The basic steps to buy an index fund on Fidelity

To buy an index fund through Fidelity, you log into your account, search for the fund by name or ticker symbol, and place a buy order just as you would for any individual stock. The order settles in your account within one to two business days, and the fund shares appear in your holdings. You do not need a separate process or approval process — if you have a Fidelity brokerage account open, you can buy index funds when ready.

The specific steps depend on whether you are using Fidelity's website, mobile app, or calling a representative. All three routes lead to the same result: you own shares of the index fund in your account, and you can sell them whenever you choose. The main difference is speed and the level of guidance you receive along the way.

Key Takeaways

  • You need an open Fidelity brokerage account to buy index funds; if you only have a retirement account like an IRA, you may need to open a separate taxable brokerage account.
  • Index funds on Fidelity are bought and sold like stocks — you search by name or ticker, enter the number of shares you want, and confirm the order.
  • Fidelity offers its own index funds (branded as Fidelity Index Funds) as well as index funds from other providers like Vanguard and iShares.
  • You can set up automatic purchases of index funds through Fidelity's automatic investment plan, which deducts money from your linked bank account on a schedule you choose.

What type of Fidelity account you need

A Fidelity brokerage account is the standard account type for buying index funds. This is a taxable account, meaning you pay capital gains tax on profits when you sell. Opening one takes about 10 minutes online and requires your Social Security number, date of birth, and a linked bank account or initial deposit.

If you already have a Fidelity retirement account — such as a traditional IRA, Roth IRA, or 401(k) — you can buy index funds inside that account without opening a new one. The process is identical, but the tax treatment and withdrawal rules differ. A retirement account limits when you can take money out without penalty, while a brokerage account has no withdrawal restrictions.

If you want to buy index funds but do not yet have any Fidelity account, start by going to Fidelity's website and selecting "Open an Account." You will choose between a brokerage account and a retirement account based on your situation. Most people buying index funds for the first time open a brokerage account.

How to search for and select an index fund

Once logged in, use Fidelity's search bar to find an index fund by its full name or ticker symbol. For example, the Fidelity S&P 500 Index Fund has the ticker FXAIX; the Vanguard S&P 500 ETF has the ticker VOO. Typing either the name or ticker will pull up the fund's page, which shows its current price, holdings, expense ratio, and performance history.

Fidelity displays funds in two formats: mutual funds and exchange-traded funds (ETFs). Mutual funds trade once per day at the closing price; ETFs trade throughout the day like stocks. Both track the same indexes, but they have different price movements during the trading day. For most people buying index funds, the difference does not matter much, but it is worth knowing which format you are buying.

The fund's page also shows the expense ratio — the annual cost to own the fund, expressed as a percentage. Fidelity's own index funds typically have expense ratios between 0.03% and 0.10%, while other providers' funds may vary. This cost is deducted automatically from your returns and does not appear as a separate bill.

Placing your first buy order

After selecting a fund, click the "Buy" button on its page. Fidelity will ask you to enter the number of shares you want to purchase. You can buy fractional shares, meaning you do not have to buy whole shares — if you have $500 to invest and one share costs $150, you can buy 3.33 shares. Enter your amount and review the order summary, which shows the total cost and any fees (most index fund purchases have no fee).

Next, choose when you want the order to execute. You can place a market order, which buys at the next available price (usually within seconds), or a limit order, which buys only if the price drops to a level you specify. For index funds, a market order is standard because the price does not swing dramatically. Click "Preview Order," review the details one more time, and then click "Submit" or "Confirm."

Your order is now placed. If you ordered during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), the order executes when ready and the shares appear in your account within minutes. If you ordered after hours or on a weekend, the order waits until the market opens the next trading day.

Setting up automatic purchases

Fidelity's automatic investment plan lets you buy index funds on a schedule without logging in each time. You choose a fund, an amount to invest, and a frequency — weekly, biweekly, or monthly. Fidelity deducts that amount from your linked bank account and buys the fund on your chosen date.

To set this up, go to your account settings and select "Automatic Investments" or "Recurring Transactions." Enter the fund name or ticker, the dollar amount or number of shares, and the frequency. You can pause, change, or cancel the plan at any time. This approach works well for people who want to invest regularly without thinking about it, and it removes the temptation to time the market or skip months when prices are high.

Understanding costs and fees

Most index fund purchases on Fidelity have no transaction fee. You do not pay Fidelity to buy or sell the fund. The only ongoing cost is the fund's expense ratio, which is built into the fund's price and paid automatically.

If you sell an index fund within 30 days of buying it, Fidelity may charge a short-term trading fee to discourage frequent trading. This fee is typically $49.95 per transaction. For people buying index funds as a long-term investment, this fee does not explore because they hold the fund for longer than 30 days.

Some index funds also have minimum investment amounts — Fidelity's own index funds often have no minimum, but other providers' funds may require $1,000 or more for the first purchase. The fund's page will display any minimum before you place your order.

Monitoring and managing your index fund holdings

After your purchase settles, the index fund appears in your "Holdings" or "Positions" section. Fidelity shows your cost basis (what you paid), current value, and gain or loss. You can view the fund's recent performance, see what stocks or bonds it holds, and check its expense ratio anytime.

You do not need to do anything to maintain your index fund investment. The fund automatically rebalances itself to stay aligned with its index, and you receive any dividends the fund pays (usually reinvested into more shares unless you change that setting). If you want to add more money, you can buy additional shares using the same process. If you want to sell, click "Sell" on the fund's page, enter the number of shares, and confirm.

Frequently Asked Questions

Can I buy index funds in a Fidelity IRA or 401(k)?

Yes. The process is identical to buying in a brokerage account — search, select, and place your order. The difference is tax treatment: gains in a traditional IRA are tax-deferred, and gains in a Roth IRA are tax-free if you follow withdrawal rules. You cannot withdraw from either account before age 59½ without penalty, unlike a brokerage account where you can withdraw anytime.

What is the difference between Fidelity's index funds and other brands like Vanguard?

All index funds tracking the same index hold nearly identical stocks or bonds, so their performance is very similar. The main difference is expense ratio — Fidelity's S&P 500 index fund (FXAIX) has a 0.03% expense ratio, while Vanguard's (VFIAX) has a 0.04%. Over decades, these tiny differences compound, but both are extremely low-cost. You can buy either through Fidelity.

Do I have to buy whole shares, or can I invest any dollar amount?

Fidelity allows fractional share purchases, so you can invest any dollar amount. If you have $100 and one share costs $350, you can buy 0.29 shares. This makes index funds accessible even if you have a small amount to start with.

What happens if I sell my index fund within 30 days?

Fidelity charges a $49.95 short-term trading fee if you sell within 30 days of purchase. This fee applies only to sales, not purchases. If you hold the fund longer than 30 days, there is no fee when you sell.

Can I set up automatic purchases if I do not have much money to invest each month?

Yes. Fidelity's automatic investment plan works with any dollar amount, including small ones like $25 or $50 per month. There is no minimum for recurring purchases, so you can start small and increase the amount later.