaction fees we really want to do. Is click on Fidelity funds?

Only so now, we've limited it to 61 different funds and you'll notice that we've got all these options, but you also got over here the expense ratios we want to, and I'm here to tell you that you can absolutely meet your objectives with really really low expense Ratios: let's go ahead and sort by the lowest expense ratios. Okay, we'll do those highest ones are 0

3 percent: that's really high for an index fund and you'll notice here that Fidelity has four different options here that have a zero percent expense ratio, meaning it costs nothing to buy the index fund, and even better it costs nothing to own it on an annual basis, Whereas many different indexed mutual funds will charge you a nominal fee, very small, two-point: zero .01.02.03, really small amounts to own the fun on a recurring basis.

That'S not the case here with these four different orders called Fidelity, zero-indexed, mutual funds, so we've got the Fidelity zero-extended market, which I'm actually not that big of a fan of we've got the Fidelity, zero international index fund, the Fidelity zero large-cap, which is very similar to the sp, 500 and then we've got the Fidelity, zero total market index fund. So really what I want to talk about and highlight here is there are lots of different options available, but I really want to talk about two different index funds that you're probably going to be something right up your alley, if you're a new investor looking to grow over the Long term, if you're looking for income here soon, if you're looking to retire soon, then this is not the conversation for you. This is not the type of video for you, but what I want to highlight here is the Fidelity 500 index fund. As you can see here, a i x is the ticker symbol, and I also want to talk about the Fidelity total market index fund. F s k a x, so first off I'll talk about this one here.

The pilot 500 index fund is a great option for the brand. New investors are to model the s p 500, which, as we know, is the top 500 us companies that meet the criteria for the index. So companies that you know of like apple on Amazon, Google, Facebook, visa, MasterCard - these are all companies that are part of the s p 500 index. So if you're here on Fidelity's website, you click on the Fidelity 500 index fund just to learn a little bit more about it. You'Ll see here, we've got performance over here.

We'Ve got some of the details here: the expense ratio which is really low, 0.015 percent, which is a market leader with respect to s p 500 index funds. I mean even vanguard's index fund. I think, for the s p. 500. F, no v! F! I a x is 04, the ETF is point zero, three percent. The point is both of those were higher than Fidelity indexed mutual fund here scroll down here, we've got some other things here. We'Ve got the turnover rate, the minimum to invest, meaning there's no required minimum to invest with the s p 500 index fund.

You can start with zero dollars and you can put in you know: 20 30 50 a week a month, whatever you're able to do right. Now you can start with that with Fidelity, there are no minimums, which is different than vanguard, Vancouver does have some minimums you would have to address, but you'll also see the hypothetical growth of ten thousand dollars over a specific period of time, and you can see that this Pretty much matches the index we scroll down further. Here we've got the top 10 holdings and it's going to be what's called a cap-weighted index. Many of the indexed mutual funds are cap-weighted, meaning that the largest companies in the index think apple, Microsoft, Amazon, the largest companies in the index, are going to get the most waiting in the index. More money will be funneled to those companies, as opposed to your small mom and pop, or the smallest companies in the index will get a very small fraction of the investment dollars going into it.

That'S the idea that you continue to buy the companies that are performing the best and you and still invest a little bit, but not a lot in the companies that are growing at a lower level. If you want to deep dive into this fund, you can come in here. Look at the performance and risk. The composition will tell you. The breakdown here. It'Ll show you the breakdown based on different market sectors. The information technology sector is 28 of the fund health care consumer. Discretionary and then, if you go down here, you'll see here, the top 10 holdings represent 27.86 of the index and you've got like apple Microsoft.

Google, like these big companies, represents a significant portion of the index you'll see here when we look at the performance that year to date, even though we have covid that has affected us despite coveting happening, your money would still have been higher. Now your account balance would be higher now than it was at the beginning of the year point five: four percent year-to-date growth one year return is fifteen percent three years, twelve percent five years, fourteen percent and over the last ten years a thirteen percent return. Excellent - and this is with an index fund - this is not where you're day trading, where you are constantly looking at your balances when you are a brand new investor, you're looking to invest in index funds, you're looking to put your money away, set it and forget it, And you can do that with an indexed mutual fund, so if you buy fx aix or if you buy fskax the total market fund, which is a little bit different but we'll get to that in a second, you can just set that money away and not even Look at it because your money is diversified across hundreds of different of the top American companies out there another option here, instead of the Fidelity 500 index fund, you can buy the Fidelity total market index fund. F s k a x, a very similar approach here. Instead of buying just the top 500 companies that are in the s p, 500, instead, the thought process is: let's buy the whole market, not just the top 500 companies.

Let'S buy everything and it's got an expense ratio. That'S still the same one, five percent, which is just ludicrous: how little it costs to own this index fund and again zero dollars minimum to invest. It'S been open since uh 2011. In this index fund, you can see the top 10 holdings are very similar to the s p 500 index fund because it's a cap-weighted fund. So, even though they're buying the entire index, even though they're buying 3 438 different stocks in this index, the top-weighted ones are still the ones that get the most investment dollars, meaning that in many cases, the total market and the s p 500 index fund Are going to almost replicate each other with respect to how they perform over time apple, Microsoft, Amazon, Facebook, these companies, Google, are going to be almost in the exact same positions and almost the exact same weightings and then further down over the thousands of other stocks that They own you get a small little bit of the entire stock market and that's the idea here.

You'Re spreading your money getting a little bit more diversification than you would get with the s. P. 500. And as a brand new investor guy you come in here, you buy a Fidelity, indexed mutual fund, you can just set it and forget it. Just invest in the s p, 500 or just invest in the total market index fund.

Just set your money away and let it grow over time. If you want to get flashy a little bit with doing this, you can buy other aspects of the index. You can buy like the mid-cap index fund or you can buy the small-cap index fund and just kind of layer that, in with the 500 of the total market, just to give yourself exposure to smaller companies and indexes, which tend to historically grow at a Faster Rate than the largest companies in the united states, but you don't have to do that. You can keep it very simple, especially if you're a brand new investor, you can just buy the s p 500 or the total market and just set it and forget it. And keep investing on a recurring basis.

So let's talk about this here, let's say you want to buy the Fidelity total market index you come in here to buy the index fund. You come in here, you can buy with a set dollar amount. You don't have to worry about buying whole shares. You can just say you know what I want to start by buying 500 worth investing 500 into this indexed mutual fund, and you could also set up recurring deposits. One of the best parts about buying Fidelity in the next mutual funds is you have the ability to set up a recurring investment into this index fund.

So let's say you want to buy the s p. 500. Well, you come in here you buy the s p 500 and you can set up a recurring transfer and say that every let's say two weeks. I want to invest 500 from this finder every month. I wanted to invest 250.

You can set it and forget and have the automatic withdrawals coming from your bank account in some cases you can even do direct deposits directly from your paycheck invested into your Fidelity. Roth ira account and it's just set and forget it and you don't have to worry about it. You don't worry about the ups and downs of the stock market. You just continue investing every single day, which is known as dollar-cost averaging just a quick definition. Here, dollar cost averaging is when no matter what's happening.

You continue to invest over time into the same fund and what happens is when the fund is a higher cost. Well, then, you invest less money and when it goes down in value, which is a great time to buy index funds or any type of investment for that matter, you're investing more shares at a lower amount, which means over time smooths out. You are investing efficiently for your future retirement. I know that I mentioned here the s p, 500 m f x, a i x, and the Fidelity total market fund. F s k a x, but I also would be remiss if I didn't talk about Fidelity zero funds.

Now, like I said, validate zero, has zero percent expense ratio, meaning that it costs you nothing to buy nothing to continue to own over time. These investments, which is just crazy, and with that, you can like I show here you've, got four different: Fidelity: zero funds, the in the extended market, I'm actually not a big fan of that one, but the total market and the large-cap. The large-cap is essentially the s p 500, but they don't name it that because then they'd have to pay a lot of money to standard and poor's, or s p, for the naming and the licensing rights so think of the large-cap index fund. As the s p 500, so if you prefer, these are new funds, they don't have a big track record of matching the market, but they've done a pretty good job so far. So if you wanted to invest for zero dollars with respect to any fees or expenses, you can totally buy the Fidelity, zero large-cap index fund or you can buy the Fidelity zero total market index fund.

One quick note here, though, with these two funds: they pay annual dividends instead of quarterly dividends. Like the other two standards. Fidelity index funds do not a big deal, especially for investing long-term for growth, as opposed to any type of income on a recurring basis. So, with Fidelity index funds, you have so many options here, but the ones that make the most sense for the complete beginner out there, the average joe, is to just invest in the s p 500 or the total market, and, like I'm, showing here, we've got the Fidelity zero funds here as well. If you want to take advantage of zero expenses, Fidelity has a great platform.

They have great investments for the average joe to grow their money over time in their retirement accounts or, if they're, potentially interested in investing in a general brokerage account. Let me know guys if you have any questions or concerns, leave your two cents in the comments below. Hopefully, you found some value out of this video here for the average joe investor, it doesn't get much better than low cost, potentially even zero cost Fidelity indexed mutual funds make sure to leave your two cents in the comments below that's all I got for you guys Have a great rest of your day and please continue during this pandemic - to stay healthy, both physically and financially, have a good one.

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