This is how I have my Fidelity accounts setup, investment/allocation strategy, and the reasoning behind my decisions. Also see Investing.
TODO: clean this up, definitely see Investing for current allocations.
You would have 4-5 actual accounts with Fidelity:
- Retirement/Investment accounts:
- A pre-tax IRA account
- A post-tax Roth account
- Optional, a separate taxable brokerage account, if you want your taxable investments separate from your incoming/savings cash management brokerage.
Cash Management Accounts:
- Incoming/savings brokerage account
- Outgoing/checking Cash Management Account(CMA)
Retirement/Investment accounts
- FZROX (total stock) 100%
Cash Management(or your checking/savings accounts):
Incoming/savings Brokerage(that maybe isn't actually linked to your CMA)
- Treasury bills (buy direct through fidelity, no fees)
- CD's (buy direct through fidelity, or use a bank like ally if they are paying more)
- HYSA (High yield savings account, typically Ally, Allied Credit Union or a local to you Credit Union with a special deal)
Your 1-3 investment accounts would be allocated per the 1-4 fund Boglehead method(s) which actual allocation may differ from person to person, depending on their long-term safety margin, but for me the answer seems to be a 2 funder:
Regardless you should probably only choose from the list @ https://www.bogleheads.org/wiki/Fidelity for your investments, unless you have a fun money allocation where you play with individual stocks or are trying to time the market somehow to beat the returns(which usually ends up being bad for you). Or go play around in the Bogleheads Investing forum, as there has been loads written/debated about the best possible investments.
No idea what the best deal on funds for taxable investment accounts yet. Maybe a Vangaurd total stock and total bond ETF, despite the sales fee(though you would ideally only sell once a year max) . More research required here around Tax Lost Harvesting(TLH) and tax advantaged funds, etc. You should not hold Bond funds(FXNAX) in a taxable account, as taxes are definitely incurred on all earnings from a bond.
Outgoing/CMA should hold enough for 1 months expenses, topped off each month. The $'s should not be held in the core account, but in the MMF that's paying the best (FTEXX at the time of this writing). Check quarterly/yearly.
Reasoning: There are rare(maybe once a year, if you are unlucky), but documented, cases where fidelity may not be able to auto-pull from your brokerage account and sell your Money Market (MM)/core(SPAXX) to cover expenses. To avoid this, don't link the brokerage and have your brokerage just top up your CMA every night, as needed. Also, rather than rely on auto-funding, just move over what you need for the next month.
Should hold ~ 1-3 months of your emergency fund, and is a great place for your income(paycheck, direct deposits, etc) to get dumped into.
This money should be tied up in a Money Market(MM), whichever is currently paying the best from the below list with these caveats:
If your state has no income tax,then just pick the one with the highest (30 day) payout. If your state has income tax, and there is a fund with your state's name in it, then buy that MM.
Reasoning: a state named MM fund will almost certainly have state tax benefits(like no taxes on any income generally), assuming you live in that state.
For me, no state income tax, so I just buy the highest performing one(currently FTEXX) that I can buy.
Your sweep/core account(SPAXX) should always hover/trend around $0, as a MM fund above will pay more, and your top up to core will auto-sell your MM fund to fund your outgoing/checking account).
Check the list on a quarterly or yearly basis(can chase returns more often if you really wanted), or a big economic event is happening(example: covid)
list of MM funds with yields: https://institutional.fidelity.com/app/tabbed/dailypricing/FIIS_PP_SP28_DPL3.html?tab=dailypricing&productLineId=3&navId=325&previousDay=true&pos=T
The rest of your Emergency fund, if any, should be in a safe cash like investment, whatever is paying more from this list:
Reasoning: You should earn roughly inflation and maybe even beat inflation a little from whatever is the highest paying from the above list. The highest paying changes occasionally, recommend checking for new highest paying on a quarterly or yearly basis, or a drastic economic event happens(like say covid). This is mostly about how lazy/invested you want to be in your finances, you could chase returns and move money around daily/weekly if you wanted...
Targeted savings(new auto, expensive toy, etc) of 1-5 years long should also use the above list, unless you want to be very aggressive, and then best of luck to you!.
Other Fidelity setups
Setup auto fill of your outgoing account
Fidelity Manage Cash, select your outgoing account, then on the bottom right, is manager cash manager. Then fill out the form.Cash Manager Settings
Fidelity® Cash Management Account Individual - TOD (X--------) Cash Manager Status Active Overdraft Protection YES (Your money will be moved automatically) Overdraft Alert YES Add/Edit Alert Delivery Minimum Target Balance YES (Your money will be moved automatically) Minimum Target Balance Amount $1,000.00 Minimum Transfer Amount $250.00 Minimum Target Balance Alert YES Add/Edit Alert Delivery Maximum Target Balance NO Maximum Target Balance Amount None Maximum Target Balance Alert NO Funding Accounts and Hierarchy 1. Individual - TOD (X----------)
Account Numbers: instead of prefix "39900000" check's numbers have shorter prefix - "7710".
Why Fidelity
- It's generally cheaper in real $'s than competitors(and certainly is cheaper for me)
- It has what amounts to a checking account unlike Vanguard.
- It's ran by a woman.