Building Wealth with Fidelity Index Funds: Your Path to Financial Success Starts Here! 2024
About fidelity index funds, I am talking about which fidelity index
funds are the best ones to invest in.
I’m also going to show you how and where to buy them.
Index funds are a great way to start investing safely without doing hours and hours of research on individual stocks.
They’re the best way to create a diversified investment portfolio that grows your money quickly.
Over the long run, Fidelity is known for being one of the most reputable.
Low-cost index fund providers, I am also a long-time user of Fidelity.
Let me clarify what is index fund.
Criteria to look for before investing in fidelity index funds: I will give you a list of the best funds that meet this criterion. Finally,
I will discuss how to buy them, including how much and in what combination. First off, I don’t want to assume anything, so allow me to explain what an index fund is,
I get into all the other stuff. An index fund is a pooled investment vehicle that gives you an instant slice of ownership in hundreds of different companies in one easy purchase the reason.
Why it’s called an index fund because the stocks in the fund are chosen by an index rather than by some super bright,
Overpaid money manager indexes you might have heard of are the S&P 500, the Nasdaq, and the Dow Jones.
So, the S&P 500 index fund will have 500 stocks in the S&P 500 index, and the Dow Jones index fund will have 30 stocks.
Criteria to look for investing?
When buying any index fund, you first want to look at the expense ratio.
The expense ratio is how much money is being skimmed from your investment yearly. In other words, it’s an annual fee.
For investing in the fund, if you want to avoid paying this fee, your only alternative would be to go out and buy every stock in the fund yourself, and that’s not possible.
So, I don’t mind paying a fee to the index fund to do all that work for me. That said, I want to keep this free as low as possible.
What can I say? A good rule of thumb is to look for an expense ratio under 0.2%. For example, let’s look at,
For the fidelity total market index fund or FSKAX, if you invested $1000 in this fund, you’d pay an annual fee of only 15 cents for peanuts; however, if you invested in this fund,
$1000 x 0.015% = $0.15
The Fidelity women’s leadership fund your annual fee would be
1.12% or $11.20 a year doesn’t
$1000 x 1.12% = $11.20
It sounds like a huge difference, but compounded over time, it is a slight difference.
This expense ratio adds up to hundreds of thousands of dollars, a difference of one percent in annual fees, which reduces your nest egg.
Overtime by a total Annual fee of $42,000 at the end of 30 years is crazy,
So when investing in an index fund, the expense ratio is the number one criterion. Just pull up the funds summary page to find a fund expense ratio.
And look for the section that says gross expensive ratio. Again, you’re looking for funds with an expense ratio of 0.2% or less.
The second criterion to look for is an automatic reinvestment of your dividends.
Let me explain: when you invest in the stock market, you get dividends monthly or quarterly, and every time you get a dividend deposit.
You don’t want that cash to sit there. You want to use that cash to buy more stocks. That way, you can make money on your dividend and buy more stocks, which pays you more dividends.
Which you use to buy more stocks and so on, and that’s called compound interest, and oh my god, it’s like the best thing.
The difference between reinvesting your dividends and not reinvesting your dividends is if you invested $100,000 to start and then reinvesting your dividends as I told you to do, you’d have over $1,52,000 today, but if you still need to reinvest.
For your dividends, you’d only have $81,000. The moral of the story is to reinvest your dividends, and the way to do that is by investing in fidelity index funds that are mutual funds, not ETFs.
Index funds come in two forms for example, you can invest in mutual funds and ETFs, such as an S&P 500 mutual fund or an S&P 500 ETF.
They’re both index funds, and the result is that you’ll own a slice of the S&P 500 index with either one, but the only difference is that the S&P 500 mutual fund index fund does automatic dividend reinvestment for you,
Whereas the ETF doesn’t you don’t get dividend reinvestment with ETFs so the second criterion to look for when buying index funds is to ensure that it’s a mutual fund, not an ETF. Okay, now for.
The third criterion is transaction fees. Transaction fees are whatever the fund charges you to buy into the fund and also to sell out of the fund.
Some funds charge you for both, others don’t charge you for either, and it all depends on what we’re going to go for the funds that don’t charge you anything.
We’re looking for a free 99. The good news is if you have an account at Fidelity, you won’t pay any transaction fees to buy any of their mutual funds, but if you have an account at Vanguard.
For example, they’ll probably charge you like $50, which is crazy if you want to buy a fidelity fund, so again, transaction fees aren’t a concern for you if you’re purchasing in-house funds.
In other words, you have a fidelity account, and you’re buying fidelity funds, but outside of that, you’ll probably deal with some hefty transaction fees.
Work with: Best Fidelity Index Funds.
First of all, these are all mutual funds.
So there are no ETFs on this list, and second of all this list the funds is not an explicit recommendation to buy it’s just a resource to help your research, then we go for domestic stock with that disclaimer out of the way.
- The Fidelity Total Market Index Fund (FSKAX) has an expense ratio of 0.015%
- The Fidelity International Index Fund (FSPSX) has an expense ratio of 0.04%
- The Fidelity Emerging Markets Index (FPADX) Fund has an expense ratio of 0.075%.
- The Fidelity Intermediate Treasury Bond Index (FUAMX) Fund has an expense ratio of 0.03%
- The Fidelity Inflation-Protected bond index fund (FIPDX) has an expense ratio of 0.05%
- The Fidelity Real Estate Index Fund (FSRNX) has an expense ratio of 0.07%
How to diversify your index funds.
Now, how much should we buy from each fund? In other words, what does that?
The allocation you want asset allocation is the particular mix of investments have in your portfolio.
And it’s the number one decision you need to make before you put any money fidelity index funds. For example, if you have $10000 of investments.
$5000 is in stock funds, and the other $5000 is in bond funds, so your asset allocation is 50% percent stock and 50% percent funds.
Generally, the longer your time horizon, the more you want to have in stocks. It’s also good.
The idea is to mix in other asset classes like real estate to make your portfolio as bulletproof as possible throughout any economic conditions.
The most essential asset allocation is doing a split between stocks and bonds. Jack Bogle, the founder of Vanguard, is also considered the ‘OG’ of index funds he recommends subtracting your age from.
100% (Your Asset )— (Your Age) = (Your Stock Allocation)
So if you’re 30, you’d own 70% in stock and 30% in bonds. For example, if you’re investing $10,000 with Fidelity.
You could buy $7000 worth of the Fidelity total market index fund and $3,000 of their bond market index fund, giving you a (70/30) soft bond allocation.
Here’s a slightly fancier asset allocation recommended by David Swensen, the legendary manager of Yale’s endowment fund.
David Swensen helped Yale grow its endowment fund from $2 billion to $27 billion.
So, whatever he recommends is gold. Swanson recommends the following asset allocation: 30% in domestic equity, 15% in international equity, 10% in emerging markets equity, 15% in US Treasury bonds, 15% in inflation-protected US Treasury bonds, and 15% in real Estate Index funds.
So, if you have $10,000 to invest, you’re using fidelity index funds in your portfolio.
There are pie charts that explain these recommended Asset Allocations as well as the list of fidelity index funds you can use.
So there you have it. Now you know what criteria to consider when investing in fidelity index funds.
You also have a list of the best fidelity index funds that meet this criterion.
You also know how to buy them and how much to buy for each. Investing doesn’t have to be complex or complicated.
Index funds are the best way for a beginner to start if you’re sitting on some cash and want to start putting your money to work.
I recommend choosing one of these assets and starting with fidelity index funds. The key here is to start now.
Perfect later because every day you wait is another day when your hard-earned money isn’t working for you.
Did you like this story? If so, please give it a Clap, and if you have any questions about what I talked about, feel free to ask me in the comments.
