Understanding Fidelity BrokerageLink
As a financial advisor who has helped hundreds of clients optimize their workplace retirement plans, I’ve found Fidelity’s BrokerageLink to be one of the most powerful yet underutilized 401(k) features. This self-directed brokerage option lets you bypass your plan’s limited mutual fund menu and access Fidelity’s entire mutual fund universe – with some important caveats.
Table of Contents
How BrokerageLink Works in Your 401(k)
Key Features
- Available in most Fidelity-administered 401(k) plans
- Typically allows investing in 95%+ of Fidelity mutual funds
- May permit non-Fidelity funds (varies by plan)
- Maintains the same tax advantages as your 401(k)
Plan-Specific Rules
Every 401(k) plan sets different BrokerageLink parameters:
- Minimums: Often $1,000 to open
- Contribution Limits: Usually 50-100% of account balance
- Trading Fees: Most Fidelity funds trade fee-free
- Restrictions: Some plans block certain asset classes
Example: One client’s plan allowed 90% of their balance in BrokerageLink but prohibited commodities funds.
Best Mutual Funds for BrokerageLink
Core Portfolio Building Blocks
| Fund Name | Ticker | Category | Expense Ratio |
|---|---|---|---|
| Fidelity 500 Index | FXAIX | Large Blend | 0.015% |
| Fidelity Extended Market | FSMAX | Mid-Cap Blend | 0.035% |
| Fidelity International Index | FSPSX | Foreign Large Blend | 0.035% |
| Fidelity U.S. Bond Index | FXNAX | Intermediate Core Bond | 0.025% |
Specialized Strategies
| Fund Name | Strategy | 5-Yr Return |
|---|---|---|
| Fidelity Real Estate (FRESX) | REITs | 6.8% |
| Fidelity Small Cap Value (FCPVX) | Value | 9.2% |
| Fidelity New Markets Income (FNMIX) | EM Debt | 5.4% |
Implementation Strategies
1. Core-Satellite Approach
- Core (70%): FXAIX + FSPSX + FXNAX
- Satellite (30%): 3-5 thematic/sector funds
2. Factor Tilting
- 50% FXAIX (market beta)
- 20% FCPVX (value)
- 20% Fidelity Growth Company (FDGRX) (growth)
- 10% FNMIX (alternative income)
3. Active/Passive Blend
- 60% index funds (FXAIX, FSPSX, FXNAX)
- 40% active funds (Contrafund, Low-Priced Stock)
Cost Considerations
While BrokerageLink expands options, costs vary:
| Fee Type | Typical Cost |
|---|---|
| Fidelity Fund Fees | 0.015%-0.75% |
| Non-Fidelity Funds | $75/trade + higher ERs |
| Account Maintenance | $25-$50/year (plan-dependent) |
Example: A $100,000 portfolio with:
- 80% in Fidelity index funds (0.03% avg ER) = $24/year
- 20% in non-Fidelity funds ($75/trade + 0.85% ER) = $245/year
Advanced Tactics
1. Mega Backdoor Roth
If your plan allows after-tax contributions to BrokerageLink:
- Contribute after-tax dollars beyond $23,000 limit
- Convert to Roth IRA
- Invest in tax-efficient growth funds like Fidelity Blue Chip Growth (FBGRX)
2. Tax-Loss Harvesting
While uncommon in 401(k)s, some BrokerageLink accounts permit:
- Selling underperforming funds
- Buying similar but not identical replacements
- Using losses to offset future gains
Common Mistakes to Avoid
- Overconcentration: I’ve seen clients put 50%+ in sector funds
- Performance Chasing: Buying last year’s top performers at peaks
- Neglecting Rebalancing: Letting allocations drift over years
- Ignoring Plan Rules: Some plans restrict trading frequency
Monitoring Your Investments
Set quarterly reminders to:
- Review asset allocation
- Compare performance to benchmarks
- Check for fund manager changes
- Assess whether strategy still matches goals
Case Study: BrokerageLink Success
A 45-year-old client had a 401(k) with only high-fee active funds (avg 1.2% ER). We:
- Moved 80% to BrokerageLink
- Built a portfolio with FXAIX, FSPSX, FXNAX (0.03% avg ER)
- Added 10% to Fidelity Contrafund (active growth)
- Reduced annual fees from $1,200 to $38
Projected savings over 20 years: $142,000
Getting Started Checklist
- Check Plan Documents: Confirm BrokerageLink availability/rules
- Allocate Wisely: Start with 20-30% of balance
- Select Funds: Mix of core + 1-2 satellite positions
- Set Calendar Reminders: Quarterly reviews
- Consult HR: Verify contribution limits
Final Recommendation
Fidelity BrokerageLink can transform a limited 401(k) into a customized investment platform. By combining low-cost index funds with strategic active positions, investors gain institutional-quality flexibility while maintaining 401(k) tax benefits. Start small (10-20% of balance), focus on long-term asset allocation, and gradually expand your strategy as you gain comfort with the platform.
