Setting up an individual investing account
How I set up my individual investment account through Fidelity and started investing regularly
At the end of last year I had a goal of setting up an individual investment account. Generally I wanted to set the account up and become more familiar with how to actively invest regularly, while managing the account myself. Here’s my experience with setting up an individual investment account through Fidelity.
Why I wanted to set up an individual investment account
Setting up an individual investment account was important to me because I wanted a test ground to experiment with learning how to invest. As a personal finance enthusiast, I have read a variety of relevant books and blogs, listened to podcasts, and feel that I have a general baseline understanding of investing and what it entails. While I have a basic understanding of the fundamentals of investing, I learn by doing. By actively trying and practicing something - by experimenting, I tend to learn a skill a lot faster than if I were to only read about it.
Psychological Barriers to Investing
I realized that after many years of “researching” investing and “how to invest,” I still hadn’t gotten started. I faced physiological barriers to investing such thinking that I didn’t know enough about investing to get started, and that I had to have a solid strategy before getting started. It’s definitely important to establish a basic understanding of investing and set goals, however I found that many of my male friends had already gotten started with investing with the knowledge they had at hand. Generally, women tend to be better investors than men, but don’t always take enough risk.
Sometimes getting started with investing later can make you feel like you’ve lost out on your investing window. While it’s easy to get discouraged, it’s never too late to get started with investing.
Getting started with my individual investment account through Fidelity
Initially I had planned out in a spreadsheet how much I wanted to invest per month. But I needed to decide on a place to open my account, and start getting it set up. I decided that I wanted to invest $500 a month in an individual investment account. Once I had decided how much I could reasonably invest per month, I started researching potential online brokers where I could open an account. My process is to generally google search the topic to point me in the right direction, there are plenty of online resources on the topic of investing. I like Nerd Wallet’s content because it is digestible and tailored towards a wide variety of familiarity with finance. Check out their article on comparing online brokers for investing. I decided on Fidelity mainly because I also have my employer 401K through Fidelity, so I had some basic familiarity with their interface.
One of the first steps was to set up my brokerage account and put a certain amount in the account. I started with $500 as a starting point. I set up recurring deposits following, to automatically deposit into the brokerage account. I saw this initial deposit as a way to experiment and learn what investments I wanted to purchase. Deciding what was the minimum initial investment I was comfortable with was helpful in getting started.
I went to Fidelity.com, went to their “open an individual investment account” to get started.” If you do not already have an account with Fidelity, then go to “sign up for an account.” I happen to already have an account with Fidelity, so I set up an individual account by logging into my 401K account, then opening an individual investment account.
Fidelity makes it easy to learn more about their broad range of investment choices. Learn more about opening a Fidelity brokerage account on their website.
Choosing Investments
After I had the foundation, I felt like I could get started. I did some basic google research and added investments to my watch list - which is essentially a favorites function within the Fidelity interface to “save” individual stocks or portfolios that you want to refer back to over time.
Once you set up an individual brokerage account via Fidelity, you can look up stocks via the search bar and “Add to watchlist.” You can learn more about creating a watchlist, this is essentially a way to “favorite” stocks so you can reference them later in your watchlist, before buying.
When selecting investments, I prioritized experimentation and trying over any sort of formalized strategy. Finding your risk tolerance is an important piece of determining what investment approach is right for you. I tend to have a higher risk tolerance and risk capacity, which means that I generally tend to invest more in stocks, and my financial situation enables me to take on more investment risk. Whereas someone with lower risk tolerance may choose to have a lower-risk allocation, because these investments tend to be less volatile, more predictable, etc. You can learn more about assessing your risk tolerance, which will help to determine the type of investment approach that is right for you based on your goals and budget.
In terms of the distribution of index funds and individual investments, I personally wanted to have a mix of index funds and individual investments. I did not have a percentage breakdown that I was looking for, but rather was shooting for a “general mix,” because that would allow me to learn more about the performance across different types of stock. Among the individual investments that I selected, initially adding to my watch list, were a mix of brands that I used, top stocks from countries that I had visited, and index funds. Again, taking the approach of experimentation and learning over a formalized strategy. I first added a selection of stocks to my watchlist, researching more about the company from google searches, alongside looking into the stock performance over time. I purchased a few investments from my watchlist incrementally, watching performance of the account as a whole, as well as individual investment performance.
In general, I invested more into ETFs and index funds vs. individual stocks. An index fund is a type of mutual fund or exchange-traded fund that aims to mimic the performance of an index. Index funds tend to be lower maintenance generally and offer lower taxes, and are oftentimes, but not always, lower risk. I like index funds because it avoids having to select individual investments (company stock, for example), because index funds are a grouping of various stocks across an index, an example is the S&P 500, which is composed of the performance of top 500 U.S. companies. Investing in index funds is a great way to get started because it allows you to invest in a group of stocks that mirrors the performance of a part of a financial market. Think of index funds as a “basket” of low-cost stock. Some of the index funds I chose to invest in were the Fidelity Disruptive Finance ETF and the Fidelity® 500 Index Fund.
While index funds offer a low maintenance, low tax way to start investing, you may also choose to invest in individual stock. Given that my individual investment account serves as a grounds for experimentation, I chose to also invest in a few individual stocks. My selections were based on some companies and services that I regularly use or purchase, alongside indexes from countries that I have visited. Some of the individual stocks I chose to invest in included but not limited to COTY Inc, Spotify Technology, and Clearway Energy.
Setting up recurring deposits
An important piece to growing my individual investment account was to set up recurring investments. You can decide how aggressive you want your investments to be based on your individual financial goals and budget. For me, initially, I set the goal of depositing $500/month into my individual investment account. From there, I would continue to research individual stocks and index funds, adding to my watch list, and purchasing stock. I would use the deposited money in the investment account to buy additional stock for the ones that were performing well, or purchase new investments for ones that seemed interesting and if the stock price was low. I used the performance indicators that denote percentage of growth or loss over time to guide which stocks to further invest in.
Fidelity has a tool for easing the scan ability of this information in the “Positions'' tab. If you are looking at the individual stock on your watch list, or after purchasing, I often reference the “Total Gain/Loss” (percentage and dollar amount) column as a simple way to track performance over time. Here’s an example of what the “Positions” tab looks like in their interface:
Using the “Positions” tab is a simple reference point for a summary of gain/loss over time. My purchased investments are blurred out on the left, but yours will appear on the left organized in a way so that you can easily see a summary of individual performance, and totaling at the bottom of the applicable columns.
My experience with individual investing account performance
I started my individual investing account in October 2023 as an experiment to further my knowledge of investing outside of my 401K. So far over the course of the last six months, I have experienced approximately 30% growth of my individual investment account. I plan to continue to set recurring deposit goals, and based on performance, will likely continue to invest more heavily in index funds instead of individual stocks due to overall market stability and resilience.
Takeaways for getting started with individual investing
In summary, starting an individual investment account (brokerage account) can be a great way to get started with investing outside of or in addition to a traditional retirement account. If this sounds like something you want to get started with, consider the following:
Assess your risk tolerance
Research and determine a broker
Set up the individual investment account
Determine an initial investment to invest and make an initial deposit
Research types of stocks and add to your watch list
Select stocks to purchase with your initial investment
Set up a recurring investment, adjust as needed
Monitor, adjust, repeat!
There is no perfect system when getting started with individual investments, only what is right for you. By getting started early, you can learn by being hands on, and adjust your investment approach over time.
If you want to learn more about individual investing, you can go learn more about investment strategies for new investors to get started.
Good luck!