Why you need to use Fidelity

Building financial freedom requires you to …

A Roth IRA is a retirement account that allows you to invest $6,000 a year, withdraw any deposits without penalty and withdraw deposits and earnings at 59½ tax free. This is the only type of investment account that allows your money to grow tax free. Ideally young people would start maxing out a Roth IRA by 22-23 years old. This means over 37.5 years, assuming the historical 10% return (S&P500), this account would be worth $2,079,818.53, all tax free! For all other retirement accounts, you have to pay income taxes on your withdrawal, losing between 10-30%+ of your account value.

Roth IRAs are a really obvious choice for young people. However, most young people start investing with Robinhood which only offers individual accounts. With an individual account, you can deposit and withdrawal as much as you want as often as you want. You pay income taxes on any investment held for less than a year and capital gains taxes (15%) on investments held longer than 1 year.

If a young person was to execute the same strategy above in a Robinhood account, they would owe 15% taxes on their investments when they withdrawal at retirement. In a Fidelity Roth IRA, their tax bill is ZERO!

Building wealth and financial freedom is all about making your money work hard for you. Young people do yourself a favor and take a 15% raise by opening a Roth IRA with Fidelity.

In these calculations, I assume investors are buying and holding. This means they make their purchase every month or year and do not sell until they start withdrawing money in retirement. Additionally, please know that Roth IRAś have income limits. This means that you have to make under $144,000 or $214,000 (for 2022) to contribute to a Roth IRA.

In the past 5 years, there have been 2 powerful changes to individual investing. #1. The removal of fees to buy and sell stock. It used to cost a minimum of $5 every single time you bought or sold. The removal of these fees by most brokerages paved the way for individual investors to buy fewer shares more frequently. #2. The ability to buy partial shares. Historically if you wanted to buy stock or ETFs (exchange traded funds), you had to have the exact amount of money to make that purchase. At the time of writing, Tesla stock is $800 a share and SPY (ETF following the S&P 500) is $425 per share. To buy either of these investments in TD Ameritrade or Charles Schwab, you have to have the full share amount to make a purchase. But not with Fidelity! Fidelity will let you buy any investment you want with only $20!!!! If buying Tesla with $20, you would own 0.025 shares. This revolution in trading blows my mind and is so incredible. This means if you only have $40 to invest this month, you can buy a fraction of the S&P 500 (500 largest publicly traded companies) and be invested and on your way to building wealth. If you dońt have a Fidelity account, you should be racing off this email to get one opened. Robinhood is the only other platform that allows partial shares but they dońt have Roth IRAs which is what makes Fidelity the best option.

I dońt get paid by Fidelity to recommend them but they should pay me for all this free press! Below are the video tutorials for how to enter a trade for partial shares.

A final note: Vanguard is also a really amazing platform. The creator of Vanguard, John Bogle, pioneered index funds giving average investors a way to buy a diversified basket of stocks for a very low fee. I use Vanguard for my 403b (nonprofit 401K) because they have the lowest fees. However I have never opened an account with them outside of my 403b. I know that some of their investments require a minimum buy in of thousands of dollars. However, I do not know if that is true for all of their funds. Additionally I can buy Vanguards S&P500 ETF : VOO through Fidelity. If looking to do more research on the subject, I would also consider Vanguard. Since I have never used their individual accounts, I cańt give you all the juicy details.

Disclaimer: I am an educator, not your personal financial advisor. Please make sure to do your own research before moving forward with any actions discussed in this newsletter.

Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Past performance does not guarantee future performance. Always remember to make smart decisions and do your own research!