When it comes to managing your investments, one of the most significant factors to consider is the cost of commissions. Over time, commissions can eat into your returns, making it essential to choose a platform that offers low fees. Fidelity, one of the most popular brokerage firms, is known for its commission-free trading for stocks, ETFs, and options. But how much money can you save on commissions when you use Fidelity? In this article, I’ll break down the potential savings, compare Fidelity’s fees with those of other platforms, and provide practical examples to help you understand how much you could potentially save in commission costs.
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Understanding Fidelity’s Fee Structure
Before we dive into the savings calculations, it’s crucial to understand the commission structure at Fidelity. They offer commission-free trades on U.S. stocks, ETFs, and options. However, for options, there is a $0.65 fee per contract. So, while you won’t pay a commission for the trade itself, there’s a small fee per contract for options trading.
Other fees to be aware of include:
- Mutual funds: Fidelity offers over 3,400 no-fee mutual funds. However, there are still some mutual funds that might carry a commission or transaction fee, generally ranging from $49.95 to $75.
- Account fees: Fidelity does not charge for account maintenance, which is a significant plus. They also have no inactivity fees, making it an attractive choice for those who may not trade frequently.
Comparing Fidelity’s Fees to Other Brokers
To understand how much you can save with Fidelity, it’s useful to compare its fees to those of other popular brokers like Charles Schwab, TD Ameritrade, and E*TRADE. Below is a comparison table to highlight the differences in commission costs.
| Broker | Stock/ETF Commission | Options Fee | Mutual Fund Fee | Account Fees |
|---|---|---|---|---|
| Fidelity | $0 | $0.65 per contract | $0 (3,400+ no-fee funds) | None |
| Charles Schwab | $0 | $0.65 per contract | $0 (Over 4,000 no-fee funds) | None |
| TD Ameritrade | $0 | $0.65 per contract | $49.99 (non-NTF funds) | None |
| E*TRADE | $0 | $0.65 per contract | $19.99-$49.99 (non-NTF funds) | $0-$25/year |
As you can see, Fidelity’s stock and ETF commissions are identical to its competitors. Where Fidelity stands out is in the wide selection of no-fee mutual funds and the absence of account maintenance or inactivity fees, which many brokers still charge.
Calculating Your Potential Savings with Fidelity
Now, let’s look at some examples to see how much money you could save on commissions with Fidelity compared to other platforms.
Scenario 1: Trading 100 Stocks Per Year
Let’s assume you buy and sell 100 stocks per year, and each trade costs $10 in commission on a competitor platform. Here’s how the numbers add up:
- Competitor Fee (per trade): $10
- Number of Trades per Year: 100
- Total Annual Commission Fees with Competitor: $10 * 100 = $1,000
If you use Fidelity, the same 100 trades would cost you nothing for stock or ETF trades. You’d save the full $1,000 in commissions.
Scenario 2: Trading Options
Now let’s consider a scenario where you’re trading options. You execute 100 options trades, each with 10 contracts. At most brokers, you’ll pay a commission fee of $0.65 per contract.
- Competitor Fee (per contract): $0.65
- Number of Contracts per Trade: 10
- Number of Trades per Year: 100
- Total Commission Fees with Competitor: $0.65 * 10 contracts * 100 trades = $650
With Fidelity, the same number of trades would still incur the $0.65 per contract fee. So, for 100 trades with 10 contracts each, you would pay:
- Fidelity Fee (per contract): $0.65
- Total Commission Fees with Fidelity: $0.65 * 10 contracts * 100 trades = $650
In this case, the commission fees would be identical, so there’s no difference in cost.
Scenario 3: Mutual Fund Investing
Suppose you’re investing in mutual funds, and you buy 10 funds per year. Let’s assume that some of the funds you choose carry a $49.95 commission fee.
- Competitor Fee (per fund purchase): $49.95
- Number of Funds per Year: 10
- Total Annual Commission Fees with Competitor: $49.95 * 10 = $499.50
On Fidelity, if you choose from their 3,400+ no-fee funds, you pay $0 in commissions. If the same funds with fees were available at Fidelity, you’d save $499.50.
Long-Term Impact of Commission Savings
The savings on commissions might seem modest for a single year, but over time, they can have a significant impact. Let’s take a long-term view and look at how much you’d save over 10 years with Fidelity compared to other brokers.
Example 1: 10 Years of Stock Trading
If you’re trading 100 stocks per year and saving $1,000 annually in commissions, over the course of 10 years, you’d save:
- Annual Savings: $1,000
- 10-Year Savings: $1,000 * 10 = $10,000
Example 2: 10 Years of Options Trading
If you’re trading options with 100 trades per year and paying $650 in commissions each year, after 10 years, you’ll save:
- Annual Savings: $0 (same commission on Fidelity and competitors)
- 10-Year Savings: $0
While you wouldn’t save money on options fees by choosing Fidelity over competitors, the fact that you’re saving in other areas (like stocks and ETFs) might offset these costs.
Example 3: 10 Years of Mutual Fund Investing
If you’re investing in mutual funds and paying $499.50 in commissions every year for 10 years, you’d save:
- Annual Savings: $499.50
- 10-Year Savings: $499.50 * 10 = $4,995
Again, if you invest in Fidelity’s no-fee mutual funds, you could save this entire amount.
Additional Savings with Fidelity
Beyond commission-free trades, Fidelity offers a variety of services that could further enhance your savings. For example, their Cash Management Account offers:
- No monthly fees
- A competitive interest rate on your cash balance
- ATM fee reimbursements (up to $30 per month)
Furthermore, Fidelity’s investment tools and research resources are available at no extra cost, which can help you make more informed decisions. By avoiding costly research subscriptions and paying fewer fees, you’re maximizing your returns.
Conclusion
When you choose Fidelity, the commission-free trades on stocks, ETFs, and mutual funds can lead to substantial savings. Even though options trading might incur a small fee, the overall savings can be impressive, especially when you trade frequently. Over the long term, these savings can add up to thousands of dollars, contributing to better returns on your investments. While commissions are just one piece of the puzzle, they’re an important factor that should not be overlooked when choosing a broker. By considering Fidelity’s fee structure, you can make more informed decisions and keep more of your hard-earned money working for you.