Yes, brokerages sell index funds as part of their standard investment offerings

A brokerage is a company that lets you buy and sell investments, and nearly every brokerage offers index funds. You open an account with them, deposit money, and then use their platform to purchase index funds from the fund companies that create them. The brokerage acts as the middleman — they don't create the index funds themselves, but they make them available to you alongside stocks, bonds, and other investments.

The major brokerages — Fidelity, Charles Schwab, E*TRADE, Vanguard, and others — all carry index funds from multiple fund companies. Some brokerages also create their own index funds. For example, Vanguard is both a brokerage and a fund company, so when you buy a Vanguard index fund through Vanguard's brokerage platform, you're buying directly from the creator. When you buy a Vanguard index fund through Fidelity's platform, Fidelity is the middleman.

Key Takeaways

  • Brokerages like Fidelity, Schwab, and E*TRADE all offer index funds from multiple fund companies in their investment menus.
  • You need a brokerage account to buy index funds — you cannot purchase them directly from the fund company without going through a broker.
  • Many brokerages offer their own index funds at no transaction cost, while index funds from other companies may carry small fees.
  • The brokerage you choose affects which index funds are available to you and what you pay in trading costs.

How to find index funds through a brokerage

Once you open an account and log into the brokerage's platform, you search for index funds by name or ticker symbol. For example, if you want the Vanguard S&P 500 ETF, you would search for "VOO" (its ticker) or type the fund name. The platform shows you the fund's details — its expense ratio, holdings, and performance history — and lets you decide how much to invest.

Most brokerages organize their offerings so you can filter by fund type: broad market index funds, sector index funds, bond index funds, and so on. Some platforms make it easier than others to compare funds side by side, but the basic process is the same across all major brokerages.

Whether you pay a trading fee depends on the fund and the brokerage

Many brokerages charge zero transaction fees to buy their own index funds. Vanguard charges nothing to buy Vanguard index funds through Vanguard. Fidelity charges nothing to buy Fidelity index funds through Fidelity. This is a selling point — the brokerage wants to keep your money with them.

When you buy an index fund from a different company through a brokerage, the fee structure varies. Some brokerages charge a small per-trade fee (often $5 to $10) to buy certain funds. Others have eliminated trading fees across the board, even for funds they don't create. The trend in recent years has been toward zero fees, but you should check your specific brokerage's fee schedule before you open an account.

The expense ratio — the annual cost to own the fund itself — is separate from any trading fee. Even if the brokerage charges zero to buy the fund, you still pay the fund's expense ratio each year, which is typically between 0.03% and 0.20% for index funds.

Different brokerages carry different index fund lineups

Not every brokerage carries every index fund. A brokerage might offer 50 S&P 500 index funds from different companies, or it might offer only a handful. If you have your heart set on a specific index fund, you should check whether your chosen brokerage carries it before you open an account.

This is one reason people choose one brokerage over another. If you want access to a wide range of index funds from many fund companies, a large brokerage like Fidelity or Schwab gives you more options. If you primarily want to buy funds from one company — say, all Vanguard funds — you can open an account directly with Vanguard and keep things straightforward.

You need a brokerage account to buy index funds

You cannot walk into a bank and buy an index fund the way you might buy a CD. You cannot call a fund company directly and purchase an index fund without a brokerage in between. The fund company creates the fund and manages the money inside it, but they don't handle individual purchases — that's the brokerage's job.

Opening a brokerage account is straightforward. You provide your name, address, Social Security number, and employment information. The brokerage verifies your identity and opens the account, usually within a few minutes to a few hours. You then link a bank account and transfer money into the brokerage account, and you're ready to buy index funds.

Types of brokerage accounts for index fund investing

Most brokerages offer several account types. A taxable brokerage account (also called a standard account) has no contribution limits and no restrictions on when you withdraw money, but you pay taxes on any gains or dividends. A 401(k) is an employer-sponsored retirement account where you can invest in index funds with pre-tax money. An IRA (Individual Retirement Account) is a personal retirement account where you can also invest in index funds with tax advantages.

If you're just starting out, a taxable brokerage account is the simplest to open — you don't need an employer or meet any income requirements. If you have access to a 401(k) through your job, that's often the best place to start because of the tax benefits and sometimes employer matching. An IRA is another good option if you're self-employed or your employer doesn't offer a 401(k).

How brokerages make money from index fund sales

Brokerages profit in several ways. They may charge trading fees when you buy or sell investments. They earn interest on cash sitting in your account. They may charge account maintenance fees or advisory fees. Some brokerages also earn money from the fund companies themselves — fund companies pay brokerages small fees to have their funds available on the platform.

This is why many brokerages have eliminated trading fees: they make money from other sources, and offering free trades attracts more customers. The competition among brokerages has generally worked in your favor — fees have dropped significantly over the past decade.

Frequently Asked Questions

Can I buy an index fund directly from the fund company without a brokerage?

No. Fund companies manage the money inside the fund but don't handle individual purchases. You must go through a brokerage to buy index funds. Some fund companies like Vanguard also operate as brokerages, so you can open an account with them and buy their funds directly, but you're still using their brokerage service.

Do all brokerages charge the same fees for index funds?

No. Trading fees vary — some brokerages charge nothing to buy any index fund, while others charge per-trade fees. Expense ratios (the annual cost of owning the fund) are set by the fund company and are the same regardless of which brokerage you use. Compare your brokerage's fee schedule before opening an account.

What's the difference between buying an index fund and a stock through a brokerage?

The process is identical — you search for the fund or stock, decide how much to invest, and click buy. The difference is what you own: a stock gives you a tiny piece of one company, while an index fund gives you a piece of many companies at once. Index funds are generally considered less risky because your money is spread across many holdings.

If I open an account with a brokerage, am I locked in to that brokerage?

No. You can transfer your investments to a different brokerage at any time, though the process takes a few days. You can also keep accounts at multiple brokerages if you want access to different funds or services. There's no penalty for moving your money, though some brokerages may charge a small transfer fee.

Which brokerage should I choose to buy index funds?

The best choice depends on which index funds you want to buy, what account type you need, and what features matter to you. Fidelity, Schwab, and Vanguard are all popular for index fund investors because they offer low fees, a wide selection of funds, and good educational resources. Read reviews and compare their fund lineups before deciding.