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The Beginner’s Guide to Fidelity Index Funds: Grow Your Wealth the Easy Way

Are you new to investing and feeling a bit overwhelmed? No worries – Fidelity index funds are an excellent choice to get started on the path to growing your wealth. 

In this easy-to-follow guide, I’ll walk you through everything you need to know.

Understanding Index Funds vs. Actively Managed Funds

An index fund is a pooled investment vehicle that gives you an instant slice of ownership in hundreds of different companies with a single purchase. The stocks in the fund are chosen by an index, rather than by an expensive fund manager.

This passive approach has been proven to outperform most actively managed funds over the long run. With an index fund, you’re simply aiming to match the performance of a market index like the S&P 500, rather than trying to “beat the market.”

The key advantages of index funds are their low fees and instant diversification. You don’t need to be a stock-picking expert to benefit from the growth of the overall market.

The 3 Key Criteria for Choosing Fidelity Index Funds

When selecting Fidelity index funds, there are three important factors to look for:

  1. Expense Ratio: This is the annual fee charged to manage the fund. You want to keep this as low as possible, ideally under 0.20%. The lower the expense ratio, the more of your investment returns you get to keep.
  2. Automatic Dividend Reinvestment: Make sure to choose mutual fund index options, not ETFs. Mutual funds will automatically reinvest your dividends, which is crucial for compounded growth over time.
  3. No Transaction Fees: When investing through a Fidelity account, you won’t pay any commissions to buy or sell their index funds. This is a huge advantage.

The Best Fidelity Index Funds for Beginners

With those criteria in mind, here are some of the top Fidelity index funds to consider:

Domestic Stocks:

  • Fidelity Total Market Index Fund (FSKAX) – Expense Ratio: 0.015%

International Stocks:

  • Fidelity International Index Fund (FSPSX) – Expense Ratio: 0.045%

Emerging Markets Stocks:

  • Fidelity Emerging Markets Index Fund (FPADX) – Expense Ratio: 0.075%

US Government Bonds:

  • Fidelity Intermediate Treasury Bond Index Fund – Expense Ratio: 0.030%

Inflation-Protected Bonds:

  • Fidelity Inflation-Protected Bond Index Fund (FIPDX) – Expense Ratio: 0.070%

Real Estate:

  • Fidelity Real Estate Index Fund – Expense Ratio: 0.070%

I’ve created a handy Index Funds Cheatsheet you can download with all these fund details in one place.

How to Buy Fidelity Index Funds

Purchasing Fidelity index funds is super simple. Just log into your Fidelity account, search for the fund by its ticker symbol, and click “Buy.”

In the trade window, you’ll need to specify the dollar amount you want to invest. The great thing is that these funds have no minimum investment, so you can start with as little as $1.

Determining Your Asset Allocation

The next step is to decide how much to invest in each fund. This comes down to your overall asset allocation – the specific mix of stocks, bonds, and other assets in your portfolio.

A good rule of thumb is to subtract your age from 100 and invest that percentage in stocks. So if you’re 30 years old, a 70/30 stock/bond split would be appropriate.

For a more sophisticated approach, consider this asset allocation recommended by investing legend David Swensen:

  • 30% Domestic Stocks
  • 15% International Stocks
  • 10% Emerging Markets Stocks
  • 15% US Treasury Bonds
  • 15% Inflation-Protected Bonds
  • 15% Real Estate

This six-fund portfolio provides excellent diversification across different asset classes to weather any market conditions.

Monitor and Adjust Your Portfolio

As you continue investing, it’s important to periodically review your portfolio and make adjustments as needed. Keep an eye on the performance of your funds and rebalance your allocation if the percentages get too far out of whack.

You may also want to gradually shift more of your portfolio to bonds as you get older and your time horizon shortens.

Start Building Wealth with Confidence

Index funds make investing simple and approachable, even for total beginners. By focusing on low-cost, diversified funds that automatically reinvest your dividends, you can grow your money over time without the complexity of individual stock picking.

The key is to start now, not wait for “perfect” conditions. Every day you delay is another day your money isn’t working for you.

Download the Index Funds Cheatsheet to have all the fund details at your fingertips, and begin your journey to financial freedom with Fidelity index funds today.

Recommended Reading to Enhance Your Investing Knowledge

  • InvestED: Step-by-step, millennial-friendly advice on how to pick stocks like Warren Buffett.
  • Rich Dad Poor Dad: The #1 selling personal finance book of all time.
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YouTuber, Money Expert, Educator, Traveler, Rebel, and #1 Book Nerd. My mission is to empower you with the mindset and financial know-how to create a life of TOTAL freedom.

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Rose

YouTuber, Money Expert, Educator, Traveler, Rebel, and #1 Book Nerd. My mission is to empower you with the mindset and financial know-how to get more of what you want out of life.

The weekly email that spills all the secrets on what it really takes to create a life of total financial freedom

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