How to Buy ETF - A Complete Step-By-Step Guide for 2025
If you want to buy ETFs, here are the four steps you will need to take:
- Pick your broker to get started
- Open a brokerage account
- Research and select your ETF
- Place your trade
16 Min read | Invest
How to Buy ETF: Complete Guide for 2025
You're about to learn exactly how to buy your first ETF, step by step.
Exchange-traded funds have become one of the most popular ways to invest because they're simple, affordable, and give you instant diversification. But here's something that might surprise you: you can start buying ETFs with as little as $1, and most major brokers don't charge commissions anymore.
Right now, over 14,000 ETFs exist globally according to Statista.com offering exposure to virtually any market, sector, or strategy you can imagine.
Whether you want to invest in U.S. stocks, international bonds, real estate, commodities, or even specific industries like technology or healthcare, there's probably an ETF for that.
This guide walks you through the entire process, from opening your first brokerage account to placing your first trade. You'll also learn about costs, common mistakes, and best practices that can save you money and improve your returns.
Plan on spending about 13-16 minutes reading this. By the end, you'll know exactly what to do to start building your investment portfolio with ETFs.
What You'll Need Before You Start
A valid government-issued ID such as a driver's license or passport for identity verification
Your Social Security number or Tax ID for tax reporting purposes
Bank account information for funding transfers, including your routing and account numbers
Basic investment knowledge, including an understanding of your risk tolerance and investment goals (which will be tested by the broker that you choose)
An email address and phone number for account verification and security alerts
Initial investment amount, which can be as little as $1 if your broker offers fractional shares (a lot of brokers do offer this function nowadays)
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How to Buy ETF: Step-by-Step Process
Buying ETFs) is more straightforward than most people think.
You can complete the entire process in four main steps, and the whole thing typically takes about 30 minutes for your initial account setup. After that, placing trades takes just minutes.
Here's exactly what you need to do, broken down into simple, actionable steps that anyone can follow.
Pick Your Broker to Get Started
Your first decision is picking where you'll buy your ETFs. You have two main options: traditional full-service brokers like Fidelity, Charles Schwab, Vanguard, ETRADE, and Interactive Brokers, or app-based platforms like TradeStation, eToro, and Ally Invest.
App-based platforms have several advantages that make them superior for most investors, especially if you're just starting out:
- They offer cleaner, more intuitive interfaces that don't overwhelm you with information.
- The mobile experience is typically better, so you can manage your investments from anywhere.
- Many app-based platforms provide better educational resources specifically designed for beginners.
- They often have lower or zero account minimums, and their customer support tends to be more responsive.
- Plus, these platforms are built with modern technology from the ground up, rather than layering new features onto decades-old systems.
That said, traditional brokers offer their own benefits, including more investment options, better research tools for advanced investors, and established reputations spanning decades.
Best Brokers for Buying ETFs | Financer's Choise
TradeStation
Why we chose TradeStation:
- Commission-free trading on stocks and ETFs with no account minimums required.
- Advanced trading platform with professional-grade tools that grow with you as you gain experience.
- Excellent mobile app that gives you full trading capabilities on the go.
- Strong educational resources including webinars, articles, and market analysis.
- Robust research tools and screening capabilities to help you find the right ETFs.
- Multiple account types including individual, joint, retirement, and custodial accounts.
Potential drawbacks:
- The platform can feel overwhelming for absolute beginners due to its professional-grade features.
- Customer service wait times can be longer during peak market hours.
You can open a TradeStation account by clicking on this link.
eToro
Why we chose eToro:
- Zero-commission trading on stocks and ETFs for U.S. investors.
- Social trading features let you see what experienced investors are buying and follow their strategies.
- Copy trading allows you to automatically replicate the portfolios of successful traders.
- Clean, beginner-friendly interface that makes investing feel less intimidating.
- Strong mobile app with all the features of the desktop platform.
- Access to a wide range of ETFs covering different sectors, geographies, and strategies.
Potential drawbacks:
- Withdrawal fees apply when you take money out of your account.
- Limited retirement account options compared to traditional brokers.
Interactive Brokers
Why we chose Interactive Brokers:
- Access to over 150 markets worldwide, giving you unmatched global investment opportunities.
- Extremely competitive pricing structure that benefits active traders.
- Professional-grade trading tools and analytics for serious investors.
- Strong reputation and financial stability as one of the largest brokers globally.
- Excellent for investors who want to trade international ETFs.
- Multiple account types and strong support for retirement accounts.
Potential drawbacks:
- The platform has a steeper learning curve and may intimidate beginners.
- Some advanced features require minimum account balances or activity levels.
- The interface prioritizes functionality over simplicity.
Open a Brokerage Account
Once you've chosen your broker, you'll need to open an account. The process is entirely online and takes about 10-15 minutes.
You'll start by providing personal information including your name, address, date of birth, and Social Security number. The broker will ask about your employment status and annual income. This isn't to judge you, it's a regulatory requirement to help ensure you're investing appropriately for your situation.
Next, you'll answer questions about your investment experience, risk tolerance, and financial goals. Be honest here because these answers help the broker provide appropriate investment options and educational resources.
You'll then link a bank account for funding. This typically requires your bank's routing number and your account number. Some brokers use instant verification through your online banking login, while others require you to confirm small test deposits (usually in the amount of $1).
Most major brokers require no minimum balance to open an account and offer commission-free ETF trading. You can start with whatever amount you're comfortable investing.
Research and Select Your ETF
Now comes the important part: choosing which ETF to buy. Your broker's platform will have screening tools that let you filter ETFs by various criteria.
Start by deciding what you want to invest in. Are you looking for broad U.S. stock market exposure? International stocks? Bonds? A specific sector like technology or healthcare? Once you know your goal, use the screening tools to filter by asset class, geography, sector, and expense ratio.
Speaking of expense ratios, 0.15% is about average for equity index ETFs according to Fidelity's research. Anything significantly higher should come with a good reason, like active management or exposure to a specialized market.
When evaluating ETFs, look at several key factors:
- First, understand the investment objective. What is this ETF trying to do? Read the description and make sure it matches your goals.
- Second, review the underlying holdings. What stocks, bonds, or other assets does this ETF actually own? You can find this information in the fund's fact sheet or prospectus.
- Third, check the historical performance and tracking difference. For index ETFs, the tracking difference (how much the ETF's return differs from its benchmark) should be close to the expense ratio. Larger differences suggest inefficient management.
- Fourth, evaluate the total cost of ownership, which includes the expense ratio plus bid-ask spreads. We'll cover this more in the costs section.
- Fifth, look at fund size and liquidity. Larger funds with higher trading volumes typically have tighter spreads and better liquidity.
- Finally, consider tax efficiency, especially if you're investing in a taxable account rather than an IRA or 401(k). ETFs are generally tax-efficient, but some structures are better than others.
Always read the prospectus before investing in ETFs. Yes, it's long and somewhat boring, but it contains critical information about risks, strategies, and costs. You don't need to read every word, but at least skim through the key sections about investment objectives, principal risks, and fees.
Place Your Trade
You're ready to buy. Here's how to execute the trade:
Start by finding your chosen ETF using its ticker symbol. This is a short code of letters that uniquely identifies the ETF. For example, SPY is the SPDR S&P 500 ETF, and AGG is the iShares Core U.S. Aggregate Bond ETF.
Double-check that you have the right ticker before trading because similar symbols exist and you don't want to accidentally buy the wrong thing.
Next, choose your order type:
- A market order buys the ETF immediately at the current market price. This guarantees your order executes quickly but doesn't guarantee the exact price, especially for less liquid ETFs.
- A limit order lets you specify the maximum price you're willing to pay. Your order only executes if the ETF reaches that price or lower. Limit orders give you price control but might not execute if the market doesn't reach your specified price.
- For most liquid ETFs during normal trading hours, market orders work fine. For less liquid ETFs or larger purchases, limit orders are smarter.
Enter the number of shares you want to buy. Most brokers now offer fractional shares, meaning you can buy a portion of a share for as little as $1. This is perfect for expensive ETFs or when you want to invest a specific dollar amount rather than buying whole shares.
Review the total cost, including any spreads between the bid and ask price. Make sure everything looks correct, then confirm the trade.
That's it. You now own an ETF. ETFs trade throughout market hours, which are 9:30 AM to 4:00 PM Eastern Time, Monday through Friday (except market holidays).
Unlike mutual funds that only trade once daily after market close, you can buy or sell ETFs anytime the market is open. Your trade will settle in one business day (T+1), meaning the shares officially transfer to your account the next business day.
ETF Costs: What You'll Actually Pay When You Buy ETFs
Knowing how to buy ETFs is important, but understanding what you'll pay is equally indispensable if you want a profitable portfolio.
ETF costs have multiple components, and focusing only on the most obvious one (the expense ratio) can lead you to miss other expenses that eat into your returns. Let's break down every cost you'll encounter so you can make informed decisions and keep more of your money working for you.
Operating Expense Ratio (OER)
The expense ratio is the annual percentage of fund assets that covers the ETF's operating costs, including management fees, administrative expenses, and other costs of running the fund.
According to Morningstar's 2025 fee study, current averages are 0.34% for all ETFs, 0.11% for passive index ETFs, and 0.59% for actively managed ETFs. This fee is automatically deducted from the fund's assets, so you don't write a separate check. It just reduces your returns slightly.
Here's an example: if you invest $10,000 in an ETF with a 0.25% expense ratio, you'll pay $25 annually in fund expenses. That might not sound like much, but over decades, these fees compound and can significantly impact your final wealth.
Bid-Ask Spreads
The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). You pay this spread every time you trade.
For highly liquid ETFs like Vanguard's VTI or Schwab's SCHB, spreads are typically just $0.01 to $0.02 per share. But for less liquid ETFs, especially those holding illiquid underlying securities like small-cap international stocks or certain bonds, spreads can widen to $0.25 or more.
During market volatility, spreads can temporarily widen even for normally liquid ETFs. This is why trading during mid-day when markets are calm typically gets you better execution than trading at market open or close.
Trading Commissions
Good news here: trading commissions are now $0 at virtually all major brokers for listed ETFs.
Fidelity, Charles Schwab, Vanguard, ETRADE, TD Ameritrade, Interactive Brokers, and most app-based platforms such as TradeStation and eToro eliminated ETF commissions years ago.
However, some brokers still charge for unlisted ETFs, broker-assisted trades, or trades placed over the phone. Always verify your broker's fee schedule.
Premium or Discount to NAV
ETFs may trade slightly above (premium) or below (discount) the value of their underlying assets, known as Net Asset Value or NAV. This happens because ETFs trade on exchanges like stocks, so supply and demand can temporarily push prices away from the underlying value.
However, the creation and redemption mechanism keeps these premiums and discounts small and temporary for most ETFs. Authorized participants can profit from significant discrepancies, which brings prices back in line.
For liquid ETFs, premiums and discounts are typically less than 0.1%. For less liquid or specialized ETFs, they can be larger. Check the premium/discount history before buying, especially for newer or smaller ETFs.
Transaction Costs
When ETFs rebalance their holdings or experience significant inflows or outflows, they incur internal transaction costs from buying and selling securities. These costs aren't included in the expense ratio but still impact returns.
Well-managed ETFs minimize these costs through efficient trading and tax-loss harvesting. This is another reason to choose ETFs from reputable, experienced fund companies.
Total Cost Example
Here's an example that will help you understand why you need to consider all costs, not just expense ratios.
Imagine ETF A has a 0.05% expense ratio but a $0.10 average bid-ask spread. ETF B has a 0.15% expense ratio but a $0.01 average bid-ask spread. If you're buying $10,000 of a $100 ETF (100 shares):
- ETF A costs you $5 annually in expenses plus $10 in spread ($0.10 × 100 shares), totaling $15
- ETF B costs you $15 annually in expenses plus $1 in spread ($0.01 × 100 shares), totaling $16.
They're nearly identical in total cost for a single purchase. But if you trade frequently or hold for many years without trading, the math changes.
For buy-and-hold investors, the expense ratio matters more. For frequent traders, spreads matter more.
Thanks to industry fee compression, investors saved an estimated $5.9 billion in fund expenses in 2024 compared to what they would have paid just one year earlier, in 2023. This is real money staying in your pocket and compounding over time.
ETF Cost Cheat Sheet (illustrative ranges)
To help you better understand the costs of buying ETFs, we decided to create this cheat sheet, where you will see all the costs and their illustrative ranges:
| ETF type (typical use) | Expense ratio (ER) | Bid–ask spread (one-way) | Premium/Discount vs. NAV | Securities lending offset | Notes / implicit costs |
|---|---|---|---|---|---|
| Broad U.S. market (core) | 0.03%–0.05% | 0.01%–0.03% | 0.00%–0.05% | –0.02% to –0.08% | Very tight tracking; low cash drag |
| International developed | 0.05%–0.10% | 0.03%–0.10% | 0.00%–0.15% | –0.02% to –0.06% | Currency effects; occasional wider spreads |
| Emerging markets | 0.10%–0.25% | 0.05%–0.20% | 0.05%–0.30% | 0.00% to –0.05% | Higher tracking error in stress |
| U.S. sector (tactical tilt) | 0.08%–0.15% | 0.02%–0.10% | 0.00%–0.10% | 0.00% to –0.05% | More cyclical; may rotate often |
| Real estate / REITs | 0.08%–0.12% | 0.02%–0.08% | 0.00%–0.10% | 0.00% to –0.04% | Rate-sensitive; sector swings |
| Gold (physically backed) | 0.20%–0.40% | 0.02%–0.10% | 0.00%–0.15% | n/a | No roll costs; storage drives ER |
| Broad commodities (futures) | 0.70%–0.95% | 0.05%–0.20% | 0.00%–0.30% | n/a | Add roll yield: ~+3% to –5%/yr depending curve |
| Municipal bond (U.S. tax-adv.) | 0.05%–0.20% | 0.02%–0.10% | 0.00%–0.20% | 0.00% to –0.03% | Mind tax rules & liquidity |
| Active equity ETF | 0.60%–0.80% | 0.02%–0.15% | 0.00%–0.20% | 0.00% to –0.05% | Higher ER; performance varies vs. index |
| Leveraged / inverse (short-term) | 0.75%–1.00% | 0.05%–0.30% | 0.05%–0.50% | n/a | Daily compounding drag; financing costs embedded |
Common Mistakes When Buying ETFs
You can lose money buying ETFs if you make avoidable mistakes, and these errors happen more often than you'd think. Some of these problems are subtle and only reveal themselves after you've already invested, while others hit you immediately with unnecessary costs or poor performance.
Knowing what to watch out for helps you protect your capital and build a stronger portfolio from day one.
Chasing past performance
This is probably the most common mistake new ETF investors make. You see an ETF that returned 30% last year and assume it will do the same this year.
Past performance doesn't predict future results, and funds that top the charts one year often underperform the next.
Hot sectors cool off, market conditions change, and what worked yesterday rarely works tomorrow. Focus on the ETF's underlying holdings, strategy, and how it fits your long-term goals instead of just looking at last year's returns.
Overlooking trading costs
While most brokers eliminated commissions years ago, you still pay the bid-ask spread every time you trade.
Buying a thinly traded ETF with a $0.50 spread on a $50 stock costs you 1% per trade. Do that on both sides (buying and selling), and you've lost 2% before the fund even moves.
Some investors pick ETFs without comparing expense ratios, assuming all funds in the same category cost about the same. They don't.
Two S&P 500 ETFs might look identical but charge 0.03% versus 0.45%. That difference compounds over decades and can cost you tens of thousands of dollars.
Always compare costs for similar ETFs and choose the lowest option when holdings and performance are comparable.
Investing without understanding the ETF's underlying holdings or strategy
Just because an ETF has an appealing name or ticker doesn't mean it matches your goals. An ETF's name doesn't always tell the full story.
A "technology ETF" might be 40% Apple and Microsoft, making it less diversified than you think. A "dividend ETF" might hold risky high-yield stocks that cut dividends during downturns.
Always read the fund's holdings, sector allocation, and strategy before buying. Spend five minutes reviewing what you actually own.
Falling for gimmicky or overly complex ETFs
The ETF industry creates new products constantly, and many are designed to attract attention rather than deliver solid returns.
Triple-leveraged ETFs, inverse ETFs, and hyper-specific sector bets sound exciting but often lose money over time due to decay, high fees, or poor construction.
Stick with straightforward, broadly diversified ETFs unless you have a specific, well-researched reason to do otherwise.
Not Checking Liquidity and Volume
Low trading volume means wider spreads and harder exits when you need to sell. ETFs with less than $50 million in assets or average daily volume under 100,000 shares can be difficult to trade efficiently.
Larger, more established ETFs give you better pricing and easier entry and exit.
Tips for Successful ETF Investing
Smart ETF investing isn't complicated, but it does require following a few proven strategies that can significantly impact your long-term returns. These aren't theoretical concepts.
They're practical approaches that have helped countless investors build wealth over decades, backed by research from Vanguard, Morningstar, and leading academic institutions. And, more importantly, you don't need to be a financial expert to implement them.
Start with broad market index ETFs
Before you chase specialized sectors or trendy themes, build your foundation with broad market ETFs that track major indexes like the S&P 500 or total stock market.
These give you instant diversification across hundreds or thousands of companies. ETFs like Vanguard's VTI or Schwab's SCHB own pieces of the entire U.S. stock market for expense ratios under 0.05%.
This approach has consistently outperformed most actively managed funds over 10+ year periods.
Use limit orders when buying ETFs
When you decide to buy or sell ETFs, use limit orders rather than market orders to control execution price, especially for less liquid ETFs.
This simple habit can save you money on every trade by ensuring you don't overpay during temporary price spikes or wide spreads.
Invest consistently regardless of market conditions
Dollar-cost averaging means investing the same amount on a regular schedule, whether markets are up, down, or sideways.
This strategy removes emotion from your decisions and naturally buys more shares when prices are low and fewer when prices are high.
Set up automatic investments of $100, $500, or whatever fits your budget every month. Over time, this smooths out market volatility and typically produces better results than trying to time your purchases.
Try to keep the total expense ratio below industry average
Monitor your total portfolio expense ratio and aim to keep it below the industry average of 0.34%.
Calculate the weighted average expense ratio of all your holdings. If it's significantly above average, look for opportunities to reduce costs by switching to lower-cost alternatives.
Rebalance once or twice per year
Your target allocation will drift as different assets perform differently. If you wanted 70% stocks and 30% bonds, a strong stock market might push you to 80/20 within a year.
Rebalancing means selling some of what's grown and buying what's lagged to return to your target. This way, you'll end up selling high and buying low.
Most investors rebalance annually or semi-annually. But keep in mind that more frequent rebalancing creates unnecessary costs without improving returns.
Don't over-diversify into too many ETFs
You can own too much of a good thing. Some investors buy 15-20 different ETFs thinking more diversification equals better returns. In reality, you're probably just creating overlap and making your portfolio harder to manage.
A portfolio of 3-5 well-chosen ETFs covering U.S. stocks, international stocks, and bonds provides excellent diversification for most investors. Additional ETFs should serve a clear purpose in your strategy.
Fractional shares can be helpful
Use fractional shares to invest even small amounts and maintain precise allocations.
Don't let share prices prevent you from building the exact portfolio you want. If your target allocation calls for 15% in international stocks, use fractional shares to hit that target precisely rather than approximating with whole shares.
Frequently Asked Questions About Buying ETFs
How much money do I need to buy an ETF?
You can start with as little as $1 using fractional shares at most major brokers. Platforms like Fidelity, Charles Schwab, Vanguard, ETRADE, and Robinhood require no minimum account balances.
If you're buying traditional full shares, prices vary widely depending on the ETF. Some trade for under $20 per share, while others cost several hundred dollars.
But with fractional shares now widely available, the share price doesn't matter. You can invest exactly the dollar amount you want, whether that's $10, $100, or $10,000.
Are there fees to buy ETFs?
Most major brokers offer commission-free ETF trading for listed ETFs, so you won't pay a trading commission.
However, you will pay the ETF's expense ratio, which averages 0.34% annually in 2025 and is automatically deducted from the fund's assets. You'll also pay bid-ask spreads when trading, typically $0.01 to $0.25 for liquid ETFs.
Some brokers charge fees for unlisted ETFs, broker-assisted trades, or phone orders. Always check your specific broker's fee schedule.
The good news is that total costs have dropped dramatically over the past two decades, making ETFs more affordable than ever.
Can I buy ETFs in my retirement account?
Yes, absolutely. ETFs can be purchased in IRAs, 401(k)s, and other retirement accounts. All major IRA providers offer ETF trading, and many employer 401(k) plans now include ETF options alongside traditional mutual funds.
Buying ETFs in retirement accounts has tax advantages because you won't pay capital gains taxes on trades within the account. You only pay taxes when you withdraw money in retirement (for traditional accounts) or not at all (for Roth accounts, assuming you follow the rules).
What's the difference between buying an ETF and a mutual fund?
ETFs trade throughout the day at market prices on exchanges, just like stocks. Mutual funds only trade once daily at the Net Asset Value calculated after market close.
ETFs typically have lower expense ratios, better tax efficiency due to their structure, and no minimum investments beyond the share price. Mutual funds often have investment minimums, typically $500 to $3,000, though some brokers waive these for retirement accounts.
Mutual funds allow automatic investments of fixed dollar amounts more easily than ETFs, though this is changing as fractional share investing becomes standard. For most investors, ETFs offer more flexibility and lower costs.
What time of day should I buy ETFs?
Trade during mid-day, typically between 10:00 AM and 3:00 PM Eastern Time, when spreads are tightest and liquidity is best. Avoid the first and last 30 minutes of trading when volatility increases and spreads widen.
Market makers and institutional traders dominate the open and close, creating price swings that can work against retail investors. During the middle of the day, markets are calmer and you're more likely to get fair execution.
Always use limit orders to control your execution price, especially for less liquid ETFs or larger trades.
Ready to Start Buying Your First ETF?
You now know exactly how to buy ETFs, from choosing a broker to placing your first trade.
ETFs offer accessible, cost-effective, and tax-efficient investing for as little as $1, with commission-free trading at virtually every major broker. The four-step process of opening an account, researching ETFs, and placing your trade can be completed quickly, even if you've never invested before.
With over 14,000 ETFs available globally and average expense ratios at historic lows of 0.34%, you have unprecedented access to diversified portfolios covering every imaginable market, sector, and strategy.
Remember the key points:
- Understand all costs, not just expense ratios.
- Use limit orders and trade mid-day for better execution.
- Start with broad market index ETFs and expand as you gain experience.
- Review prospectuses before investing.
- Avoid common mistakes like using orders when the market opens or closes, investing without understanding holdings, or overlooking trading costs.
- Keep your total portfolio expense ratio below the industry average, reassess your portfolio twice a year, and invest consistently regardless of market conditions.
You can’t start yesterday, but you can start today. Compare brokers below, open an account, and build your ETF portfolio starting right now.
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Investing involves risk. Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities via mobile or web. Regulatory and exchange fees may apply. Please see Robinhood Financial Fee Schedule to learn more.
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