You need a brokerage account, then pick a fund and place an order

Buying an S&P 500 index fund means opening an account with a brokerage firm, choosing which S&P 500 fund you want (there are several), and placing a buy order. The whole process takes about 15 minutes if you already have a bank account and a Social Security number. You do not need a financial advisor, a large sum of money, or any prior investing experience.

The brokerage holds your money and executes the trade. Common brokerages include Fidelity, Vanguard, Charles Schwab, E-Trade, and Robinhood. Each one offers multiple S&P 500 index funds, so you are choosing both a brokerage and a specific fund within it. The fund itself is the investment; the brokerage is just the platform where you buy it.

Key Takeaways

  • Open a brokerage account online with your name, address, Social Security number, and bank details — most take 5 to 10 minutes.
  • Link your bank account so you can transfer money into the brokerage, which usually takes one to three business days to settle.
  • Search for an S&P 500 index fund by its ticker symbol (VOO, IVV, or SPLG are common examples) and check the expense ratio before buying.
  • Place a buy order for as many shares as your money allows — you can buy fractional shares at most brokerages, so you do not need a round number.
  • Your shares settle within one to two business days, and you own them until you sell.

Opening a brokerage account

Go to the website of the brokerage you choose and click the button to open an account. You will enter your name, date of birth, address, Social Security number, and employment status. The brokerage runs a background check (usually instant) and asks you to verify your identity — most do this by uploading a photo of your driver's license or passport.

Next, you link a bank account. Provide your bank's routing number and your account number (both appear on a check or in your bank's app). The brokerage will make two small deposits to that account within a few days, and you confirm the amounts in your brokerage account to prove you own the bank account. This step prevents fraud and takes three to five business days total.

Once your bank account is verified, you can transfer money from your bank into the brokerage. Most transfers take one to three business days. Some brokerages offer instant transfers for a small fee or if you link your account differently (like through your bank's app rather than manually). You do not need to transfer a large amount — you can start with $100 or $500 if that fits your budget.

Choosing which S&P 500 fund to buy

The three most common S&P 500 index funds are Vanguard's VOO, iShares' IVV, and SPDR's SPY. Each one tracks the same 500 companies in the same way, so the returns are nearly identical. The main difference is the expense ratio — the annual fee the fund charges as a percentage of your money. VOO charges 0.03 percent, IVV charges 0.03 percent, and SPY charges 0.09 percent. On $10,000 invested, that means VOO and IVV cost $3 per year, while SPY costs $9 per year.

You can buy any of these at any brokerage. Vanguard's VOO is often the default choice because Vanguard created the first index fund and keeps costs low. If you open an account at Vanguard itself, you might see slightly better terms on Vanguard funds, but the difference is small. Pick whichever brokerage feels easiest to you, then buy whichever S&P 500 fund that brokerage offers.

Some brokerages also offer their own S&P 500 index funds — Fidelity has FSKAX, Schwab has SWTSX. These are all legitimate and have low expense ratios. The choice between them matters far less than the choice to invest in an index fund at all, so do not spend weeks comparing. Pick one and start.

Placing your first buy order

Log into your brokerage account and search for the fund by its ticker symbol. The fund's page will show its current price per share, its expense ratio, and a chart of its performance over time. Click the button to buy (usually labeled "Buy" or "Trade"). Enter the number of shares you want, or the dollar amount you want to invest — most brokerages let you choose either one.

If you enter a dollar amount, the brokerage calculates how many shares you can buy, including fractional shares. For example, if the fund costs $450 per share and you have $1,000, you can buy 2.22 shares instead of being forced to buy only 2 full shares. This means you can invest any amount, not just multiples of the share price.

Review the order one more time — check the fund name, the number of shares or dollar amount, and the total cost. Then click "Confirm" or "Place Order". The order executes immediately during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), or queues for the next market open if you order after hours or on weekends. Your shares settle within one to two business days, meaning the transaction completes and the shares officially belong to you.

What happens after you buy

Once your order settles, you own shares of the S&P 500 index fund. You can see them in your account balance and in a holdings list that shows how much they are worth right now. The value changes every trading day as the stock market moves, but you do not have to do anything. The fund automatically rebalances itself to stay aligned with the S&P 500, and you do not pay anything for that.

If the fund pays a dividend (a small cash payment from the companies in the index), the brokerage automatically reinvests it into more shares of the fund unless you change that setting. Most investors leave it on automatic reinvestment because it compounds your returns over time.

You can buy more shares anytime you have money to invest. Many people set up automatic monthly transfers from their bank account and buy shares on the same day each month — this is called dollar-cost averaging and removes the stress of trying to time the market. You can also sell your shares anytime the market is open, though most people hold them for years or decades.

Taxes and account types

If you buy an S&P 500 index fund in a regular taxable brokerage account, you will owe capital gains tax when you sell at a profit. You will also owe tax on any dividends the fund pays. This is not a reason to avoid investing — the tax is only on gains, and long-term gains (shares held over a year) are taxed at a lower rate than short-term gains.

If you want to avoid or delay taxes, consider opening the account as a Roth IRA or traditional IRA instead of a regular brokerage account. These are retirement accounts with tax advantages: a Roth IRA lets your money grow tax-free forever, and a traditional IRA lets you deduct contributions from your taxes now. Both have annual contribution limits (currently $7,000 for people under 50), but you can still open a regular brokerage account and invest more there if you want.

Most brokerages let you open an IRA in the same process as a regular account — just choose the account type when you sign up. Then you buy the same S&P 500 fund inside the IRA instead of a regular account. The buying process is identical; the only difference is the tax treatment.

Common mistakes to avoid

Do not wait for the "perfect" price to buy. The S&P 500 goes up and down every day, and trying to time the market costs most people money. Buying the same amount every month, regardless of price, historically beats trying to pick the best moment.

Do not confuse the fund ticker with the company ticker. SPY, VOO, and IVV are fund tickers. AAPL, MSFT, and TSLA are individual company tickers. Buying an S&P 500 index fund means buying the fund, not individual stocks.

Do not panic sell during market downturns. The S&P 500 has crashed many times and recovered every time. Selling during a crash locks in losses. If you are investing for retirement or a goal more than five years away, ignore the daily price and keep buying.

Frequently Asked Questions

How much money do I need to start?

Most brokerages have no minimum. You can open an account and invest $100, $50, or even $1 if you want. Some brokerages waive account fees if you maintain a minimum balance, but you can avoid those fees by choosing a brokerage with no minimums at all.

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

Yes. You can buy the same funds inside a Roth IRA, traditional IRA, or 401(k) if your employer offers one. The buying process is identical — you just choose the fund and place an order. The account type determines the tax treatment, not the fund itself.

What if I want to add money every month?

Set up an automatic transfer from your bank account to your brokerage account on the same day each month. Then place a buy order for the S&P 500 fund on that day or the next business day. Many brokerages let you automate the buy order too, so money transfers in and buys shares without you doing anything.

Should I buy VOO, IVV, or SPY?

All three track the S&P 500 and return nearly identical results. VOO and IVV have lower expense ratios (0.03 percent) than SPY (0.09 percent), so they cost less over time. Pick whichever one your chosen brokerage makes easiest to buy, or pick VOO if you have no preference.

What if the market crashes right after I buy?

The value of your shares will drop, but you still own them. If you sell immediately, you lock in the loss. If you hold and keep buying during the crash, you buy more shares at lower prices, which increases your gains when the market recovers. History shows the market always recovers from crashes.