You buy ETFs the same way you buy individual stocks — through a brokerage account, using a buy order placed during market hours

An ETF purchase starts with a brokerage account at a firm like Fidelity, Charles Schwab, E*TRADE, or your bank's investment division. You log in, search for the ETF by its ticker symbol (a short code like SPY or VOO), enter how many shares you want, and submit a buy order. The order executes during market hours — typically 9:30 a.m. to 4 p.m. Eastern time on weekdays when the stock market is open. The shares appear in your account within one business day, and you own them outright.

The main decision before you buy is whether to use a regular taxable brokerage account or a tax-advantaged account like an IRA or 401(k). Many people hold ETFs in both. A taxable account has no contribution limits and no withdrawal penalties, but you owe capital gains tax when you sell at a profit. An IRA or 401(k) lets your ETF holdings grow tax-deferred or tax-free, but has annual contribution limits and early withdrawal penalties. Your brokerage will let you choose the account type when you place the order.

Key Takeaways

  • You need a brokerage account open before you can buy an ETF — most major brokerages charge no account opening fee and no minimum balance.
  • Search for the ETF by its ticker symbol, decide how many shares you want to buy, and place a buy order during market hours (9:30 a.m. to 4 p.m. Eastern, weekdays).
  • Your order executes at the market price at the moment it processes, not at a price you set in advance — unless you use a limit order to cap the price you will pay.
  • Decide whether to hold the ETF in a taxable account (no limits, but you owe tax on gains) or a tax-advantaged account like an IRA (limited contributions, but tax-deferred growth).
  • Most brokerages charge no commission to buy or sell ETFs, though some charge a small fee for certain ETF families.

Opening a Brokerage Account

You cannot buy an ETF without a brokerage account. Opening one takes 10 to 15 minutes online. You will need your Social Security number, a government ID, your address, and a bank account to fund the account with your first deposit. Most major brokerages — Fidelity, Charles Schwab, E*TRADE, Vanguard, TD Ameritrade, and Robinhood — charge no account opening fee and no monthly fee. Some have no minimum deposit, while others ask for $500 or $1,000 to start.

When you open the account, you will choose between a taxable brokerage account and a retirement account (IRA, Roth IRA, or SEP-IRA if you are self-employed). A taxable account is the default if you just want to invest money without special tax treatment. A traditional IRA or Roth IRA is for retirement savings and has annual contribution limits — $7,000 per year for most people in 2024, or $8,000 if you are 50 or older. If you already have a 401(k) through your employer, you can often buy ETFs inside it, though your employer's plan administrator controls which ETFs are available.

After you open the account, you will need to fund it by linking a bank account and transferring money. This usually takes one to three business days. Once the money is in your brokerage account, you are ready to buy.

Finding and Selecting an ETF to Buy

Every ETF has a ticker symbol — a short code of one to five letters. SPY tracks the S&P 500, VOO tracks the S&P 500 with lower fees, QQQ tracks the Nasdaq 100, and BND tracks U.S. bonds. You search for the ETF by typing its ticker into your brokerage's search bar. The brokerage will show you the ETF's current price per share, its expense ratio (the annual fee charged as a percentage of your investment), and basic information about what it holds.

Before you buy, check the expense ratio. Most broad stock ETFs charge between 0.03% and 0.20% per year — meaning you pay $3 to $20 annually on a $10,000 investment. Bond ETFs and specialty ETFs may charge more. The expense ratio is deducted automatically from the fund's value, so you do not pay it separately. Lower is better, but a slightly higher fee is worth paying if the ETF tracks an index you specifically want.

You can also see the ETF's trading volume — how many shares trade hands each day. High volume (millions of shares per day) means you can buy and sell easily without moving the price. Low volume (tens of thousands of shares) means your order might take longer to fill or cost you a bit more. For most investors, any ETF with daily volume above 100,000 shares is liquid enough.

Placing a Buy Order

Once you have found the ETF, click the buy button in your brokerage account. You will see a form asking how many shares you want. Enter the number — if the ETF costs $100 per share and you want to invest $5,000, you would enter 50 shares. Some brokerages let you enter a dollar amount instead, and they calculate the shares for you.

Next, you choose the order type. A market order buys at whatever price the ETF is trading at the moment your order executes. This is the default and is fine for most ETFs because they trade constantly. A limit order lets you set a maximum price you will pay — useful if you want to buy only if the price drops to a certain level. A limit order may not fill if the price never reaches your limit.

You will also choose when the order is good for. A day order expires at the end of the trading day if it does not fill. A good-till-canceled order (GTC) stays active until you cancel it or it fills, usually for up to 90 days. For a market order on a liquid ETF, day order is standard.

Finally, confirm which account the purchase will come from — your taxable account, IRA, or 401(k) — and submit the order. The order executes during market hours (9:30 a.m. to 4 p.m. Eastern, Monday through Friday). If you place an order after market hours or on a weekend, it will execute the next market open.

What Happens After You Buy

Once your order fills, the shares appear in your account within one business day. You own them outright and can hold them as long as you want, sell them whenever you want, or buy more. Your brokerage will send you a confirmation email showing the number of shares, the price per share, and the total cost (including any commission, though most brokerages charge no commission for ETF trades).

You will see the ETF's current value update in real time during market hours. If the price goes up, your position gains value. If it goes down, your position loses value. This is normal — ETF prices move every day. You do not owe any tax on these gains until you sell the shares. If you hold the ETF in a Roth IRA, you owe no tax on gains even when you sell.

If the ETF pays a dividend (many do, especially bond and dividend-focused ETFs), your brokerage will deposit the dividend into your account automatically, usually quarterly. You can reinvest the dividend by buying more shares, or leave it as cash. Some brokerages offer automatic dividend reinvestment, which buys more shares for you without you having to do anything.

Costs and Fees to Know About

Most brokerages charge no commission to buy or sell ETFs. This was not always true — 10 years ago, a typical trade cost $5 to $10 — but competition has driven commissions to zero at all major firms. A few brokerages charge a small fee (usually $1 to $5) for certain ETF families, but this is rare and usually disclosed upfront.

The main cost you will pay is the ETF's expense ratio, which is a percentage of your investment charged annually. A 0.10% expense ratio on a $10,000 investment costs $10 per year. This is deducted automatically from the fund's value, so you never write a check for it. Over time, a difference of 0.10% in expense ratio can add up — a 0.05% ETF will outperform a 0.15% ETF by about 0.10% per year, all else equal.

If you buy and sell frequently, you may also owe short-term capital gains tax on profits. Short-term gains (on shares held less than one year) are taxed as ordinary income, which is usually higher than the long-term capital gains rate. Long-term gains (on shares held more than one year) are taxed at a lower rate. This is one reason holding ETFs in a Roth IRA or traditional IRA can be valuable — you avoid these taxes entirely.

Common Mistakes to Avoid

A common mistake is placing a market order outside market hours and being surprised by the price when it fills the next morning. ETF prices can move overnight if world markets move, so the price you see at 6 p.m. may not be the price you get at 9:30 a.m. If you want to control the price, use a limit order or wait to place your order during market hours.

Another mistake is buying an ETF with very low trading volume. If an ETF trades only a few thousand shares per day, your order might take a long time to fill, or you might pay a slightly higher price than the last trade. Check the daily volume before you buy — anything above 100,000 shares per day is safe for most investors.

A third mistake is not considering the tax account. Buying a high-dividend ETF in a taxable account means you will owe tax on those dividends every year, even if you do not sell. Buying the same ETF in a Roth IRA means the dividends grow tax-free. Think about what kind of ETF you are buying and which account makes sense for it.

Frequently Asked Questions

Can I buy ETFs with a small amount of money?

Yes. Since ETFs trade in shares and most ETFs cost $50 to $200 per share, you can buy one or two shares with a small amount. Some brokerages also offer fractional shares, letting you invest any dollar amount — for example, $100 even if one share costs $150. Check your brokerage's website to see if fractional shares are available.

What is the difference between buying an ETF and a mutual fund?

ETFs and mutual funds both hold a basket of stocks or bonds, but ETFs trade like stocks (you buy and sell during market hours at changing prices) while mutual funds trade once per day at a set price. ETFs usually have lower expense ratios and are more tax-efficient. Most new investors choose ETFs over mutual funds.

Do I need a lot of money to start buying ETFs?

No. Most brokerages have no minimum deposit, and you can buy a single share of an ETF for whatever that share costs. If you want to invest $500, you can do that. If you want to invest $50,000, you can do that too. Start with whatever amount you are comfortable with.

What happens if the brokerage goes out of business?

Your ETF shares are protected. The Securities Investor Protection Corporation (SIPC) insures brokerage accounts up to $500,000 per account holder per firm. Your ETFs are held in your name, not the brokerage's name, so even if the brokerage fails, your shares belong to you and can be transferred to another brokerage.

Can I set up automatic purchases of an ETF?

Yes. Most brokerages offer automatic investment plans where you set up a recurring transfer from your bank account and a recurring purchase of an ETF. You might set it to buy $500 of an ETF every month, for example. This is called dollar-cost averaging and can reduce the impact of price swings over time.