Fidelity Investments is a financial company that holds and manages money for individual investors

Fidelity Investments is a privately held company that lets you open an account to buy stocks, bonds, mutual funds, and exchange-traded funds (ETFs). You deposit money into your account, and Fidelity holds it while you decide what to invest in. The company makes money by charging you fees — either a flat monthly fee, a percentage of what you have invested, or a commission when you buy or sell. Fidelity also offers retirement accounts like IRAs and 401(k) rollovers, and it provides brokerage services to people who already have workplace retirement plans.

Fidelity is not a bank, and it does not lend you money or take deposits the way a bank does. It is a brokerage firm — a middleman between you and the financial markets. When you place an order to buy 100 shares of a company, Fidelity executes that order and keeps a record of what you own. Your money and investments are held in your name, and Fidelity is required by law to keep them separate from its own money.

Key Takeaways

  • Fidelity is a brokerage firm where you open an account, deposit money, and buy investments like stocks and mutual funds.
  • You pay Fidelity through account fees, trading commissions, or a percentage of your assets under management, depending on the account type.
  • Fidelity offers retirement accounts (IRAs, rollovers) and regular taxable investment accounts, each with different rules about when you can withdraw money.
  • Your investments are held in your name and protected by law, but the value of what you own rises and falls with the market.
  • Fidelity is one of several large brokerages; others include Vanguard, Charles Schwab, and E-Trade, and they operate similarly.

How you open an account and deposit money

To start, you visit Fidelity's website or call their phone line and choose the type of account you want. The most common choice for a beginner is a taxable brokerage account — you can deposit any amount, withdraw it anytime, and there are no income limits. You will need to provide your Social Security number, address, and employment information so Fidelity can verify your identity and comply with federal anti-money-laundering rules.

Once your account is open, you link a bank account and transfer money into it. This usually takes one to three business days. The money sits in a cash position in your Fidelity account until you decide to invest it. You can then place an order to buy a specific stock, fund, or bond. Fidelity executes the order during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays when the stock market is open), and the investment appears in your account.

The difference between a taxable account and a retirement account

A taxable brokerage account has no restrictions on how much you can deposit or when you can withdraw money. However, when you sell an investment for a profit, you owe capital gains tax on that profit. If you hold the investment for more than one year before selling, you pay a lower long-term capital gains rate; if you sell within one year, you pay your ordinary income tax rate. Fidelity sends you a tax form (1099-B) each year listing your sales and gains.

A retirement account — such as a Traditional IRA or Roth IRA — has strict rules about when you can withdraw money without penalty. In a Traditional IRA, you can deduct your contributions from your taxes in the year you make them, but you must start taking withdrawals at age 73 (as of 2023), and withdrawals are taxed as ordinary income. In a Roth IRA, you contribute after-tax money, your investments grow tax-free, and you can withdraw them tax-free after age 59½ — but you cannot withdraw the earnings before that age without a penalty. Fidelity holds these accounts and enforces the withdrawal rules.

What fees Fidelity charges and how they vary

Fidelity's fee structure depends on the type of account and how you invest. For a basic taxable brokerage account where you buy individual stocks or ETFs, Fidelity charges no commission per trade — you pay nothing when you buy or sell. However, if you buy certain mutual funds, Fidelity may charge a transaction fee (typically $49.95 per trade) unless the fund is on Fidelity's no-transaction-fee list.

If you use Fidelity's advisory services — where a financial advisor manages your account for you — you pay an annual fee based on a percentage of your assets, typically ranging from 0.35% to 1% per year. For example, if you have $100,000 invested and pay 0.5%, you pay $500 per year. Some Fidelity accounts also charge a monthly account maintenance fee if your balance falls below a certain threshold, though this is waived for many account types. Always review the fee schedule for your specific account type before you open it.

How your money is protected if Fidelity fails

Your investments and cash held at Fidelity are protected by the Securities Investor Protection Corporation (SIPC), a government-backed insurance program. SIPC covers up to $500,000 per account if Fidelity goes out of business or cannot return your securities and cash. This protection applies to each separate account you hold at Fidelity — so if you have both a taxable account and an IRA, each is covered up to $500,000.

SIPC does not protect you against market losses. If you buy a stock for $10,000 and it drops to $5,000, SIPC does not reimburse you the $5,000 loss — that is the risk of investing. SIPC only protects you if Fidelity itself fails and cannot return your money or securities. Additionally, Fidelity carries additional insurance beyond SIPC for certain account balances, so check their website for the current coverage limits.

How Fidelity compares to other brokerages

Vanguard is similar to Fidelity but is structured as a mutual company owned by its clients rather than by outside shareholders. Vanguard is known for low-cost index funds and is often cheaper for long-term investors who buy and hold. Charles Schwab is another large brokerage that offers commission-free trading and is known for good customer service and educational resources. E-Trade and Robinhood are brokerages aimed at active traders, with mobile apps and real-time data.

All of these companies operate the same basic way: you open an account, deposit money, and buy investments. The main differences are the fees they charge, the investment options they offer, the quality of their research tools, and the level of customer support. Fidelity is one of the largest and oldest, which means it has a wide range of investment options and generally reliable customer service, but it may not be the cheapest option for every investor.

What happens when you want to withdraw your money

In a taxable account, you can sell any investment and withdraw the cash anytime. You place a sell order during market hours, Fidelity executes it, and the cash appears in your account within one to three business days. You can then transfer it back to your bank account. There is no penalty for withdrawing from a taxable account, though you will owe taxes on any gains you realized when you sold.

In a retirement account, the rules are stricter. If you withdraw money before age 59½ from a Traditional or Roth IRA, you typically owe a 10% early withdrawal penalty plus income tax on the amount withdrawn (except for certain exceptions, such as a first-time home purchase or medical hardship). At age 73, you are required to take a minimum withdrawal each year from a Traditional IRA, calculated by Fidelity based on your age and account balance. If you do not take the required minimum distribution, you owe a 25% penalty on the amount you should have withdrawn.

Frequently Asked Questions

Can I lose all my money if I invest through Fidelity?

Yes, if you invest in individual stocks or other securities, the value can drop to zero and you can lose your entire investment. However, Fidelity itself cannot take your money — SIPC insurance protects your cash and securities if Fidelity fails. The risk is market risk, not company risk.

Does Fidelity report my investments to the IRS?

Yes. Fidelity sends you a 1099-B form each year listing all the sales you made and the gains or losses. If you earned dividends or interest, you receive a 1099-DIV or 1099-INT form. You report these on your tax return. Fidelity also reports this information directly to the IRS.

What is the minimum amount I need to open a Fidelity account?

Fidelity has no minimum deposit requirement for most taxable brokerage accounts. However, some retirement accounts or advisory services may have minimums. Check the specific account type you are interested in before opening.

Can I move my money to a different brokerage later?

Yes. You can transfer your investments and cash to another brokerage through a process called an ACAT transfer (Automated Customer Account Transfer). The receiving brokerage usually handles the paperwork. This typically takes five to ten business days and does not trigger a taxable event in a retirement account.

Is Fidelity a bank?

No. Fidelity is a brokerage firm and investment manager, not a bank. It does not take deposits or make loans. However, Fidelity offers cash management services where you can earn interest on uninvested cash in your account, similar to a high-yield savings account.