You need a brokerage account, money to invest, and a decision about which ETFs to buy

Investing in ETFs starts with opening an account at a brokerage firm — the company that holds your money and executes your trades. You then deposit cash, search for the ETF by its ticker symbol, and place an order to buy shares at the market price. The whole process takes minutes once your account is open, though the account setup itself can take a few days. You do not need a large sum to start; many brokerages allow you to begin with $1 or $100, though some set minimums at $500 or $1,000.

The main decision before you start is whether you want to pick individual ETFs yourself or use a robo-advisor — an automated service that builds and manages a portfolio for you based on your age and risk tolerance. Both routes work; the first gives you more control and typically costs less in fees, while the second requires less research and decision-making on your part.

Key Takeaways

  • You must open a brokerage account with a firm like Fidelity, Vanguard, Charles Schwab, or a discount broker, which takes one to three business days.
  • Deposit money into your account by linking a bank account or transferring funds, then search for ETFs by their ticker symbol (for example, VOO or VTI).
  • Place a buy order during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays) and your shares will settle in two business days.
  • ETF prices move throughout the day, so the price you see when you search may not be the price you pay if you wait; place your order when you are ready to buy.
  • You can hold ETFs in a regular taxable account or in a retirement account like an IRA or 401(k), which affects how your gains are taxed.

Opening a brokerage account

A brokerage account is the container that holds your money and your investments. You open one by visiting a brokerage's website, providing your name, address, Social Security number, and employment information, and linking a bank account. The brokerage verifies your identity and your bank connection, which usually takes one to three business days. During that time, you cannot yet trade.

Common brokerages include Fidelity, Vanguard, Charles Schwab, E-Trade, and Webull. Discount brokerages like Robinhood, Tastytrade, and Firstrade charge lower or zero commissions per trade. All of them allow you to buy ETFs. The main differences are the user interface, the research tools they provide, the minimum deposit (if any), and whether they charge monthly fees for account maintenance. Most charge nothing to hold an account, and most do not charge per-trade commissions anymore.

Decide whether you want a taxable account (a regular investment account where you pay taxes on gains each year) or a retirement account (an IRA or Roth IRA, which has tax advantages but limits how much you can deposit per year and when you can withdraw). If you are self-employed or have a 401(k) through your employer, you have additional options. For a first-time investor, a taxable account is simpler; you can move money in and out without penalty.

Depositing money and finding ETFs to buy

Once your account is open, you deposit money by linking your bank account and initiating a transfer. Most brokerages allow you to transfer money immediately, though it may take one to three business days to clear. Some brokerages also accept wire transfers or checks, which can be faster or slower depending on the method.

To find an ETF, you search by its ticker symbol — a short code like VOO (Vanguard S&P 500 ETF), VTI (Vanguard Total Stock Market ETF), or QQQ (Invesco QQQ Trust). You can search by name too, but the ticker is faster and more precise. When you search, the brokerage shows you the current price, the fund's holdings, its expense ratio (the annual fee), and its performance history. Read the expense ratio; it ranges from 0.03% to over 1% per year, and lower is generally better for long-term investors.

If you do not know which ETFs to buy, start by reading the fund's prospectus or fact sheet on the brokerage's website or the fund company's website. These documents explain what the fund holds and how it is managed. You can also use a robo-advisor like Betterment, Wealthfront, or Vanguard Personal Advisor Services, which will recommend a mix of ETFs based on your age, income, and goals.

Placing your first buy order

To buy an ETF, you search for it by ticker, click "buy" or "trade," and enter the number of shares you want. You then choose between a market order (buy at whatever the current price is) and a limit order (buy only if the price drops to a level you set). For most first-time investors, a market order is simpler and faster. You review the order, confirm it, and it executes immediately if the market is open.

The market is open Monday through Friday, 9:30 a.m. to 4 p.m. Eastern time. If you place an order outside those hours, it will execute at the next market open. The price you see on your screen is the last trade price, not necessarily the price you will pay; ETF prices move constantly during the day. Once you place your order, the shares are yours, but they do not settle in your account until two business days later. During that time, you cannot sell them, but you own them.

After your order executes, your brokerage sends you a confirmation with the number of shares, the price per share, and the total cost including any fees. Keep this for your records; you will need it for taxes.

Understanding costs and fees

When you buy an ETF, you pay the share price and nothing else — there is no commission at most brokerages. However, you pay an ongoing fee called the expense ratio, which is deducted from the fund's value each year. For example, if you own $10,000 in an ETF with a 0.10% expense ratio, you pay $10 per year in fees. This happens automatically; you do not write a check.

Some brokerages charge monthly account maintenance fees if your balance is below a certain threshold, though most waive this for accounts over $500 or $1,000. Some also charge for wire transfers or other services. Read the fee schedule on the brokerage's website before you open an account.

If you buy and sell frequently, you may trigger short-term capital gains taxes, which are taxed at your ordinary income rate. If you hold for more than one year, you pay long-term capital gains tax, which is lower. This is one reason many investors buy ETFs and hold them for years rather than trading in and out.

Choosing between doing it yourself and using a robo-advisor

If you want to pick your own ETFs, you research funds, decide on a mix (for example, 70% stock ETFs and 30% bond ETFs), and place the orders yourself. This gives you full control and typically costs less in fees — you pay only the ETF's expense ratio, which is often under 0.20% per year. The downside is that you have to do the research and make the decisions.

A robo-advisor automates this process. You answer questions about your age, income, and risk tolerance, and the robo-advisor builds a portfolio of ETFs for you. It then rebalances your portfolio automatically, selling winners and buying losers to keep your mix consistent. Robo-advisors charge a management fee on top of the ETF expense ratios — typically 0.25% to 0.50% per year. Examples include Betterment, Wealthfront, and Vanguard Personal Advisor Services.

For a first-time investor with less than $50,000, a robo-advisor can be worth the fee because it removes the guesswork. For larger amounts or if you enjoy research, picking your own ETFs usually costs less over time.

What happens after you buy

Once you own ETF shares, you do not have to do anything. The fund manager buys and sells securities inside the fund, and you benefit from those changes without taking action. Some ETFs pay dividends — small cash payments from the companies or bonds the fund holds — which you can reinvest automatically or take as cash.

You can check your account balance anytime on the brokerage's website or app. You can also add more money, buy more ETFs, or sell shares whenever you want during market hours. If you sell, you will owe capital gains tax on any profit, so most long-term investors hold their ETFs for years.

Keep records of all your trades, including the date, price, and number of shares. Your brokerage provides a tax report each year (Form 1099-B) that you use when filing your taxes.

Frequently Asked Questions

How much money do I need to start investing in ETFs?

Most brokerages allow you to start with as little as $1 or $100. Some set minimums at $500 or $1,000. Check the brokerage's website for its minimum deposit. You can add more money later whenever you want.

Can I buy ETFs in a retirement account like an IRA?

Yes. You can open an IRA at any brokerage and buy ETFs inside it. The tax treatment differs from a regular account — you do not pay taxes on gains each year, but you cannot withdraw money before age 59½ without penalty. A Roth IRA lets you withdraw contributions anytime without penalty, though earnings are locked until retirement.

What is the difference between a market order and a limit order?

A market order buys at the current price immediately. A limit order buys only if the price drops to a level you set, which may never happen. For most ETFs, a market order is fine because they trade frequently and the price does not swing much. Use a limit order if you want to be certain you do not overpay.

Do I have to reinvest dividends?

No. Most brokerages let you choose whether to reinvest dividends automatically or receive them as cash. Reinvesting buys more shares and compounds your growth over time. Taking cash lets you use the money elsewhere. For long-term investors, reinvesting is usually the better choice.

When should I sell my ETF shares?

Most investors buy ETFs and hold them for years or decades. Sell when you need the money, when your goals change, or when you want to rebalance your portfolio. Selling triggers a capital gains tax, so hold for at least one year if possible to pay the lower long-term rate.