How to Automatically Reinvest Dividends with Fidelity: A Step-by-Step Guide
Dividends are a great way to earn passive income from your investments. Reinvesting these dividends can help grow your portfolio over time. Fidelity Investments, one of the largest brokerage firms in the United States, offers an automatic dividend reinvestment program (DRIP) that allows you to reinvest your dividends automatically. In this article, we will guide you through the process of setting up automatic dividend reinvestment with Fidelity, and answer some frequently asked questions about the program.
Step 1: Open a Fidelity Account
To begin, you need to have a Fidelity brokerage account. If you don’t have one, visit Fidelity’s website and follow the steps to open an account. You can choose between a traditional brokerage account, an individual retirement account (IRA), or other account types. Once your account is open and funded, you can proceed to the next step.
Step 2: Enroll in the Dividend Reinvestment Program
Log into your Fidelity account and navigate to the “Accounts & Trade” tab. From there, select “Account Features” and then “Dividend Reinvestment.” You will be prompted to accept Fidelity’s terms and conditions for the dividend reinvestment program. Carefully read through the terms, and if you agree, click on “Enroll” or a similar button to proceed.
Step 3: Choose Your Investments
After enrolling in the dividend reinvestment program, you need to select the specific investments you want to reinvest dividends for. You can choose individual stocks, mutual funds, exchange-traded funds (ETFs), or other eligible securities. To make your selections, go to the “Accounts & Trade” tab, click on “Positions,” and then choose “Dividends & Capital Gains” from the dropdown menu. From there, you can select the investments you want to reinvest dividends for.
Step 4: Confirm Your Selections
Once you have chosen the investments you want to reinvest dividends for, review your selections to ensure they are correct. Double-check that you have selected the right securities and that the reinvestment option is enabled for each investment. If everything looks good, click on “Save” or a similar button to confirm your selections.
Step 5: Sit Back and Reap the Benefits
Congratulations! You have successfully set up automatic dividend reinvestment with Fidelity. From now on, any dividends you receive from your selected investments will be automatically reinvested, helping to grow your portfolio over time. You can track your reinvested dividends and monitor the performance of your investments through your Fidelity account.
FAQs:
1. Can I enroll in Fidelity’s dividend reinvestment program for all types of investments?
Fidelity’s dividend reinvestment program is available for most stocks, mutual funds, and ETFs. However, certain securities, such as foreign stocks or those with low trading volume, may not be eligible. Check Fidelity’s website or contact customer support for specific details.
2. Do I need to pay any fees to participate in the program?
Fidelity does not charge any fees for enrolling in their dividend reinvestment program. However, there might be transaction fees associated with buying or selling securities, so it is important to review the fee schedule for your account.
3. Can I choose to reinvest dividends for some investments and receive cash for others?
Yes, Fidelity allows you to choose which investments you want to reinvest dividends for. You can also choose to receive cash for certain investments if you prefer.
4. How often are dividends reinvested?
Dividends are typically reinvested as soon as they are received by Fidelity. The reinvestment process usually occurs within a few business days after the dividend payment date.
5. Can I change my dividend reinvestment options later?
Absolutely! You can modify your dividend reinvestment options at any time. Simply log into your Fidelity account, navigate to the dividend reinvestment settings, and make the desired changes.
6. Will my reinvested dividends be subject to taxes?
Reinvested dividends are generally taxable, just like cash dividends. Consult with a tax advisor or review Fidelity’s tax guidelines for more information on the tax implications of reinvested dividends.
7. Can I reinvest dividends for a specific number of shares?
Fidelity’s dividend reinvestment program reinvests dividends based on the dollar amount received rather than the number of shares. This ensures that fractional shares are purchased, allowing you to maximize your reinvested dividends.
8. Can I set up automatic dividend reinvestment for my retirement accounts?
Yes, Fidelity’s dividend reinvestment program is available for individual retirement accounts (IRAs) and other retirement account types. The process for setting it up is similar to that of a regular brokerage account.
9. Can I enroll in the dividend reinvestment program for multiple accounts?
Yes, you can set up dividend reinvestment for multiple Fidelity accounts. Simply follow the same steps outlined above for each account.
10. Will I receive notifications when dividends are reinvested?
Yes, Fidelity will provide notifications to inform you when dividends are reinvested. You can choose to receive these notifications via email or through your Fidelity account.
11. Can I stop dividend reinvestment for specific investments?
Yes, you can disable dividend reinvestment for specific investments at any time. Simply go to your dividend reinvestment settings and deselect the investments you want to receive cash dividends for.
12. What happens if I sell my securities that are enrolled in the dividend reinvestment program?
If you sell your securities, any pending dividends will be paid in cash rather than reinvested. To continue reinvesting dividends, you will need to select new investments for the program.
By following these steps and utilizing Fidelity’s dividend reinvestment program, you can automatically reinvest your dividends and potentially accelerate the growth of your investment portfolio. Remember to consult with a financial advisor or Fidelity’s resources for further guidance specific to your investment goals and preferences.