You choose what to buy inside your Fidelity Roth IRA account

Once you open a Fidelity Roth IRA and fund it with money, you then decide what investments to hold in that account. Fidelity does not automatically invest your cash — it sits in a settlement fund (currently earning a small interest rate) until you pick stocks, bonds, mutual funds, exchange-traded funds (ETFs), or other securities. The Roth IRA is the tax wrapper; what you buy inside it is up to you.

Fidelity offers thousands of investments with no account minimums for most of them. You can buy individual stocks, Fidelity's own mutual funds, third-party mutual funds, ETFs, bonds, and money market funds all within the same account. You are not locked into any single type of investment, and you can change your holdings as often as you want without tax consequences — one of the main advantages of using a Roth IRA.

Key Takeaways

  • Cash deposited into your Fidelity Roth IRA stays uninvested until you place a trade or set up an automatic investment plan.
  • You can hold stocks, mutual funds, ETFs, bonds, and money market funds in the same Roth IRA with no minimum purchase amounts for most investments.
  • Fidelity's website and mobile app let you search for investments by name, ticker symbol, or investment goal, then buy them with a few clicks.
  • Target-date funds and index funds are common starting points for people who do not want to pick individual investments.
  • You can set up automatic monthly or quarterly investments so money moves from your settlement fund into your chosen investments without you having to trade each time.

How to place your first investment trade on Fidelity

Log into your Fidelity account online or through the mobile app. Click on the "Trade" or "Invest" tab (the exact label varies by platform). Search for the investment you want by typing its name or ticker symbol — for example, "VOO" for Vanguard's S&P 500 ETF, or "Apple" for the stock.

Once you find it, Fidelity shows you the current price, a chart of recent performance, and basic information about the investment. Click "Buy" and enter the number of shares you want, or the dollar amount you want to spend. Review the order, confirm it, and submit. The trade executes during market hours (typically 9:30 a.m. to 4 p.m. Eastern time on weekdays). Your settlement fund balance drops by the amount you spent, and the new investment appears in your holdings.

If you are buying a mutual fund instead of a stock or ETF, the process is the same, but mutual funds typically settle at the end of the trading day rather than instantly. Fidelity does not charge commissions on stocks, ETFs, or most mutual funds, so you pay only the price of the investment itself.

Understanding Fidelity's investment options and how to choose

Index funds and ETFs track a market index — such as the S&P 500, the total U.S. stock market, or the bond market — and hold all or most of the stocks or bonds in that index. They typically have low fees (called expense ratios) and require little active decision-making. Examples include Fidelity's own FSKAX (total U.S. stock market) or FTBFX (total bond market), or third-party options like VOO or VTI.

Target-date funds are all-in-one portfolios designed for a specific retirement year. If you plan to retire around 2050, you pick a 2050 target-date fund, and it automatically holds a mix of stocks and bonds appropriate for someone retiring then. As the target date approaches, the fund gradually shifts toward more conservative holdings. Fidelity offers its own target-date series (such as FIKFX for 2050) and also carries Vanguard and other providers' versions.

Individual stocks let you own shares of specific companies. This requires more research and carries more risk than index funds, because the performance of one company can swing widely. Fidelity's stock screener and research tools can help you compare companies, but picking individual stocks is not necessary to build wealth in a Roth IRA.

Mutual funds are actively managed pools of stocks or bonds chosen by a fund manager. They typically charge higher fees than index funds because someone is actively trading to try to beat the market. Some do; many do not. Fidelity offers its own mutual funds and carries thousands from other providers.

Bonds and bond funds are loans you make to governments or corporations in exchange for interest payments. Individual bonds have a set maturity date and pay a fixed rate. Bond funds hold many bonds and fluctuate in price. They are generally less volatile than stocks but also offer lower long-term returns.

Setting up automatic investments so you do not have to trade manually each time

Fidelity's automatic investment plan (sometimes called a "systematic investment plan") lets you schedule regular transfers from your settlement fund into your chosen investments. Go to the "Accounts & Trade" section, find "Automatic Investments," and set up a new plan. Choose the investment, the dollar amount, and the frequency (weekly, biweekly, monthly, or quarterly).

Once the plan is active, Fidelity moves the money on your chosen dates without you having to log in and place a trade each time. This is useful if you receive a paycheck on a regular schedule and want to invest a fixed amount right away. It also removes the temptation to time the market or hold cash waiting for a "better" entry point.

You can pause, change, or cancel an automatic investment plan at any time. There is no penalty for doing so, and the money stays in your account if you stop the plan.

What happens to dividends and capital gains inside your Roth IRA

When stocks or funds inside your Roth IRA pay dividends, or when you sell an investment for a profit, that money stays inside the account and is not taxed. You can either let dividends reinvest automatically (buying more shares of the same investment) or have them land in your settlement fund so you can invest them elsewhere.

To set up automatic dividend reinvestment, go to your account settings and turn on DRIP (dividend reinvestment plan) for each holding, or set a default for all holdings. This is a common choice for long-term investors because it compounds your growth without creating a tax bill — one of the main reasons to use a Roth IRA in the first place.

If you sell an investment at a loss, you cannot deduct that loss on your taxes (unlike in a regular taxable account). But you also do not owe tax on gains, so there is no penalty for rebalancing or changing your strategy.

Rebalancing and changing your investments over time

As your investments grow at different rates, your portfolio can drift away from your original plan. If you started with 70% stocks and 30% bonds, and stocks soared, you might now have 80% stocks and 20% bonds. Rebalancing means selling some of the winners and buying more of the losers to get back to your target mix.

You can rebalance as often as you want inside a Roth IRA without tax consequences. Many people rebalance once a year or when their allocation drifts more than 5% from the target. If you use a target-date fund, the fund manager rebalances automatically, so you do not have to.

If you change your mind about an investment entirely, you can sell it and buy something else the same day. There is no holding period, no penalty, and no tax bill. This flexibility is one reason a Roth IRA is a good place to learn about investing — you can experiment without the tax cost of mistakes.

Frequently Asked Questions

Can I keep cash in my Fidelity Roth IRA without investing it?

Yes. Cash sits in Fidelity's settlement fund, which currently earns interest, though the rate is typically lower than a high-yield savings account. However, cash does not grow enough to meet most retirement goals, so most people invest at least part of it. You can keep some cash as an emergency buffer and invest the rest.

What is the minimum amount I have to invest in a single stock or fund?

For stocks and ETFs, you can buy as little as one share, which might be $50 to $500 depending on the stock's price. Most mutual funds have no minimum. Some Fidelity funds have zero minimums; others have $2,500 minimums, but those minimums are often waived if you set up automatic investments. Check the fund's details page before you buy.

Can I lose money in my Roth IRA?

Yes. If you invest in stocks or stock funds and the market falls, your account value drops. However, you cannot lose more than you put in (unless you use leverage, which Fidelity does not allow in IRAs). The Roth IRA is a tax-advantaged account, not a may provide against investment losses. Time and diversification reduce risk over long periods.

Should I pick individual stocks or use index funds?

Index funds are simpler and statistically outperform most individual stock pickers over 10+ years. If you are new to investing, an index fund or target-date fund is a solid starting point. Individual stocks require more research and carry more risk, but some people find them educational and rewarding. You can do both — hold mostly index funds and use a small portion for individual stocks.

How do I know if my investments are performing well?

Fidelity shows your account balance, the value of each holding, and your overall gain or loss. You can also see your performance over different time periods (one month, one year, five years, etc.). Compare your returns to a relevant benchmark — for example, if you hold an S&P 500 index fund, compare it to the S&P 500 index. Over short periods, performance varies; over 10+ years, consistency matters more than beating the market.