You can buy index funds through a brokerage account, a retirement account, or your employer's plan

Index funds are sold by investment firms called brokers or brokerage platforms. You open an account with one of these firms, deposit money, and then purchase the index fund you want. The broker holds your shares and handles the paperwork. Most brokers charge no commission to buy index funds, though some charge annual account fees or require a minimum deposit.

Your choice of where to buy depends on three things: whether you want a regular taxable account or a tax-advantaged retirement account, whether you have access to an employer plan, and which broker's fees and fund selection match your situation. The same index fund (say, a fund tracking the S&P 500) may be available at multiple brokers, but the fund's expense ratio — the annual cost to own it — stays the same no matter where you buy it.

Key Takeaways

  • Major brokers like Fidelity, Vanguard, Charles Schwab, and E*TRADE all offer index funds with no commission and low or no account minimums.
  • Employer 401(k) and 403(b) plans often include index fund options and may offer matching contributions, which is information programs you should not pass up.
  • Individual Retirement Accounts (IRAs) through any broker let you buy index funds with tax advantages, but have annual contribution limits.
  • The same index fund can have different expense ratios depending on the fund company, so comparing costs matters even after you choose a broker.
  • Robo-advisors like Betterment and Wealthfront automatically build and manage index fund portfolios for you, but charge a percentage of your assets annually.

Full-service brokers with low or no minimums

Fidelity, Vanguard, Charles Schwab, and E*TRADE are the largest brokers for individual investors. All four offer index funds with no commission, no account minimums, and no annual account fees. Each firm offers its own index funds (Fidelity has Fidelity Index Funds, Vanguard has Vanguard Index Funds) and also sells index funds from other companies.

The main difference between these brokers is their fund selection and the expense ratios on their own funds. Vanguard's index funds are known for low expense ratios — often 0.03% to 0.10% per year. Fidelity's index funds are similarly low-cost. Charles Schwab and E*TRADE also offer low-cost index funds but may have a narrower selection of fund types. All four provide research tools, educational content, and customer service by phone or chat.

If you are starting with a small amount of money, any of these four will let you open an account and buy a single share of an index fund. Some brokers also offer fractional shares, meaning you can invest a specific dollar amount rather than buying whole shares.

Index funds through your employer's retirement plan

If your employer offers a 401(k), 403(b), or 457 plan, you can usually buy index funds directly through that plan. Your employer contracts with a plan administrator (like Fidelity, Vanguard, or Empower) who manages the investment options available to you. The index funds offered in your plan may have higher expense ratios than the same funds sold elsewhere, because the plan administrator charges a fee to manage the plan.

The main reason to use your employer plan is the employer match. If your employer matches 3% of your salary, that is an when ready 100% return on your money — something you cannot get anywhere else. Even if the index funds in your plan cost slightly more, the match usually makes up for it. You contribute money before taxes are taken out, which lowers your taxable income for the year.

To see what index funds are available in your plan, log into your plan's website or ask your HR department for the plan document or investment menu. Most plans list the funds by name, expense ratio, and performance history.

Individual Retirement Accounts (IRAs) at any broker

You can open an IRA at any of the major brokers listed above, or at many smaller brokers. An IRA is a tax-advantaged account, meaning the money you contribute may be tax-deductible (in a Traditional IRA) or grows tax-free (in a Roth IRA). Once the account is open, you can buy any index fund the broker offers.

The annual contribution limit for an IRA is $7,000 in 2024 (or $8,000 if you are 50 or older). You can contribute to an IRA only if you have earned income from a job or self-employment that year. If you have already contributed to an employer plan, you may not be able to deduct a Traditional IRA contribution, depending on your income — check the IRS rules or ask a tax professional.

An IRA is useful if you do not have access to an employer plan, or if you have already contributed the maximum to your employer plan and want to save more. You can also roll over money from an old employer plan into an IRA, which consolidates your accounts in one place.

Robo-advisors that build index fund portfolios for you

Robo-advisors like Betterment, Wealthfront, and M1 Finance are platforms that automatically build and manage a portfolio of index funds based on your age, goals, and risk tolerance. You answer a questionnaire, deposit money, and the platform buys a mix of index funds for you. The platform rebalances your portfolio (sells some funds and buys others to keep your target mix) automatically.

Robo-advisors charge a percentage of your assets under management, typically 0.25% to 0.50% per year. This is in addition to the expense ratios of the index funds themselves. Some robo-advisors waive the advisory fee if your account is below a certain size (often $500 to $1,000). If you prefer not to choose individual funds or rebalance yourself, a robo-advisor removes that work.

The trade-off is cost: you pay more in annual fees than you would if you bought index funds directly from a broker and managed them yourself. However, if you are new to investing and want a hands-off approach, the fee may be worth it.

Comparing costs and fund selection across brokers

When choosing where to buy index funds, compare three things: account fees, fund selection, and expense ratios. Account fees are what the broker charges you annually to hold an account — most major brokers charge zero. Fund selection is the number and type of index funds available; larger brokers offer more choices. Expense ratios are the annual costs to own each fund, expressed as a percentage of your investment.

A fund tracking the S&P 500 at Vanguard might cost 0.03% per year, while the same fund at another broker might cost 0.05% or 0.10%. On a $10,000 investment, that difference is $2 to $7 per year — small but real. Over decades, low expense ratios compound into significant savings.

Most brokers publish their fund lists and expense ratios on their websites. You can also use comparison tools like Morningstar or your broker's own search function to look up a specific fund and see its cost at different brokers. If you plan to buy only one or two broad index funds and hold them for years, the difference in expense ratios may matter less than convenience and account features.

Frequently Asked Questions

Do I need a lot of money to start buying index funds?

No. Most major brokers have no account minimum and allow you to buy fractional shares, so you can start with $10, $50, or $100. Some brokers require a minimum deposit to open the account (often $0 to $500), but once the account is open, you can invest any amount. Check your chosen broker's website for their current minimums.

Can I buy the same index fund at different brokers?

Yes, but the fund you buy depends on which broker you use. Vanguard's S&P 500 Index Fund (ticker VFIAX) is only available at Vanguard. Fidelity's S&P 500 Index Fund (ticker FXAIX) is only available at Fidelity. Both track the same index and have similar expense ratios, but they are different funds. You cannot buy VFIAX at Fidelity or FXAIX at Vanguard.

What happens if my broker goes out of business?

Your investments are protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 per account if a broker fails. This protection covers the value of your securities and cash, not losses from market declines. Larger brokers like Fidelity and Vanguard also carry additional insurance beyond SIPC. Your index funds themselves are held in your name, so they remain yours regardless of what happens to the broker.

Should I buy index funds in a regular account or a retirement account?

If you have access to an employer plan with a match, contribute enough to get the full match first — that is information programs. After that, max out a Roth IRA if you are may be able to access, because the tax-free growth is valuable over decades. If you have more to invest after that, a regular taxable account is your next option. The order depends on your income, age, and how much you can save each year.

Can I set up automatic monthly investments in index funds?

Yes. Most brokers offer automatic investment plans where you set up a recurring transfer from your bank account to your brokerage account, and the broker automatically buys your chosen index fund on a set date each month. This is called dollar-cost averaging and removes the need to time your purchases. Set it up once and it runs on its own.