As discussed in a previous article, “The Definitive Guide To Investing In Stocks As A Minor,” a custodial account is the best method of investing if you are under 18. Unfortunately, law prohibits minors from opening and managing a stock account by themselves, so the next best thing is this type of account, where a custodian (usually a parent) oversees your finances until you are an adult, but you fully own all assets.
A big question for new investors is “what broker should I choose?” The short answer is whichever one suits your needs; TD Ameritrade has its pros and cons, as does Capital One Sharebuilder. My broker is Fidelity, partly because that is the broker my family uses, but also because of its unique set of pros that suite my investing style best. Previously, I had used Capital One Sharebuilder for a more hands-off conserving approach to investing, but my style changed to be more active, so I moved to Fidelity.
I personally feel that Fidelity is the best all-around broker for many different styles of investing. Here are its pros and cons (referring to the custodial account):
- Low-cost trade commissions
Fidelity offers lower than average brokerage fees. There are no annual account fees and commissions are only $4.95 per trade (low compared to an industry average of about $6.00).
- Commission-free ETFs and mutual funds
They offer more than 5,000 Fidelity Mutual Funds and ETFs. Some big names include the Fidelity® Balanced Fund (FBALX) and the Fidelity® International Small Cap Fund (FISMX). The best part about these funds is that they trade commission-free, so instead of paying $50 for each mutual fund trade, if you use Fidelity funds, it costs $0. In addition to this, they offer thousands of other funds, which trade for a fee of $49.95.
- Great research tools
Fidelity’s website offers awesome research tools, many of which can be used without an account.
- Excellent customer support
Though I have never had to use customer support, others speak highly of this service. Physical brokerage locations are great, and advisors go out of their way to help you out.
- Minimum balance requirement of $2,500
For some beginning investors, this could be a deal-breaker. $2,500 is a fairly large chunk of money to put down for a beginning investor, and there are other brokers who offer $0 account minimums. But, these come with trade-offs such as higher fees (which add up) so I would recommend to save up to a Fidelity account.
Now that you know why I think of Fidelity so highly and recommend them as a broker, I’m going to walk you through opening an account with them online.
To begin, you’re going to need your custodian, the person who will manage the account until you become of age. Usually, this is your parent. You will also need both your social security numbers, bank information and about 15-30 minutes.
Heres how you open the account. First, go to this link: https://www.fidelity.com/open-account/custodial-account. It brings you to a landing page where you can read about Fidelity’s Custodial Account features. When you are ready, click ‘Open A Custodial Account’.
1) About You
Your custodian* enters personal information; they need to verify your identity to open an account.
*it is important that your custodian fills out the form, it is illigal for a minor to open an account by him/herself.
After you click the ‘Open A Custodial Account’, you are presented with this screen:
(The rest of this guide assumes that your custodian doesn’t already have an account with Fidelity. If he/she does, then it should only be one or two clicks to create an account, and the rest of this guide does not apply to you.)
Select ‘no’ in the field where it asks if you are a customer. This brings up a field asking for your custodian’s name and email, which they should fill out.
Clicking ‘Get Started’ brings you to the next screen, asking for your custodian’s personal information, and address.
After this is filled out, you continue on to fill out the custodian’s employment status. If they are employed by a company, they may need to give their employers address. This section also requires two mandatory disclosures.
Then, its time to input your (the minor’s) information.
Following this screen, you are done imputing personal information. Now, you’ll need to choose your account preferences.
2) About Your Account
Set up account features and preferences, such as whether you want to receive financial documents electronically.
I prefer receiving account statements by mail, and they don’t cost anything (unlike other banks/brokers).
3) Review & Confirm
Review your selections, the customer agreement, and the terms and conditions.
After choosing your settings, you then need to confirm your information. Double check everything because if something is wrong it takes some time to fix it again.
After hitting submit, all you need to do is review the terms and conditions. They are in a PDF format, and I suggest reading them completely, then printing them for records.
4) Fund Your Account (Optional)
Transfer money and assets to your account.
After agreeing to the terms and conditions, you will own the account. All you need to do is fund it, something you can do now, or wait until later. If you choose to do it now, simply input your bank’s information such as a routing and account number. You may need to wait a few days to be processed. In the meantime, your custodian will be prompted to create a username and password.
Congratulations, you now own a Fidelity Brokerage account! Log onto Fidelity, and begin to explore their platform. They offer some great guides for first-time investors, which can be found here: www.fidelity.com/learning-center/overview.
We’ve published guides to opening custodial accounts with the following brokers. Each comes with it’s own perks, so take a look! 👇
|Schwab||Fidelity||Vanguard||TD Ameritrade||E-Trade||Ally Invest|