Buying shares in an ETF (exchange-traded fund) works exactly the same as buying shares of stock…and it’s easy to do both. In fact, all it takes is four simple steps, and you’ll be the proud owner of an investment portfolio.
Step 1: Choose a broker. You can’t buy stocks or ETFs without going through a broker – but that doesn’t mean you have to deal with a person. Online investing is quick, easy, and less expensive than going the traditional route. Some great choices for beginners buying both stocks and ETFs online:
|Online Broker||Trade Commission||Account Minimum|
All three offer more than 100 commission-free ETFs, plus convenient, secure apps to make your investing life easy and portable.
Step 2: Open your account. It takes about 15 minutes to fill in the forms needed to create your brokerage account. Some things you’ll want to have handy:
- Your social security number
- Your bank account and routing numbers
- Your driver’s license (or another government issued ID)
- Your annual income
- Your net worth
Not sure how to calculate your net worth? Learn how here.
Make sure you open a cash account and NOT a margin account (where you borrow money to buy stocks – and have to pay the full amount even if the stocks lose money before your loan comes due).
Step 3: Fund your account. You need money in your brokerage account before you can buy your first ETF or stock. You can either transfer the money directly from a checking or savings account, or send a check through the mail. It can take anywhere from a few days to more than a week for that deposit to show up in your account. If you’re excited to get started, a transfer will get you there faster.
Step 4: Invest! Now that your account is set up and funded, it’s time to choose your first investment or two. ETFs make a good foundation for any portfolio, especially for beginning investors. Start with a broad index fund (one that tracks the S&P 500, for example). As you gain knowledge and insights, you’ll be able to choose more focused funds to diversify your portfolio…and maybe even some individual stocks…and keep your net worth growing.