You can invest in ETFs through a brokerage account in the same way you buy individual stocks

To invest in ETFs, you open an account with a brokerage firm, deposit money, search for the ETF by its ticker symbol, and place a buy order during market hours. The ETF shares settle in your account within two business days. You do not need special permission, a minimum balance (though some brokerages set one), or prior investing experience. The entire process typically takes 15 minutes to an hour from account opening to your first purchase.

The main decision is which brokerage to use. Different firms charge different fees, offer different research tools, and have different account minimums. Some brokerages charge per trade; others charge nothing. Some require $500 to open an account; others require nothing. Your choice depends on how much you plan to invest, how often you plan to trade, and what tools matter to you.

Key Takeaways

  • You buy ETFs through a brokerage account using the ETF's ticker symbol, the same way you would buy a single stock.
  • Different brokerages charge different fees and have different account minimums, so comparing a few before opening an account saves money over time.
  • You can invest any amount, from a single share to thousands, and most brokerages now allow fractional share purchases.
  • ETF orders execute during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), and your shares settle two business days later.
  • You can hold ETFs in a regular taxable account or in a retirement account like an IRA, each with different tax treatment.

Choose a brokerage and open an account

A brokerage is a firm that holds your money and executes your trades. Common brokerages include Fidelity, Charles Schwab, E*TRADE, Vanguard, and Robinhood. Each one has a website and a mobile app where you can manage your account. To open an account, you visit their site, provide your name, address, Social Security number, and employment information, and link a bank account or transfer money in. The whole process is online and usually takes 10 to 15 minutes.

Before you choose, compare what each brokerage charges. Some charge a flat fee per trade (typically $5 to $10). Others charge nothing per trade but make money from other sources. Some charge annual account maintenance fees; most do not. Some require a minimum deposit to open an account (often $500 to $2,500); others require nothing. Look at the brokerage's website or call their customer service line to find the current fees, because they change.

You will also see options for account type: taxable account, IRA, Roth IRA, or 401(k). If you are not sure which one you need, start with a taxable account. You can always open a retirement account later. A taxable account has no contribution limits and no withdrawal restrictions, so it is the simplest place to begin.

Deposit money into your account

Once your account is open, you need to move money from your bank into the brokerage. You do this by linking your bank account to the brokerage and initiating a transfer. The brokerage will ask for your bank's routing number and your account number, which you can find on a check or in your bank's app. The transfer usually takes three to five business days.

Some brokerages offer faster options. A few allow you to transfer money the same day using a wire transfer, though wire transfers usually cost $10 to $25. Others let you deposit a check by taking a photo with their app. Check your brokerage's deposit options before you open an account if speed matters to you.

You do not have to deposit all your money at once. Many people deposit a small amount to start, make their first purchase, and then deposit more later as they save.

Find the ETF you want to buy and place an order

Once money is in your account, log in to your brokerage and look for the search or quote box. Type in the ETF's ticker symbol — a short code like SPY, VOO, or QQQ. The brokerage will show you the ETF's current price, its performance over different time periods, and a description of what it holds. Read the description to make sure it matches what you thought you were buying.

Click the "Buy" button. The brokerage will ask how many shares you want. You can buy whole shares or fractional shares (a piece of a share). For example, if an ETF costs $400 per share and you have $500 to invest, you can buy 1.25 shares instead of being forced to buy just 1 share and have $100 left over. Enter the number of shares and review your order. The order will show you the total cost and any fees.

Submit the order. If you place it during market hours (9:30 a.m. to 4 p.m. Eastern time on a weekday when the stock market is open), it will execute when ready at the current price. If you place it after hours or on a weekend, it will execute at the market open the next trading day. Your shares will appear in your account within two business days.

Understand the difference between market orders and limit orders

When you place a buy order, you choose between a market order and a limit order. A market order buys the ETF at whatever price it is trading at right now. It executes when ready during market hours, but the exact price you pay might be slightly different from the price you saw on the screen a few seconds ago, because prices move constantly.

A limit order lets you set a maximum price you are willing to pay. If the ETF is trading at $100 and you set a limit order for $99, the order will only execute if the price drops to $99 or lower. If the price never reaches $99, your order never executes and you do not buy anything. Limit orders are useful if you want to be sure you do not overpay, but they can also mean you miss out if the price never reaches your target.

For most people starting out, a market order is simpler. The price difference is usually small, and you know your order will go through. As you gain experience, you can experiment with limit orders.

Decide whether to use a taxable account or a retirement account

You can hold ETFs in a regular taxable account or in a retirement account. The difference is how the government taxes your gains and whether there are limits on how much you can contribute.

In a taxable account, you pay capital gains tax on any profit when you sell the ETF. You also pay tax on any dividends the ETF distributes. There are no contribution limits and no age restrictions on withdrawals. This is the simplest account type for beginners.

In a traditional IRA, contributions may be tax-deductible, and you do not pay tax on gains or dividends while the money is in the account. You pay tax when you withdraw money in retirement. You can contribute up to $7,000 per year (or $8,000 if you are 50 or older), and you cannot withdraw money before age 59½ without a penalty.

In a Roth IRA, contributions are not tax-deductible, but withdrawals in retirement are tax-free. Like a traditional IRA, the annual contribution limit is $7,000 (or $8,000 if you are 50 or older). Roth IRAs have income limits — if you earn above a certain amount, you cannot contribute directly.

If your employer offers a 401(k), you can also hold ETFs there. Contributions are usually deducted from your paycheck before taxes, and you do not pay tax on gains until you withdraw in retirement. Contribution limits are higher than IRAs — $23,500 per year in 2024, or $31,000 if you are 50 or older.

Monitor your investment and decide when to buy more

After you buy an ETF, you can check its value anytime by logging into your brokerage account. The account will show you how much you paid, what it is worth now, and whether you have a gain or a loss. Do not panic if the value drops — ETF prices move up and down every day, and short-term changes do not matter if you plan to hold for years.

Many people invest regularly by buying more ETF shares on a set schedule — for example, $500 every month. This is called dollar-cost averaging, and it means you buy more shares when the price is low and fewer shares when the price is high. Some brokerages let you set up automatic investments so the money transfers and buys automatically without you having to do anything.

You do not have to do anything else. ETFs hold many stocks or bonds, and the fund manager rebalances the holdings automatically. You straightforward hold the ETF and let it do its job.

Frequently Asked Questions

Do I need a lot of money to start investing in ETFs?

No. Most brokerages have no minimum deposit to open an account, and you can buy fractional shares, so you can invest any amount. Some people start with $100 or $500. The only limit is what you can afford to set aside.

What is the difference between buying an ETF and buying a stock?

The process is identical — you search for the ticker, place an order, and own shares. The difference is that an ETF holds many stocks or bonds inside it, so you own a piece of many companies with one purchase. A stock is a single company.

Can I sell an ETF whenever I want?

Yes. During market hours, you can sell any ETF in a taxable account anytime. In a retirement account like an IRA, you can sell anytime, but withdrawals before age 59½ usually trigger a penalty. Check your brokerage's rules for your specific account type.

What happens if the brokerage goes out of business?

Your money and investments are protected. Brokerages are required to hold customer assets separately from their own money, and the Securities Investor Protection Corporation (SIPC) insures up to $500,000 per account if a brokerage fails. Your ETF shares are yours regardless of what happens to the brokerage.

Should I buy ETFs in a taxable account or a retirement account?

If you have money you will not need for at least five years, a retirement account usually saves you more in taxes over time. If you might need the money sooner or want to withdraw without penalties, start with a taxable account. Many people use both.