You need a brokerage account, then place an order for the fund by its ticker symbol

Buying an S&P 500 index fund means opening an account at a brokerage firm, finding the specific fund you want (each has a ticker symbol like SPY or VOO), and placing an order to purchase shares. The whole process takes about 15 minutes to set up, though the account approval can take a day or two. You do not need to be wealthy or have investment experience — most brokerages accept accounts with no minimum balance.

The steps are straightforward: choose a brokerage, open an account, link a bank account or transfer money in, search for your chosen fund by ticker, and click buy. After that, the fund sits in your account and tracks the S&P 500 automatically. You own a piece of 500 large U.S. companies without having to pick individual stocks.

Key Takeaways

  • You must open a brokerage account first — this is where your money goes and where you place buy orders.
  • Each S&P 500 index fund has a ticker symbol (SPY, VOO, IVV, VTSAX); you search by that symbol when placing your order.
  • Most brokerages charge no commission to buy index funds, though some charge annual account fees or require minimum balances.
  • Money takes one to three business days to settle after you buy, during which time you own the shares but cannot sell them yet.
  • You can buy through a regular taxable brokerage account or through a retirement account like an IRA, which has different tax rules.

Choose a brokerage and understand the account types

A brokerage is a company that holds your money and lets you buy and sell investments. Common ones include Fidelity, Vanguard, Charles Schwab, E-TRADE, and Robinhood. Each one offers S&P 500 index funds, charges different fees, and has different minimum balances — some require $0 to start, others require $500 or $1,000. Look at the brokerage's website to see what they charge per trade (most now charge $0 for index funds) and whether they charge annual account maintenance fees.

You will choose between a taxable brokerage account and a retirement account. A taxable account has no contribution limits and no withdrawal restrictions — you can buy and sell whenever you want, but you pay taxes on any gains when you sell. A retirement account like a Traditional IRA or Roth IRA has annual contribution limits (for 2024, $7,000 for most people under 50) but offers tax advantages: Traditional IRAs let you deduct contributions from your taxes now, and Roth IRAs let your money grow tax-free if you follow the withdrawal rules. If your employer offers a 401(k), you can also buy index funds there, though your choices are usually limited to what the plan offers.

Open your account and verify your identity

Go to the brokerage's website and click the button to open a new account. You will enter your name, address, Social Security number, date of birth, and employment information. The brokerage will ask whether you want a taxable account, IRA, or 401(k) — choose based on what you decided in the previous step. They will also ask about your investment experience and risk tolerance; these are informational and do not prevent you from opening the account or buying index funds.

The brokerage will verify your identity, usually instantly or within a day. Some brokerages ask you to confirm a small deposit they make to your bank account, or they may ask for a photo ID. Once approved, you will receive login credentials and can move to the next step. The whole process typically takes 10 to 30 minutes.

Fund your account by linking a bank account or transferring money

Before you can buy, you need money in your brokerage account. Most brokerages let you link your bank account directly and transfer money electronically — this usually takes one to three business days. Some brokerages offer instant transfers for a small fee. You can also mail a check, though this is slower and less common now.

Start with whatever amount you plan to invest. There is no rule that says you must invest a certain sum at once; you can transfer $100 or $10,000 depending on your situation. If you are buying through a retirement account like an IRA, remember the annual limit — you cannot contribute more than $7,000 per year (for 2024) across all your IRAs combined, whether they are at one brokerage or spread across several.

Search for the S&P 500 index fund by ticker symbol and place your order

Once your money is in the account, log in to your brokerage and look for the "buy" or "trade" section. Search for the fund by its ticker symbol. The most common S&P 500 index funds are:

  • SPY — SPDR S&P 500 ETF Trust (an exchange-traded fund)
  • VOO — Vanguard S&P 500 ETF (an exchange-traded fund)
  • IVV — iShares Core S&P 500 ETF (an exchange-traded fund)
  • VTSAX — Vanguard S&P 500 Index Fund Admiral Shares (a mutual fund)
  • FXAIX — Fidelity S&P 500 Index Fund (a mutual fund)

The difference between these is small — they all track the same 500 companies and charge very low fees (typically 0.03% to 0.04% per year). The main difference is whether you buy an exchange-traded fund (ETF) or a mutual fund. ETFs trade like stocks throughout the day and you buy a specific number of shares. Mutual funds are priced once per day after the market closes. For a beginner, either works fine; pick whichever your brokerage makes easiest to buy.

Enter the ticker symbol, then enter the dollar amount you want to invest or the number of shares you want to buy. Most brokerages let you do either. Review the order — it will show you the current price, the total cost, and any fees. Click confirm to place the order. The order goes through immediately, though the shares do not settle in your account for one to three business days.

Understand what happens after you buy

After you place your order, the brokerage will show the shares as "pending" or "unsettled" for one to three business days. During this time, you own the shares but cannot sell them yet. Once they settle, they appear in your account normally and you can sell them anytime you want (though if this is a retirement account, early withdrawal may trigger taxes or penalties).

Your S&P 500 index fund will now track the index automatically — you do not have to do anything. The fund holds all 500 companies in the S&P 500 in the same proportions as the index, so when the index goes up, your fund goes up, and vice versa. You will receive dividends (usually quarterly) that the brokerage can reinvest automatically into more shares, or you can take as cash. Most people set dividends to reinvest so the money compounds over time.

Frequently Asked Questions

Do I have to buy a whole share, or can I buy a fraction?

Most brokerages now offer fractional shares, meaning you can buy $50 worth of an S&P 500 fund even if one share costs $400. This makes it much easier to start investing with a small amount. Check your brokerage's website to confirm they offer fractional shares — most do, but some older platforms do not.

What is the difference between an ETF and a mutual fund version of the S&P 500?

Both track the same index and charge similar fees. ETFs trade throughout the day like stocks, so the price changes minute by minute. Mutual funds are priced once per day after the market closes. For long-term investing, the difference is negligible. ETFs are slightly more tax-efficient in taxable accounts, but for most people starting out, either choice is fine.

Can I buy an S&P 500 index fund inside a retirement account?

Yes. You can hold index funds in a Traditional IRA, Roth IRA, 401(k), or other retirement account. The process is the same — you open the account type you want, fund it, search for the fund by ticker, and buy. The main difference is that you cannot withdraw the money without penalties until you reach retirement age (usually 59½), and contributions have annual limits.

What happens if the market drops right after I buy?

Your fund value will drop along with the market. This is normal. Index funds are designed for long-term holding, not short-term trading. If you sell immediately after a drop, you lock in the loss. If you hold through the downturn, history shows the market has always recovered and gone higher over periods of five years or more.

Do I need to rebalance my S&P 500 index fund?

No. The fund itself rebalances automatically to stay aligned with the index. You do not need to do anything. If you own multiple types of investments (stocks, bonds, international funds), you may want to rebalance your overall portfolio once a year, but a single S&P 500 fund requires no maintenance from you.