Unlocking Your Investment Potential: A Step-by-Step Guide to Changing Investments on Fidelity
Are you feeling a pull to refresh your investment strategy? Perhaps your financial goals have shifted, the market has taken an unexpected turn, or you've simply learned more about investing and want to optimize your portfolio. Whatever your reason, taking control of your investments is a powerful step towards achieving your financial aspirations. If you're a Fidelity client, you're in good hands – they offer a robust platform and resources to help you make informed decisions and execute changes with confidence.
This comprehensive guide will walk you through the process of changing your investments on Fidelity, from understanding your current portfolio to making trades and rebalancing. Let's dive in!
Step 1: Engage with Your Current Portfolio – What Do You Own and Why?
Before you start making any changes, it's crucial to understand your existing investment landscape. This is your starting point, and knowing it well will inform all subsequent decisions.
Sub-heading 1.1: Logging In and Navigating Your Accounts
Action: Head to Fidelity.com and securely log in to your account.
Tip: If you haven't logged in recently, take a moment to ensure your credentials are up-to-date. Fidelity's platform is generally intuitive, but familiarity helps!
Navigation: Once logged in, look for a section like "Accounts & Trade" or "Portfolio." This is where you'll get an overview of all your holdings.
Sub-heading 1.2: Understanding Your Current Asset Allocation
What it is: Your asset allocation is the percentage breakdown of your investments across different asset classes, such as stocks, bonds, and cash. For example, you might have 70% in stocks and 30% in bonds.
Why it matters: Asset allocation is a key driver of your portfolio's risk and return characteristics. Market movements can cause your allocation to drift over time.
Fidelity Tools: Fidelity provides tools to help you visualize your current asset allocation. Look for "Analysis" or "Portfolio Summary" sections, which often have charts breaking down your holdings by asset class, sector, and even geographic region. This visual representation can be incredibly insightful!
Sub-heading 1.3: Reviewing Individual Holdings
Details, details: Go beyond the broad asset allocation and delve into your individual investments. Click on each stock, ETF, or mutual fund to see more details.
Key information to review:
Performance: How has the investment performed over various timeframes (e.g., 1-year, 3-year, 5-year)?
Cost Basis: This is what you paid for the investment. It's crucial for understanding potential tax implications when selling (more on this later).
Expense Ratios/Fees: For mutual funds and ETFs, understand the annual fees. Lower fees can significantly impact your long-term returns.
Investment Objective: Does the fund or stock still align with its original purpose or your current goals?
Step 2: Define Your Investment Goals and New Strategy
Now that you have a clear picture of your current investments, it's time to look forward. What are you trying to achieve?
Sub-heading 2.1: Reassessing Your Financial Goals
Short-term vs. Long-term: Are you saving for a down payment on a house (short-term) or retirement (long-term)? Your timeframe heavily influences your investment choices.
Risk Tolerance: How comfortable are you with potential ups and downs in the market? A higher risk tolerance might mean more exposure to volatile assets like stocks, while a lower tolerance might favor more stable options like bonds. Fidelity often has questionnaires to help you assess your risk tolerance.
Life Events: Has there been a significant life event (marriage, new child, job change) that impacts your financial situation or goals?
Sub-heading 2.2: Researching New Investment Options
Fidelity's Research Tools: Fidelity offers a wealth of research tools for stocks, ETFs, and mutual funds.
Screeners: Use stock or fund screeners to filter investments based on criteria like sector, market cap, dividend yield, expense ratio, or Morningstar ratings.
Analyst Reports: Access research reports from various providers.
Educational Content: Fidelity's "Learning Center" has articles and videos on different investment types and strategies.
Common Investment Types on Fidelity:
Stocks: Individual shares of publicly traded companies. Higher risk, higher potential reward.
ETFs (Exchange-Traded Funds): Baskets of securities that trade like stocks. Offer diversification and often lower expense ratios than mutual funds.
Mutual Funds: Professionally managed portfolios of stocks, bonds, or other securities. Can be actively or passively managed.
Bonds: Debt instruments that typically offer more stability and income than stocks.
Options: Complex financial instruments for experienced investors. Proceed with caution if you're new to options.
Consider Diversification: Even if you're shifting your strategy, diversification remains paramount. Don't put all your eggs in one basket.
Sub-heading 2.3: Formulating Your Target Asset Allocation
The "Ideal" Mix: Based on your new goals and risk tolerance, decide on your desired asset allocation. For example, you might aim for 80% stocks and 20% bonds if you have a long time horizon and high risk tolerance.
Model Portfolios: Fidelity often provides model portfolios aligned with different risk profiles, which can be a great starting point for developing your own.
Step 3: Executing Your Investment Changes (Placing Trades)
This is where you put your plan into action. Fidelity offers various ways to buy and sell investments.
Sub-heading 3.1: Understanding "Sell First, Then Buy" vs. "Sell to Buy"
Sell First, Then Buy: This involves selling your existing investments to generate cash, and then using that cash to buy new investments. This gives you direct control over the cash flow.
Sell to Buy (Exchange): For mutual funds within the same fund family, you can often perform an "exchange" where the proceeds from the sale are immediately used to purchase another fund. This can be more streamlined. For different fund families, it's typically a "sell first, then buy" scenario.
Sub-heading 3.2: Placing Sell Orders
Navigation: From your "Accounts & Trade" section, look for "Trade" or "Account Positions."
Selecting the Investment: Choose the investment you wish to sell.
Quantity: Specify how many shares or what dollar amount you want to sell. You can often sell all shares or a specific number.
Order Type:
Market Order: Executes immediately at the best available price. Fast but price can fluctuate.
Limit Order: Allows you to specify the maximum price you're willing to pay (for buying) or the minimum price you're willing to accept (for selling). Provides price control but may not execute immediately.
Review and Confirm: Always carefully review your order details before placing the trade. Look for any fees or commissions. Fidelity generally offers $0 commissions for online US stock, ETF, and option trades. Mutual funds may have transaction fees depending on whether they are Fidelity funds or non-Fidelity funds.
Sub-heading 3.3: Placing Buy Orders
Navigation: Similar to selling, go to the "Trade" section.
Searching for Investments: Enter the ticker symbol or name of the investment you want to buy.
Quantity: Specify the number of shares or dollar amount. Fidelity offers fractional share investing for many securities, allowing you to invest a specific dollar amount rather than buying whole shares.
Order Type: Choose between market order or limit order, as discussed above.
Review and Confirm: Double-check all details before placing your buy order.
Sub-heading 3.4: Considering Tax Implications (Especially in Taxable Accounts)
Capital Gains: If you sell an investment at a profit in a taxable brokerage account, you'll incur a capital gain, which is generally taxable.
Cost Basis Method: Fidelity's default cost basis method is FIFO (First-In, First-Out), meaning the oldest shares are sold first. You might be able to choose specific shares to sell to manage your tax liability. Consult a tax advisor for personalized guidance.
Tax-Advantaged Accounts: Changes within retirement accounts like IRAs or 401(k)s generally do not trigger immediate tax consequences.
Step 4: Rebalancing Your Portfolio (Ongoing Maintenance)
Changing investments isn't a one-and-done event. Regular rebalancing is crucial for maintaining your desired risk level and staying aligned with your goals.
Sub-heading 4.1: Why Rebalance?
Drift: Over time, some investments will outperform others, causing your portfolio's asset allocation to "drift" away from your target. For example, if stocks have a strong year, your stock allocation might become disproportionately large.
Risk Management: Rebalancing helps you maintain your intended risk level. If your stock allocation grows too large, you might be taking on more risk than you intended.
Buy Low, Sell High (Implicitly): Rebalancing often involves selling assets that have performed well (and are now "overweight") and buying assets that have underperformed (and are now "underweight"). This can implicitly lead to a "buy low, sell high" strategy.
Sub-heading 4.2: Approaches to Rebalancing
Calendar-Based: Rebalance on a set schedule, e.g., annually or semi-annually. This is a simple and disciplined approach.
Threshold-Based: Rebalance only when an asset class deviates by a certain percentage from its target allocation (e.g., +/- 5% or 10%). This can reduce unnecessary trading.
Hybrid Approach: A combination of the above, such as reviewing quarterly but only rebalancing if a threshold is met.
Sub-heading 4.3: Automating or Simplifying Rebalancing
Managed Accounts: Fidelity offers managed portfolios (like Fidelity Go® or Fidelity Managed Portfolios) where professionals handle the rebalancing for you. This is a great option if you prefer a hands-off approach.
All-in-One ETFs: Some ETFs are designed to be "all-in-one" portfolios that automatically rebalance their underlying holdings.
New Contributions: Instead of selling, you can sometimes use new contributions to rebalance by directing fresh money towards underperforming asset classes. This can help avoid capital gains taxes.
Step 5: Monitoring and Reviewing Your Investments
The investment journey is continuous. Regular monitoring ensures your strategy remains effective.
Sub-heading 5.1: Setting Up Alerts
Price Alerts: Set up alerts to be notified when an investment reaches a certain price.
Performance Alerts: Monitor how your portfolio is performing against benchmarks.
Sub-heading 5.2: Regular Reviews
Schedule Check-ins: Even if you're not rebalancing, set a regular schedule (e.g., quarterly or annually) to review your portfolio's performance and ensure it still aligns with your goals.
Market News: Stay informed about broader market trends, but avoid impulsive decisions based on short-term news.
10 Related FAQ Questions
How to choose the right investment types on Fidelity?
Answer: Consider your financial goals, risk tolerance, and time horizon. Utilize Fidelity's research tools like screeners and educational content to explore stocks, ETFs, mutual funds, and bonds that align with your profile.
How to sell specific tax lots on Fidelity?
Answer: When placing a sell order, look for an option to "Choose Specific Shares" or "Select Tax Lots." This allows you to choose which shares (based on purchase date and price) you want to sell, which can be useful for tax-loss harvesting or managing capital gains.
How to transfer money to Fidelity to buy investments?
Answer: You can link your bank account for electronic funds transfers (EFT), set up direct deposit, or even send a check. Fidelity's "Transfers" section will guide you through the options.
How to view my investment performance on Fidelity?
Answer: Log in and navigate to your "Portfolio" or "Accounts & Trade" section. Look for performance dashboards or reports that show your returns over various periods.
How to find low-cost investment options on Fidelity?
Answer: Look for Fidelity Zero℠ mutual funds (which have no expense ratio), commission-free ETFs, and actively managed mutual funds with lower expense ratios. Use screeners to filter by fees.
How to rebalance my Fidelity portfolio automatically?
Answer: Consider Fidelity's managed solutions like Fidelity Go® or Fidelity Managed Portfolios, which handle rebalancing for you. Alternatively, some "all-in-one" ETFs offer embedded rebalancing.
How to connect with a Fidelity financial advisor?
Answer: Fidelity offers various levels of advisory services. You can typically find information on their website under "Planning & Advice" or "Find an Advisor."
How to change my personal information (e.g., address) on Fidelity?
Answer: Log in to your account and go to your "Profile" or "Security Settings" to update personal details.
How to understand Fidelity's investment fees and commissions?
Answer: Fidelity generally has $0 commissions for online US stock, ETF, and option trades. Mutual funds may have transaction fees depending on the fund. Review Fidelity's "Commissions and Fees" schedule on their website for a detailed breakdown.
How to get help from Fidelity customer service?
Answer: Fidelity offers 24/7 customer service via phone (800-343-3548), live chat, and a virtual assistant. You can also find help resources and FAQs on their website.
