You can buy index funds through a brokerage account, a retirement account, or directly from a fund company
Index funds are sold through three main routes: online brokerages (like Fidelity, Charles Schwab, or Vanguard), investment apps (like Robinhood or M1 Finance), and directly from fund companies themselves. Most people use a brokerage because they offer the widest selection of funds and let you hold other investments in the same account. Your choice depends on how much you want to invest, whether you want a retirement account for tax benefits, and how much hand-holding you need during the process.
The brokerage you choose does not lock you in. You can move your money between brokerages later, though the process takes a few weeks and may involve paperwork. Starting with whichever brokerage feels most straightforward to you is usually the right call — the differences between them matter far less than actually starting.
Key Takeaways
- Online brokerages like Fidelity, Charles Schwab, and Vanguard let you buy index funds in a regular taxable account with no minimum investment at most firms.
- Retirement accounts (401(k), IRA, Roth IRA) offer tax advantages and often come with index fund options built in, especially through an employer plan.
- Investment apps charge lower or zero fees but typically offer fewer fund choices and less educational support than full brokerages.
- You can move your investments between brokerages later through a process called a transfer, so your first choice is not permanent.
- Fund companies like Vanguard and Fidelity sell their own funds directly, but most people find it simpler to buy through a brokerage that carries multiple fund families.
Online brokerages: the most common route
An online brokerage is a company that holds your money and lets you buy and sell investments. The largest ones — Fidelity, Charles Schwab, Vanguard, E-Trade, and TD Ameritrade — all offer index funds with no account minimum and no commission when you buy or sell. You open an account online in about 10 minutes, link a bank account, transfer money, and then search for the index fund you want by its ticker symbol (like VOO for Vanguard's S&P 500 fund).
Each brokerage carries thousands of index funds from different fund companies. Fidelity and Schwab also offer their own index funds alongside others, which can make the choice feel overwhelming — but for a beginner, picking any low-cost S&P 500 index fund is a reasonable starting point. The brokerage website or app will show you the fund's expense ratio (the annual fee, usually between 0.03% and 0.20% for index funds) so you can compare before you buy.
Brokerages also offer research tools, educational articles, and customer service by phone or chat. If you have questions about how to place an order or what a fund does, you can reach someone who can walk you through it. This support is especially useful if you are new to investing.
Retirement accounts: tax-advantaged investing
If your employer offers a 401(k) plan, you can usually buy index funds inside it. The money you contribute comes out of your paycheck before taxes, which lowers your taxable income for the year. Your employer may also match a portion of what you contribute — that is assistance programs. Most 401(k) plans offer a menu of index funds to choose from, though the selection is usually smaller than what you would find at a brokerage.
If you do not have an employer plan, you can open an Individual Retirement Account (IRA) at any brokerage. A traditional IRA lets you deduct contributions from your taxes (with income limits), and a Roth IRA lets your money grow tax-free forever. Both types hold index funds the same way a regular brokerage account does. The main difference is that you cannot withdraw the money before age 59½ without paying a penalty — so a retirement account is best for money you will not need for years.
Many people use both: they contribute to their employer's 401(k) to get the match, then open an IRA at a brokerage to invest additional money with more fund choices. This is a common and sensible approach.
Investment apps: lower fees, fewer choices
Apps like Robinhood, M1 Finance, and Wealthfront let you buy index funds with very low or zero fees and a simpler interface than traditional brokerages. Some apps are designed for beginners and show you only a handful of popular index funds rather than thousands. Others let you build a custom portfolio and rebalance automatically.
The trade-off is selection and support. Most apps carry fewer index funds than a full brokerage, and customer service is usually limited to email or chat — no phone support. If you know exactly which index fund you want and do not need help, an app can be a good fit. If you think you might have questions or want to explore different funds, a traditional brokerage is usually easier.
Some apps also focus on fractional shares, meaning you can buy a portion of a fund with a small amount of money — sometimes as little as $1. This can make starting easier if you do not have much to invest upfront.
Buying directly from a fund company
Fund companies like Vanguard, Fidelity, and Schwab sell their own index funds directly to investors through their websites. You can open an account with Vanguard and buy only Vanguard funds, for example. This works fine, but most people find it simpler to use a brokerage that carries funds from multiple companies in one place. That way, if you want to compare a Vanguard fund to a Fidelity fund to a Schwab fund, you can do it all in one account without logging into three different websites.
Buying directly makes sense if you are very committed to one fund family and want to keep things simple. Otherwise, a brokerage gives you more flexibility without any real downside.
Comparing what you will pay
| Account Type | Account Minimum | Trading Commissions | Fund Selection | Best For |
|---|---|---|---|---|
| Online brokerage (Fidelity, Schwab, Vanguard) | Usually $0 | $0 per trade | Thousands of index funds | Most people starting out |
| Investment app (Robinhood, M1) | Usually $0 | $0 per trade | Dozens to hundreds | Beginners who want simplicity |
| Employer 401(k) | Varies | $0 per trade | Typically 10–30 funds | Getting employer match |
| IRA at a brokerage | Usually $0 | $0 per trade | Thousands of index funds | Tax-advantaged long-term investing |
| Direct from fund company | Varies ($0–$1,000) | $0 per trade | Only that company's funds | Investors committed to one fund family |
The real cost of owning an index fund is the expense ratio — the annual percentage fee charged by the fund itself, not the brokerage. Most index funds charge between 0.03% and 0.20% per year. On a $10,000 investment in a fund with a 0.05% expense ratio, you would pay $5 per year. This fee is deducted automatically and does not show up as a separate bill.
Brokerages do not charge you a commission to buy or sell index funds anymore — that changed in the mid-2010s. Some brokerages make money by lending out your shares or offering premium services, but basic index fund investing is free in terms of trading costs.
How to decide which brokerage to use
If you are starting with a regular taxable account (not a retirement account), any of the major brokerages — Fidelity, Charles Schwab, Vanguard, E-Trade, or TD Ameritrade — will work well. They all offer low-cost index funds, no account minimum, and no trading commissions. The differences are small: some have slightly better apps, some have more educational content, some have better phone support. Read a few reviews, pick one, and open an account. You can always move your money later if you change your mind.
If you have an employer 401(k), start there first — especially if your employer matches contributions. That is the highest-return investment available to you. Then, if you have more money to invest, open an IRA or a taxable brokerage account at whichever firm feels most comfortable.
One practical tip: if you already bank with a large financial institution like Bank of America or Wells Fargo, they own brokerages (Merrill Edge and Wellstrade, respectively). Using your bank's brokerage can simplify login and transfers, though the fund selection and fees are comparable to standalone brokerages.
Frequently Asked Questions
Do I need a lot of money to start buying index funds?
No. Most brokerages have no account minimum, and many let you buy fractional shares, so you can start with $10, $50, or $100. The only practical limit is that very small amounts will take a long time to grow, so most people aim to invest at least a few hundred dollars if they can. But starting small is better than waiting until you have more money.
Can I move my index funds to a different brokerage later?
Yes. You can transfer your account to another brokerage through a process called an ACAT transfer (Automated Customer Account Transfer). It usually takes one to two weeks and is free at most brokerages. You do not have to sell your funds and rebuy them — the shares move as-is to your new account.
What is the difference between buying an index fund at a brokerage versus through an app?
Brokerages offer more funds to choose from, better customer support, and more research tools. Apps are simpler and sometimes cheaper, but they carry fewer funds and offer limited support. For a beginner, a brokerage is usually the safer choice because you have more help if you get stuck.
Should I open a retirement account or a regular brokerage account first?
If your employer offers a 401(k) with a match, start there — the match is assistance programs. If not, or if you have extra money beyond what you can put in a 401(k), open an IRA next (traditional or Roth, depending on your income). A regular taxable brokerage account is useful for money you might need before retirement or amounts above the annual IRA limit.
Do I have to buy index funds through the same company that manages them?
No. You can buy a Vanguard index fund through Fidelity, or a Fidelity index fund through Schwab. Most brokerages carry funds from many different fund companies. Buying through a brokerage that carries multiple fund families gives you more options in one place.