How to buy an ETF in four steps

To buy an ETF, you open a brokerage account, fund it with money, search for the ETF by its ticker symbol, and place a buy order during market hours. The whole process takes about 10 minutes once your account is set up. The ETF shares settle in your account two business days after you buy them, and you own them until you sell.

An ETF is a fund that holds many stocks or bonds and trades like a single stock on an exchange. You do not need special permission or a large minimum investment — most brokerages let you buy a single share of any ETF. The cost is one commission per trade (often zero at major brokerages) plus the fund's annual expense ratio, which is a small percentage taken from the fund's assets each year.

Key Takeaways

  • You need a brokerage account with a firm like Fidelity, Charles Schwab, or Vanguard before you can buy any ETF.
  • Most brokerages charge zero commission per trade, but every ETF charges an annual expense ratio that reduces your returns slightly each year.
  • You buy an ETF by searching for its ticker symbol (a short code like SPY or VOO), entering the number of shares you want, and placing the order during market hours.
  • Your order executes at the market price at the moment it fills, not at a price you set in advance, unless you use a limit order.
  • Shares settle two business days after you buy them, meaning the money leaves your account and the shares appear in your holdings.

Opening a brokerage account

You cannot buy an ETF without a brokerage account. A brokerage is a firm licensed to buy and sell securities on your behalf. Major brokerages include Fidelity, Charles Schwab, E-Trade, Vanguard, and Interactive Brokers. Each one has a website and mobile app where you can open an account in about 10 minutes.

The account opening process asks for your name, address, Social Security number, employment status, and how much money you plan to invest. The brokerage verifies your identity and runs a background check. You will receive approval or a request for more information within one business day. Once approved, you can fund the account by linking a bank account or mailing a check.

There is no minimum investment at most brokerages, though some have a $500 or $1,000 minimum to open a retirement account like an IRA. A regular taxable brokerage account has no minimum. You do not pay a fee to open or hold the account at most firms.

Funding your account

After your account is open, you need to move money into it. The fastest way is to link your bank account and transfer money electronically. This usually takes one to three business days. You can also mail a check, which takes five to ten business days, or wire money, which is faster but may cost $10 to $25.

The money sits in a cash position in your brokerage account until you use it to buy an ETF. You can leave it there, move it back to your bank, or buy an ETF with it at any time. There is no deadline to invest the money once it arrives.

Finding and selecting an ETF

ETFs are identified by a ticker symbol — a short code of one to five letters. The S&P 500 ETF trades under the ticker SPY, VOO, or IVV depending on which fund you choose. All three track the same index but have slightly different expense ratios and trading volumes. You can search for ETFs by ticker, by the index they track, or by category (like "technology" or "bonds") on your brokerage's website.

Before you buy, check three things: the expense ratio (listed as a percentage, usually between 0.03% and 0.50% per year), the fund's assets under management (larger funds are usually more stable), and the trading volume (how many shares trade each day — higher volume means easier buying and selling). You can find all this information on the ETF's fact sheet, which every brokerage displays next to the ticker.

If you are new to investing, a broad market ETF like VOO (Vanguard S&P 500 ETF) or VTI (Vanguard Total Stock Market ETF) is a common starting point. These hold hundreds of stocks and charge very low expense ratios, usually under 0.10% per year.

Placing your buy order

Once you have chosen an ETF, log into your brokerage account and search for the ticker symbol. Click on the ETF name to open its detail page. Look for a "Buy" button or link. You will see a form asking how many shares you want to buy and what type of order you want to place.

A market order buys the ETF at whatever price it is trading at the moment your order reaches the market. This usually fills within seconds during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). A limit order lets you set a maximum price you are willing to pay — if the ETF never drops to that price, your order does not fill. For most beginners, a market order is simpler and fills reliably.

Enter the number of shares you want. If the ETF costs $150 per share and you have $1,500 in your account, you can buy 10 shares. You do not have to spend all your money at once. Review the order summary, which shows the number of shares, the estimated cost, and any commission (usually zero). Then click "Confirm" or "Submit Order".

After your order fills

Your order fills when a seller agrees to sell you the shares at the price your order specified. For a market order during market hours, this happens in seconds. Your brokerage sends you a confirmation email with the execution price (the actual price you paid per share), the total cost, and the settlement date.

The shares do not appear in your account immediately. They settle two business days after the trade date. This is called T+2 settlement and is standard for all stock and ETF trades in the United States. During those two days, the money is held and the shares are in transit. On the settlement date, the money leaves your cash balance and the shares appear in your holdings.

Once settled, you own the shares. You can sell them at any time the market is open, hold them for years, or use them as collateral for a loan (in some account types). If the ETF pays a dividend, it will be deposited into your account automatically.

Understanding costs and taxes

When you buy an ETF, you pay two types of costs. The first is the commission, which is zero at most brokerages. The second is the expense ratio, which is charged automatically each year. If an ETF has a 0.10% expense ratio and you own $10,000 of it, you pay $10 per year in fees. This is taken from the fund's assets, so you do not write a check — it just reduces your returns slightly.

When you sell an ETF for more than you paid, you owe capital gains tax on the profit. If you held it for less than one year, it is taxed as short-term capital gains at your ordinary income tax rate. If you held it for more than one year, it is taxed as long-term capital gains at a lower rate (0%, 15%, or 20% depending on your income). You do not owe tax until you sell, so you can hold an ETF indefinitely and pay no tax.

Frequently Asked Questions

Can I buy an ETF with less than $100?

Yes. You can buy a single share of almost any ETF, even if one share costs $200 or more. If you have $50 and an ETF costs $100 per share, you cannot buy a full share, but some brokerages let you buy fractional shares (a piece of a share). Check your brokerage's website to see if fractional shares are offered.

What happens if I place an order after the market closes?

Your order will not fill until the market opens the next day. If you place a market order after 4 p.m. Eastern time on a weekday, it sits in a queue and fills at the opening price the next morning. If you place it on a weekend or holiday, it fills when the market opens on the next trading day. The price may be very different from what it was when you placed the order.

Do I have to buy whole shares?

Most brokerages now offer fractional shares, so you can buy 0.5 shares or 2.3 shares if you want. This lets you invest a specific dollar amount rather than being limited to whole shares. Check whether your brokerage supports fractional shares before you open an account if this matters to you.

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

Both hold many securities in one fund. The main difference is that ETFs trade on an exchange like stocks (you can buy and sell during market hours), while mutual funds trade once per day after the market closes. ETFs usually have lower expense ratios and are more tax-efficient. For most beginners, an ETF is the simpler choice.

Can I set up automatic purchases of an ETF?

Yes. Most brokerages offer automatic investment plans where you can set up a recurring purchase (weekly, monthly, or quarterly) of a specific ETF. This is called dollar-cost averaging and can help reduce the impact of price swings. Set it up in your account settings or contact your brokerage's customer service.