You need a brokerage account, then place an order for shares

Buying an S&P 500 index fund means opening an account at a brokerage firm, depositing money, and instructing them to purchase shares of a fund that tracks the S&P 500. You do not need permission from anyone, a minimum income, or special credentials. The entire process takes a few hours to a few days depending on how fast your bank transfers money.

The brokerage holds your account and executes the trade. Common brokerages include Fidelity, Vanguard, Charles Schwab, E-Trade, and Robinhood, though there are dozens of others. Each one offers S&P 500 index funds under different names — Vanguard calls theirs VOO or VTSAX, Fidelity calls theirs FSKAX, and so on. The fund itself is the same product; the brokerage is just the middleman who lets you buy it.

Key Takeaways

  • You must open a brokerage account first, which requires your Social Security number, address, and proof of identity, and takes 10 to 30 minutes online.
  • After your account is open and funded, you search for an S&P 500 index fund by its ticker symbol (VOO, FSKAX, IVV, or similar) and place a buy order for the number of shares you want.
  • Different brokerages charge different fees — some charge nothing per trade, while others charge a flat fee or a percentage of what you invest.
  • You can buy as little as one share or as much as your account balance allows, and you can add money and buy more shares whenever you want.

Opening a brokerage account

Go to the website of a brokerage you choose and click the button to open a new account. You will enter your name, date of birth, Social Security number, address, and phone number. The brokerage will ask whether the account is for yourself or a trust, and whether you want a regular taxable account or a retirement account like an IRA. For most people, a regular taxable account is the starting point.

The brokerage will verify your identity, usually by checking your information against public records. This takes a few minutes to a few hours. Once verified, you can log in and see your account dashboard. At this point the account exists but holds no money.

Some brokerages offer a choice between a standard brokerage account and a self-directed account. For buying index funds, a standard account is fine. Self-directed accounts are for people who want to trade options or use margin (borrowed money), which you do not need for index funds.

Funding your account

After your account is open, you must transfer money from your bank into it. Log into your brokerage account and look for a link that says "Deposit" or "Fund Account" or "Link Bank Account." The brokerage will ask for your bank's routing number and your account number, which you can find on a check or in your bank's app.

Once you link your bank account, you can transfer money. The first transfer usually takes three to five business days because the brokerage verifies the connection by making two small deposits to your bank account, which you then confirm. After that, transfers are faster — usually one to two business days. Some brokerages offer next-day transfers for an extra fee.

You can transfer as much or as little as you want. There is no minimum, though some brokerages have a minimum order size (for example, you must buy at least $1 worth of a fund). Once the money arrives in your brokerage account, it sits there until you place a buy order.

Finding and buying the fund

Log into your account and look for a "Buy," "Trade," or "Invest" button. You will see a search box where you can type the ticker symbol of the S&P 500 fund you want. Common tickers are VOO (Vanguard), FSKAX (Fidelity), IVV (iShares), and SPLG (Spdr). Type the ticker and the fund will appear.

Click on the fund and you will see its price per share, how much it has gained or lost today, and a button to buy. Enter the number of shares you want to purchase. If the fund costs $400 per share and you have $1,000 in your account, you can buy 2 shares (costing $800) and have $200 left over. Some brokerages also let you enter a dollar amount instead of a share count — you would type $1,000 and the system calculates how many shares that buys.

Review the order to make sure the fund name, ticker, and number of shares are correct. Then click "Confirm" or "Place Order." The trade executes immediately during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after market close or on a weekend, it executes the next market open.

Understanding fees and costs

Most brokerages charge nothing to buy or sell index funds — no per-trade commission. However, the fund itself has an expense ratio, which is a yearly fee the fund company takes from the fund's assets. For S&P 500 index funds, this is usually between 0.03% and 0.20% per year. That means if you own $10,000 of the fund, you pay $3 to $20 per year in fees, taken automatically.

Some brokerages charge account maintenance fees if your balance is below a certain amount, though most waive this if you set up automatic deposits or keep a minimum balance. A few brokerages charge fees to transfer money out of the account or to close it, but these are rare and usually only apply if you close within a short time of opening.

Compare expense ratios across brokerages before you choose one. Vanguard and Fidelity typically offer the lowest ratios for S&P 500 funds. Over decades, a difference of 0.10% per year compounds into thousands of dollars, so it is worth checking.

What happens after you buy

Once your order is filled, the shares appear in your account. You own them outright. The brokerage holds them in your name and sends you statements showing what you own and what it is worth. You do not have to do anything else — the fund automatically reinvests dividends (small cash payments the fund receives from the companies it owns) back into more shares, unless you change that setting.

You can check your balance anytime by logging into your account. The price of each share changes every day the market is open. You can buy more shares whenever you want by depositing more money and placing another order. You can also sell shares anytime during market hours, and the money returns to your account within one to two business days.

Keep your login information and password secure. If your brokerage offers two-factor authentication (a second verification step, usually a code sent to your phone), turn it on. Your account is insured up to $500,000 by the Securities Investor Protection Corporation (SIPC) if the brokerage fails, though this is extremely rare.

Tax considerations for taxable accounts

If you buy an S&P 500 index fund in a regular taxable account (not a retirement account), you will owe taxes on any gains when you sell. If you buy 10 shares at $400 each ($4,000 total) and sell them later for $5,000, you owe tax on the $1,000 gain. The tax rate depends on how long you held the shares — if you held them for more than one year, the rate is lower (long-term capital gains). If you held them for less than one year, the rate is higher (short-term capital gains, taxed as ordinary income).

The fund also pays dividends, which are taxable in the year you receive them, even if you reinvest them. Your brokerage sends you a tax form (1099-DIV) at the end of the year showing how much you owe. You report this on your tax return.

If you want to avoid these taxes, consider opening an IRA (Individual Retirement Account) instead of a taxable account. In an IRA, you do not pay taxes on gains or dividends until you withdraw the money in retirement. The tradeoff is that you cannot withdraw the money before age 59½ without a penalty, with some exceptions.

Frequently Asked Questions

Do I need a lot of money to start?

No. Most brokerages have no minimum deposit, and you can buy as little as one share. If an S&P 500 fund costs $400 per share, you can start with $400. Some brokerages offer fractional shares, meaning you can buy $100 worth of a $400 fund and own 0.25 shares. Start with whatever amount you can afford.

What is the difference between an index fund and an ETF?

Both track the S&P 500 and work the same way for most investors. An index fund is a mutual fund; an ETF (exchange-traded fund) trades like a stock. For buying and holding, the difference does not matter. Both have low fees and track the same index. Pick whichever your brokerage recommends or whichever has the lower expense ratio.

Can I lose money buying an S&P 500 index fund?

Yes. The value of the fund rises and falls with the stock market. If you buy at $400 per share and the market drops, your shares might be worth $350 each. If you hold long enough, history shows the market recovers, but there is no may provide. Do not invest money you will need within the next five years.

Should I buy all at once or spread purchases over time?

Both strategies work. Buying all at once is simpler. Spreading purchases over time (called dollar-cost averaging) can reduce the risk of buying right before a market drop, but it also means you miss gains if the market rises. For long-term investors, the difference is small. Pick whichever feels right to you.

Can I set up automatic purchases?

Yes. Most brokerages let you set up automatic transfers from your bank account and automatic purchases of a fund on a schedule you choose — weekly, monthly, or quarterly. This is called a recurring investment plan. It removes the need to remember to buy and helps you invest consistently over time.