A brokerage account is where you buy and sell investments like stocks and mutual funds
A brokerage account is a container that holds your money and investments. You deposit cash into it, and then you use that cash to buy things like individual stocks, mutual funds, or exchange-traded funds (ETFs). When you sell those investments, the money goes back into the account. Fidelity is the company that holds the account and processes your trades — the buying and selling.
Think of it like a bank account, except instead of just sitting there earning interest, your money is available to invest in the stock market. You control what you buy and sell, and you pay Fidelity a fee (or sometimes no fee) to hold the account and execute your trades.
The main difference between a brokerage account and other investment accounts is that there are no contribution limits and no tax advantages. You can put in as much money as you want, whenever you want. But you will owe taxes on any gains when you sell, and on dividends you receive — unlike a retirement account, where those taxes are deferred or eliminated.
Key Takeaways
- A brokerage account at Fidelity lets you buy and sell stocks, mutual funds, and ETFs using money you deposit.
- You have no contribution limits and can deposit or withdraw money whenever you want, unlike retirement accounts.
- You pay taxes on investment gains and dividends each year, rather than deferring them until retirement.
- Fidelity charges no commission on most stock and ETF trades, though some mutual funds and other products may have fees.
- You can open a brokerage account online in minutes with just a Social Security number and basic personal information.
How a brokerage account differs from a retirement account
The biggest difference is tax treatment and access to your money. With a retirement account like an IRA or 401(k), you get a tax break now or later, but you cannot touch the money before age 59½ without paying a penalty. A brokerage account has no such restriction — you can withdraw your money anytime, for any reason.
Retirement accounts also have annual contribution limits. For 2024, you can put a maximum of $7,000 into an IRA, or much more into a 401(k) if your employer offers one. A brokerage account has no limit. You can deposit $100,000 in a single day if you want.
The trade-off is taxes. In a retirement account, you either pay no tax on gains (Roth) or defer taxes until you withdraw (traditional). In a brokerage account, you owe taxes on capital gains and dividends every year, even if you do not sell anything. This makes a brokerage account better for short-term investing or for money you might need soon.
What you can buy and sell in a Fidelity brokerage account
Fidelity lets you trade stocks, mutual funds, ETFs, bonds, and options. Most people start with stocks or ETFs because they are straightforward and have low fees.
A stock is a small piece of ownership in a company. When you buy Apple stock, you own a tiny fraction of Apple. The price goes up and down based on how the market values the company.
An ETF (exchange-traded fund) is a basket of stocks or bonds bundled together. Instead of buying 100 individual stocks, you can buy one ETF that holds all 100. This spreads your risk and requires less research.
A mutual fund is similar to an ETF but is managed by a professional who picks the investments. Mutual funds often charge higher fees than ETFs, and some have minimum investment amounts.
Fidelity also offers its own mutual funds and ETFs, which you can buy with no commission. If you buy mutual funds or ETFs from other companies through Fidelity, you may pay a transaction fee, though many popular ones are commission-free.
How fees work at Fidelity
Fidelity charges no commission on stock trades and most ETF trades. This means you can buy or sell a stock or ETF without paying Fidelity a fee per transaction. This was not always the case — until 2019, most brokers charged $5 to $10 per trade.
You may still encounter fees in other places. If you buy a mutual fund that charges an internal fee (called an expense ratio), you pay that fee annually, whether you sell or not. Fidelity's own mutual funds and ETFs tend to have lower expense ratios than competitors, but you should check the specific fund before buying.
If you want to use advanced features like margin (borrowing money to invest) or options trading, Fidelity may charge additional fees or require a minimum account balance. For most people starting out, a basic brokerage account with stocks and ETFs costs nothing to open and nothing per trade.
How to open a brokerage account at Fidelity
You can open an account online in about 10 minutes. Fidelity will ask for your name, address, date of birth, Social Security number, and employment information. You will also choose whether you want an individual account (just you), a joint account (you and another person), or a trust account.
After you submit the process, Fidelity reviews it — this usually takes a few minutes to a few hours. Once approved, you can log in and deposit money. You can transfer funds from a bank account, or you can mail a check.
Once the money is in your account, you can start buying investments when ready. Fidelity's website and mobile app both let you search for stocks and ETFs, see their prices, and place orders.
What happens when you buy and sell investments
When you place an order to buy a stock, Fidelity sends it to the market and executes it at the best available price. For stocks, this usually happens within seconds. The investment then appears in your account, and you own it.
When you sell, the same thing happens in reverse. Your investment is sold, and the cash goes back into your brokerage account. You can then withdraw that cash to your bank account, or use it to buy something else.
Every time you sell an investment for more than you paid for it, you have a capital gain. If you sell for less, you have a capital loss. At the end of the year, Fidelity sends you a tax form (Form 1099-B) that reports all your trades. You use this to calculate your taxes.
If an investment pays a dividend (a payment to shareholders), Fidelity deposits it into your account automatically. You can choose to reinvest it (buy more of the same investment) or leave it as cash.
When a brokerage account makes sense for you
A brokerage account is useful if you have money you want to invest but do not plan to retire on it soon. For example, you might open one to save for a house down payment in five years, or to invest money left over after you have maxed out your retirement account contributions.
It is also the right choice if you want to trade frequently or experiment with investing. Because there are no withdrawal penalties, you can buy and sell without worrying about being locked in.
If you are just starting to invest and are not sure whether you want a brokerage account or a retirement account, consider opening both. Many people use a retirement account for long-term wealth building and a brokerage account for shorter-term goals or extra savings.
Frequently Asked Questions
Do I need a minimum amount of money to open a Fidelity brokerage account?
No. Fidelity has no minimum deposit requirement to open an account. You can open it with $0 and deposit money later. However, some individual investments (like certain mutual funds) may have minimums of $1,000 or more, so check before you buy.
Can I lose more money than I put in?
With stocks and ETFs, no — the worst that can happen is the investment goes to zero and you lose what you invested. With options and margin trading, yes, you can lose more than you put in, but these are advanced strategies most beginners do not use.
How long does it take for money to settle after I sell an investment?
Stock and ETF sales settle in two business days, meaning the cash is available in your account two days after you sell. You can withdraw it to your bank account when ready, though your bank may take another one to three business days to process the transfer.
Will I owe taxes if my investments go down in value?
No. You only owe taxes when you sell at a gain or receive dividends. If an investment loses value and you do not sell, you owe nothing. If you sell at a loss, you can use that loss to offset other gains, which can lower your tax bill.
Can I have both a brokerage account and a retirement account at Fidelity?
Yes. Many people have both. You might use a retirement account (like a Roth IRA) for long-term investing and a brokerage account for money you may need sooner. They are separate accounts with separate rules and tax treatment.