Fidelity review

Brokerage Review: Fidelity


11 December,2012

One of the reasons that investors sometimes choose the “big guys” when it comes to investing is because of the wide range of investment products and research tools. Fidelity, a company that has long been known as a financial services provider, and has a long history offering funds, is one that many investors find attractive.

However, like many other large discount brokers, you might find that the advanced trading tools and research come with a price: Higher transaction fees.

Lower Commissions and Fees from Fidelity

Prior to 2011, Fidelity featured some of the highest commissions and fees. However, the rise of online discount brokers has changed the landscape, and Fidelity bowed to the inevitable. The company reduced its commissions, and now it is competitive with many of the discount brokers out there.

Stock trades and non-iShares ETF trades cost $7.95 per transaction. Options trading is $7.95 + $0.75 per contract. While these prices aren’t terrible — they are competitive with some of the other online brokers — they aren’t the lowest costs, either. It is a plus that there are 30 free iShares ETFs to choose from, though. You can trade these for free.

Additionally, it’s a credit to Fidelity that the company has a low cost for trading bonds. U.S. Treasuries are free to trade, and other bonds are only $1.00 per bond. You can invest in primary market CDs for free, and secondary market CDs only cost $1.

Fidelity mutual funds can be bought for free. There is a small surcharge if you decide to sell a fund, though. That surcharge amounts to $0.0192 for every $1,000 in principal. While non-Fidelity mutual funds areĀ technically free to trade, you will find yourself subject to a flat fee of $75 for the FundsNetwork Transaction Fee funds. That’s a pretty hefty sum for mutual fund trading. The early redemption fee for mutual funds (if you sell less than 180 days after you buy) is also $75.

Additionally, if you have mutual fund balances under $2,000, you could pay $12 a year for each noncore Fidelity mutual fund. It’s important to keep that in mind if you decide to go with mutual funds to look for those that aren’t going to end up costing you.

Other Benefits and Features of Fidelity

Fidelity does have a large number of solid trading features, though. There are a number of research tools that you can take advantage of on the Fidelity site. Fidelity has a lot of independent research that you can draw on, including:

  • Stock screening: You can narrow down which stocks you prefer with the help of a screening tool. Specify the criteria you find most attractive, and Fidelity’s tool will help you identify which stocks are most likely to meet your needs.
  • Historical trading strategy: Get an overview of how different strategies perform historically, and even see how yours stacks up. Figure out how you are doing — and where there is room for improvement.
  • Daily market commentary: This is a great tool if you are interested in finding out what, exactly, is going on with the markets. Insightful and detailed market commentary can keep you up to date, and help you identify major players and factors.
  • Individual stock research: You can find in-depth information on more than 4,000 companies, from 13 different firms. If you want to know something about a stock, chances are that you can find the information on Fidelity’s web site.

One of the problems with Fidelity’s web site, though, is that it can be somewhat difficult to navigate at times. It’s not as intuitive as other brokerage web sites are. It can take some time to find what you are looking for, although some efforts have been made to improve the layout of the site. Realize, too, that you might have a hard time executing trades. During heavy times, the Fidelity site sometimes slows down, and you can’t change your orders once you get the process going.

The good news, though, is that even with some of the difficulties associated with trading on the Fidelity site, opening an account is fairly straightforward and simple. You can open the brokerage account in less than 10 minutes. You need to indicate your name and address, of course, and share other personal information. You can also designate a beneficiary. Choose electronic delivery for your documents for fast service. You do need to make an ACH transfer to get started, and it can take four to six business days for the funds to be available. This is a little bit slower than what you can expect with other brokerages, where it usually only takes three to four business days.

Bottom Line

Fidelity’s strongest point is the research it offers. Additionally, there are a lot of investment products to choose from. However, some of the costs of trading with Fidelity can really add up. Your best option is to look for Fidelity mutual funds and iShares ETFs that are free to trade. Invest in them for the long-term, so that you don’t run afoul of the early redemption fee, and make sure that you invest at least $2,000. Fidelity can be an excellent choice for a retirement fund or other long-term account.