You can buy S&P 500 index funds through a brokerage account in about 15 minutes

An S&P 500 index fund tracks the 500 largest publicly traded companies in the United States. To buy one, you open an account with a brokerage firm, deposit money, and place an order for shares. The fund itself does the work of holding all 500 stocks in the right proportions — you do not pick individual companies.

The most common S&P 500 index funds are offered by Vanguard (ticker: VOO), Fidelity (ticker: FSKAX or FNILX), and iShares/BlackRock (ticker: IVV). Each tracks the same 500 companies but charges slightly different fees. The difference in cost matters over decades, but all three are low-cost options compared to actively managed funds.

You do not need a large amount to start. Most brokerages let you open an account and buy your first shares with $1 to $100, depending on the firm. Once you own shares, you can add money whenever you want or set up automatic monthly deposits.

Key Takeaways

  • You need a brokerage account (through Vanguard, Fidelity, Charles Schwab, or similar) to buy S&P 500 index fund shares.
  • The three largest S&P 500 index funds charge between 0.03% and 0.04% per year in fees, meaning you pay $3 to $4 annually on every $10,000 invested.
  • You can buy fractional shares at most brokerages, so you can invest any dollar amount, not just whole share prices.
  • Once you buy shares, you own them until you sell them; the fund does not expire or require you to do anything else.
  • Dividends paid by the 500 companies are automatically reinvested or held as cash in your account, depending on your settings.

Opening a brokerage account and funding it

Choose a brokerage firm. The largest and most straightforward options are Vanguard, Fidelity, Charles Schwab, and E*TRADE. Each has a website where you can open an account online without visiting a branch. Smaller brokerages like Webull and M1 Finance also offer S&P 500 index funds, often with no account minimum.

Go to the brokerage website and click "Open an Account" or "Sign Up." You will enter your name, Social Security number, address, employment status, and bank details. The process takes 10 to 15 minutes. Most brokerages approve accounts instantly or within one business day.

Link a bank account or transfer money to fund your brokerage account. You can use a checking or savings account at any U.S. bank. The first transfer usually takes three to five business days to clear. Some brokerages offer a debit card or allow you to deposit checks by phone, which can speed this up.

Placing your first order for S&P 500 index fund shares

Log into your brokerage account once your money has arrived. Look for a "Trade," "Invest," or "Buy" button. Search for the fund by its ticker symbol: VOO (Vanguard), FSKAX or FNILX (Fidelity), or IVV (iShares). The search will show you the fund name, current price per share, and the annual fee.

Decide how much money to invest. You can buy a specific dollar amount (for example, $500) or a specific number of shares. Most brokerages now let you buy fractional shares, meaning if one share costs $450 and you have $500, you can buy 1.11 shares instead of waiting to save for two full shares.

Choose "Buy" and confirm the order. You will see a summary showing the fund name, the number of shares, the total cost, and the date the order will settle (usually one to two business days). Once you confirm, the order is placed. Your shares will appear in your account after settlement.

Understanding fees and how they affect your money over time

S&P 500 index funds charge an annual fee called an expense ratio, expressed as a percentage of your balance. Vanguard's VOO charges 0.03% per year. Fidelity's FSKAX charges 0.015% per year. iShares' IVV charges 0.03% per year. These are among the lowest fees available.

On a $10,000 investment, a 0.03% fee costs $3 per year. On $100,000, it costs $30 per year. The fee is deducted automatically from the fund's value each day — you do not pay it separately. Over 30 years, the difference between a 0.03% fee and a 0.50% fee (common for actively managed funds) can amount to tens of thousands of dollars in lost growth.

Your brokerage may also charge a commission to buy or sell shares. Most major brokerages (Vanguard, Fidelity, Schwab, E*TRADE) charge zero commission for buying index funds. Some smaller brokerages may charge $5 to $10 per trade. Check the brokerage's fee schedule before you open an account.

What happens after you buy: dividends and account maintenance

The 500 companies in the S&P 500 pay dividends (cash payments to shareholders) throughout the year. Your index fund collects these dividends and either reinvests them automatically to buy more shares or holds them as cash in your account. Most brokerages reinvest dividends by default, which means your share count grows without you doing anything.

You do not need to monitor or rebalance your S&P 500 index fund. The fund manager automatically keeps the holdings in line with the index. You do not pay taxes on dividends or growth until you sell shares (in a regular taxable account) or withdraw money (in a retirement account). If you want to add more money, you can buy additional shares anytime.

If you want to sell your shares later, log into your account, find the fund, and click "Sell." You can sell all your shares or just some of them. The sale settles in one to two business days, and the money goes back into your brokerage account as cash. You can then withdraw it to your bank account.

Tax accounts: regular brokerage versus retirement accounts

You can buy S&P 500 index funds in a regular taxable brokerage account or inside a retirement account like an IRA or 401(k). In a taxable account, you pay income tax on dividends each year and capital gains tax when you sell shares at a profit. In a retirement account, taxes are delayed (traditional IRA or 401(k)) or avoided entirely (Roth IRA).

If you have access to an employer 401(k) that offers an S&P 500 index fund option, that is often the best place to start because contributions reduce your taxable income. If you do not have a 401(k), you can open a Roth IRA or traditional IRA at any brokerage and buy S&P 500 index funds inside it. Contribution limits apply: for 2024, you can contribute up to $7,000 per year to an IRA (or $8,000 if you are 50 or older).

A regular taxable brokerage account has no contribution limit and no withdrawal restrictions, so it is useful if you want to invest more than the IRA limit or may need the money before retirement age.

Common mistakes to avoid when buying index funds

Do not wait for the "right" price. Trying to time the market — selling before a drop and buying before a rise — rarely works and often costs money in taxes and missed gains. Most investors do better by buying regularly, regardless of price, and holding for years.

Do not confuse S&P 500 index funds with individual stocks or sector funds. An S&P 500 index fund holds all 500 companies, so you are not betting on one company or industry. This diversification is the main reason index funds are recommended for most investors.

Do not assume the cheapest brokerage is the best. A brokerage with a $0 account minimum but a $10 trading commission will cost you more than one with a $100 minimum and zero commissions. Compare the total cost, not just the opening requirement.

Do not panic and sell during market downturns. Index funds go down in value during recessions and corrections, but they have recovered every time in U.S. history. Selling during a drop locks in losses. Holding or buying more during downturns has historically led to better long-term results.

Frequently Asked Questions

Can I buy S&P 500 index funds through my bank?

Some banks offer brokerage services and S&P 500 index funds, but most do not. Your bank's primary business is deposits and loans. For index funds, you will usually get better fees and more options by opening an account directly with a brokerage like Vanguard, Fidelity, or Schwab. You can keep your bank account and your brokerage account separate.

What is the difference between VOO, FSKAX, and IVV?

All three track the same 500 companies and perform almost identically. VOO (Vanguard) and IVV (iShares) are exchange-traded funds (ETFs) that trade like stocks. FSKAX (Fidelity) is a mutual fund. The main difference is fees: FSKAX charges 0.015% annually, while VOO and IVV charge 0.03%. Over decades, FSKAX's lower fee saves money, but all three are low-cost options.

Do I have to buy whole shares, or can I buy partial shares?

Most brokerages now allow fractional share purchases. You can invest any dollar amount — $50, $237, $1,000 — and own a proportional piece of a share. This makes it easier to start with small amounts and to reinvest dividends without waiting to accumulate enough for a whole share.

What happens if the brokerage goes out of business?

Your shares are protected by the Securities Investor Protection Corporation (SIPC), which insures up to $500,000 per account at a failed brokerage. Your shares would be transferred to another brokerage automatically. This protection applies at all major brokerages, so you do not need to worry about losing your investment if the firm fails.

Should I invest a lump sum or add money gradually?

Research shows that investing a lump sum all at once has historically outperformed investing the same amount gradually over time, because markets tend to rise over long periods. However, if you are uncomfortable with market risk or do not have the money available, investing gradually (dollar-cost averaging) is better than not investing at all. Either approach works if you stay consistent and do not sell during downturns.