Fidelity targets the next generation of investors with teen-inspired portfolios

Fidelity demystifies investing for teens overwhelmed by options with new Fidelity Youth Baskets. Here's how they work.

• Fidelity introduces new Youth Baskets to support and educate the next generation of investors. 
• Using its existing basket-investing technology, Fidelity created portfolios using feedback from teenagers.
• They're available through the Fidelity Youth app and target market sectors that young investors are most interested in.

Fidelity is sharpening its focus on younger investors with new investment options targeting sectors that teens are most interested in.

The firm this week introduced Fidelity Youth Baskets. They're available through the Fidelity Youth app, which is designed to help teens learn to manage and invest their money. Analysts created three thematic investment baskets — Clothes, Shoes & Beauty; Gaming, Social Media & Connectivity; and Entertainment — after surveying app users about their interests.

The new investment options are based on Fidelity's existing technology for building basket portfolios. Fidelity Youth account holders who invest in them will also get educational videos and animations teaching them how they work.

"We see that it's our responsibility to educate people who are just getting started," Kelly Lannan Senior Vice President of Emerging Customers at Fidelity Investments, said in an interview. "One of our main principles is making investing accessible. By eliminating trading fees, commissions, and minimums, we've opened a door for a wide range of people."

Teens can access Youth Baskets without paying the $4.99 monthly Fidelity Basket Portfolios subscription. However, teen-inspired baskets don't have the same flexibility and customization as regular Fidelity Basket Portfolios.

Are Fidelity Youth Baskets right for you? Here's everything you need to know about basket investing for teens through Fidelity.

What are Fidelity Youth Baskets?

Fidelity Youth Baskets are an accessible, straightforward trading strategy for teens to get a jumpstart on their investing journey. Basket investing is sort of like customizing your own mutual fund. You fill a basket with hand-picked stocks and ETFs based on a theme, idea, or market sector. But rather than managing those securities individually, a basket is managed as a singular investment.

"Teens are investing in stocks and companies they already know," said Lannan. "We surveyed thousands of teens on what interests them and what trends were important to them. Then we collected that data and gave it to our asset management team to create baskets."

Teenagers from age 13 to 17 with active Fidelity Youth accounts can invest in the following three Youth Baskets:

• Clothes, shoes, and beauty
• Gaming, social media, and connectivity
• Entertainment

Fidelity used its existing basket-investing technology and paired it with feedback from teenagers to design expert-curated investment portfolios suitable for novice investors. For example, teens can invest in Apple, Netflix, and Disney in the Entertainment Youth Basket.

Accounts must be converted into a standard Fidelity brokerage account when teens turn 18. Fidelity won't sell the securities in your Youth Basket when you turn 18, but you'll need to pay the Fidelity Basket Portfolio subscription to continue managing these securities as one investment. 

Fidelity Youth Basket pros and cons

Fidelity Youth Baskets vs. Fidelity Basket Portfolios

With a regular Fidelity Basket Portfolio, you can choose one of the pre-built models from Fidelity experts or create your own using market screeners and other charting tools. You'll have the flexibility to add and remove securities as you see fit, adjust target weights, and set recurring investments. 

"Investing in basket portfolios is similar to buying a meal kit," said Lannan. "You're automatically provided with the right recipe and ingredients."

Fidelity Youth Baskets, on the other hand, lack this flexibility. Teens investing in a Youth Basket portfolio won't be able to add or remove investments outside the three pre-built teen-inspired thematic baskets, nor can they adjust the target weights.

The Youth thematic baskets aim to ease teens into stock trading with simplified investing strategies while mitigating portfolio risk. The lack of flexibility, while limiting, can prevent teens from investing in volatile or high-risk assets like mutual funds, REITs, or crypto. 

"Baskets add an element of diversification," Said Lannan. "Rather than investing in a single security, teens invest in a whole portfolio of different securities. This helps balance out some of the risks that come along with investing." 

Risk is also mitigated through the app's curated video content. Before investing in one of the Youth Baskets, users are greeted with an educational video featuring one of the basket's creators. "Pairing investments with education offers a way for teens to build up confidence even before clicking on the portfolios," said Lannan. 

How to invest in Fidelity Youth Baskets

Anyone aged 13-17 with an active Fidelity Youth account can invest in Fidelity Youth Baskets free of subscriptions or additional fees. Parents with an existing Fidelity account can open Youth accounts on behalf of a child. Once signed up, teens can download the free Fidelity Youth app on their mobile devices and activate their accounts. 

Unlike a custodial account, teens are fully in charge of managing their Youth investment portfolios. Parents can still track and monitor their teen's account, but they'll be unable to make withdrawals or transactions on behalf of their kids. 

Are Fidelity Youth Baskets right for you? 

Fidelity's new Youth Basket portfolios provide an accessible, straightforward way for young investors to manage a diversified portfolio of investable securities. If you're between 13 and 17 years old, basket investing through Fidelity is a great way to build upon existing investing knowledge and get hands-on experience managing a diversified portfolio of stocks and ETFs. 

"The earlier you start, the better off you are," said Lannan. "We know the importance of starting early. With Fidelity, we're trying to help teens and their parents build money-managing skills."

Overall, Fidelity Youth Baskets are inexpensive. There are no additional minimums, subscription fees, or commissions. You can start investing for as little as $1. Investors 18 and up must pay the $4.99 subscription fee to access Fidelity Basket Portfolios. So, if you're teen is nearing the age of 18, this may be a drawback. 

It's also important to mention that Fidelity Youth is not a custodial UTMA/UGMA account. Parents interested in investing and managing on behalf of a child until they are 18 (or 25, depending on the state) shouldn't open a Fidelity Youth account since Youth accounts are teen-owned.

Fidelity does offer a custodial account option for those interested. Or you check out our guide to the best custodial accounts for more options.