You buy an ETF through a brokerage account, the same way you buy individual stocks

An exchange-traded fund (ETF) is a collection of investments bundled together and traded as a single unit on a stock exchange. To buy one, you open an account with a brokerage firm, deposit money, search for the ETF by its ticker symbol, and place an order. The whole process takes minutes once your account is funded. You do not need special permission or a minimum amount of money — most brokerages let you buy a single share of any ETF.

The main difference between buying an ETF and buying a stock is that an ETF holds many investments inside it, so you own a piece of all of them at once. The price moves during market hours, just like a stock price does. You can sell whenever the market is open.

Key Takeaways

  • You need a brokerage account before you can buy an ETF; opening one takes 10 to 20 minutes and requires basic identity information and a funding method.
  • ETFs trade by ticker symbol (like SPY or VOO), which you search for in your brokerage's platform to place an order.
  • You can buy as little as one share of an ETF, and the price per share varies depending on which ETF you choose.
  • Most brokerages charge no commission to buy or sell ETFs, though you may pay a small fee if you trade through certain platforms or use margin.

Opening a brokerage account

You cannot buy an ETF without a brokerage account. A brokerage is a company licensed to hold your money and execute trades on your behalf. Common brokerages include Fidelity, Charles Schwab, E-Trade, Vanguard, and Robinhood, though many others exist.

To open an account, go to the brokerage's website and click the sign-up button. You will provide your name, address, Social Security number, and employment information. The brokerage will verify your identity — this usually takes a few minutes to a few hours. Once approved, you link a bank account or debit card to fund your brokerage account. Most brokerages let you start with any amount; some have no minimum, while others ask for $500 or $1,000 to begin.

After your account is funded, you are ready to search for and buy ETFs. The entire account setup typically takes 10 to 20 minutes.

Finding and ordering an ETF

Every ETF has a ticker symbol — a short code of letters that identifies it. For example, SPY tracks the S&P 500, and VOO also tracks the S&P 500 but is run by Vanguard. You search for the ETF by typing its ticker into your brokerage's search bar or trade screen.

Once you find the ETF, you will see its current price per share. You decide how many shares you want to buy. If an ETF costs $100 per share and you have $500 in your account, you can buy five shares. Some brokerages also let you buy fractional shares — meaning you can spend exactly $500 and own 5.00 shares even if the price does not divide evenly.

You then place an order. A market order buys the ETF at whatever price it is trading at right now — this usually fills within seconds during market hours. A limit order lets you set a maximum price you are willing to pay; the order only fills if the ETF drops to that price or lower. For most people starting out, a market order is simpler and faster.

Understanding ETF costs and fees

Most brokerages charge zero commission to buy or sell ETFs — you pay nothing to place the trade itself. However, every ETF has an expense ratio, which is an annual fee charged by the fund company. This fee is deducted automatically from the fund's value each year and is expressed as a percentage. For example, an ETF with a 0.03% expense ratio costs $3 per year for every $10,000 you own in that fund.

Expense ratios vary widely. Large, popular ETFs that track broad indexes (like the S&P 500) often charge 0.03% to 0.10% per year. More specialized ETFs might charge 0.20% to 0.50% or higher. You can find the expense ratio on the ETF's fact sheet, which the brokerage displays when you search for it.

You may also pay fees if you use margin (borrowed money) to buy, if you trade through a robo-advisor platform, or if you place certain types of orders. Most basic buy-and-hold investors pay only the ETF's expense ratio and nothing else.

When your order settles and when you can sell

When you place a buy order during market hours (9:30 a.m. to 4:00 p.m. Eastern Time on weekdays), the trade usually fills within seconds. However, the trade does not officially settle — meaning the shares do not fully belong to you and the money does not fully leave your account — until two business days later. This is called the settlement period.

During the settlement period, you own the shares and can see them in your account, but some brokerages restrict what you can do with the cash. Once settlement is complete, you can sell the shares, buy more investments, or withdraw the cash with no restrictions.

If you place an order after 4:00 p.m. or on a weekend, it will not fill until the market opens the next business day. The settlement period still runs from the day the order fills, not from the day you placed it.

Choosing between different types of brokerage accounts

Most people buy ETFs in a taxable brokerage account, which has no contribution limits and no restrictions on when you can withdraw money. You pay taxes on any gains when you sell, and you may owe taxes on dividends the ETF pays out each year.

If you are saving for retirement, you might buy ETFs inside an IRA (individual retirement account) or a 401(k) plan instead. These accounts offer tax advantages — either you pay no taxes on gains until you withdraw in retirement, or you pay no taxes on gains ever, depending on the account type. However, you cannot withdraw the money before age 59½ without a penalty (with some exceptions). Most brokerages let you open an IRA and buy ETFs inside it using the same process described above.

If you are under 18, you will need a parent or guardian to open a custodial account on your behalf, but the process is similar.

What happens after you buy

Once you own an ETF, you do not have to do anything. The fund company manages the investments inside the ETF, buying and selling as needed to track whatever the fund is designed to track. You simply hold the shares and watch their value change as the market moves.

If the ETF pays dividends — which many do — the brokerage will deposit the dividend into your account automatically. You can then spend that money, reinvest it in more shares of the same ETF, or buy something else. Most brokerages let you set up automatic reinvestment so dividends buy more shares without you having to do anything.

When you want to sell, you search for the ETF in your brokerage account, enter how many shares you want to sell, and place a sell order. The process is identical to buying, except in reverse. The money from the sale lands in your account two business days later.

Frequently Asked Questions

Do I need a lot of money to start buying ETFs?

No. Most brokerages have no minimum deposit, and you can buy a single share of any ETF. If an ETF costs $50 per share, you can open an account with $50 and buy one share. Some brokerages offer fractional shares, so you can invest any dollar amount, even $10.

Can I buy an ETF outside of market hours?

You can place an order anytime, but it will not fill until the market is open (9:30 a.m. to 4:00 p.m. Eastern Time, Monday through Friday). Orders placed after hours or on weekends fill at the market open the next business day at whatever price the ETF is trading at then.

What is the difference between buying an ETF and buying a mutual fund?

ETFs trade like stocks during market hours, so you see the price change throughout the day and can sell anytime. Mutual funds are priced once per day after the market closes, and you can only buy or sell at that daily price. ETFs also typically have lower expense ratios and are more tax-efficient for most investors.

Do I pay taxes when I buy an ETF?

No taxes are due when you buy. You only owe taxes when you sell (on any gain) or when the ETF pays dividends, and only if the ETF is in a taxable account. ETFs held in an IRA or 401(k) are not taxed until you withdraw in retirement.

Can I lose money buying an ETF?

Yes. ETF prices move with the market. If you buy an ETF and its value drops before you sell, you will have a loss. However, if you hold long-term and the market recovers, you may regain that loss and earn gains. Past performance does not predict future results.