How to Invest in ETF - A Complete Guide for 2025
- ETFs are now the go-to for simple, low-cost investing that offer broad diversification, tiny fees, and commission-free access at most brokers.
- This step-by-step guide shows you how to choose a platform, research and select ETFs, place your first trade, and build a resilient portfolio.
- You’ll learn proven strategies (asset allocation, core-satellite), the real costs you’ll pay, and the mistakes to avoid.
- By the end, you’ll know exactly how to start investing in ETFs with confidence today.
12 Min read | Invest
How to Invest in ETF: Complete Guide for 2025
You've read a lot about what ETFs are and how they work, and now you're ready to start learning how to invest in them. You've come to the right place.
ETFs have become one of the most popular investment vehicles in America, and for good reason. In 2024, ETFs saw record-breaking flows of over $1 trillion, pushing total assets to $13.8 trillion in 2025. That's a testament to how accessible and effective these investment tools have become.
Here's what makes ETFs so attractive: expense ratios for index ETFs average just 0.14%, compared to 0.89% for actively managed mutual funds. Over decades, that difference compounds into serious money staying in your pocket instead of going to fund managers.
This comprehensive guide will walk you through everything you need to know, from choosing a brokerage platform to building your first ETF portfolio. We'll cover the step-by-step process, common mistakes to avoid, and strategies that actually work.
By the end, you'll have the knowledge and confidence to start investing in ETFs today.
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How to Invest in ETF: Step-by-Step Process
Investing in ETFs is more straightforward than most people think. Follow these six steps, and you'll be on your way to building a diversified investment portfolio.
Step 1: Choose a Brokerage Platform
Your first decision is selecting a broker that offers commission-free ETF trading. Most major brokers now offer this, which is a game-changer for investors. Just a few years ago, you'd pay $7-10 per trade. Today, you can trade most ETFs for free.
Here are the factors to consider when choosing a broker:
User interface: Is the platform easy to navigate? Can you find what you need quickly?
Research tools: Does the broker provide screening tools, analyst reports, and educational content?
Educational resources: Are there guides, videos, and tutorials to help you learn?
Customer service: Can you reach a real person when you need help?
Available ETF selection: Some brokers offer 3,000+ commission-free listed ETFs
Demo account: Does the broker offer a demo account where you can test the platform itself and try out different ETF investing strategies?
Financer's comparison tool can help you find the right broker for your needs. But if you were to ask us which is the best ETF investing platform, we would suggest having a look at these three options:
TradeStation
TradeStation offers access to thousands of ETFs with commission-free trading on most listed ETFs. This platform is known for its powerful trading tools and comprehensive research capabilities.
Why we chose TradeStation:
This broker excels at providing professional-grade tools that are still accessible to beginners
Their platform offers advanced charting, screening tools, and educational resources that help you make informed decisions
The research capabilities are particularly strong, with access to third-party research reports and detailed ETF analytics
They provide commission-free trading on most listed ETFs
You have access to strong customer service with knowledgeable representatives
Cons:
Platform is complex, and can feel a bit overwhelming for complete beginners
Some advanced features require a learning curve
eToro
eToro provides access to hundreds of ETFs with a user-friendly interface that's perfect for beginners. The platform is known for its social trading features and straightforward approach to investing.
Why we chose eToro:
This broker makes ETF investing incredibly accessible
The interface is clean and intuitive, making it easy to research ETFs, place trades, and monitor your portfolio even as a beginner
The social trading features let you see what other investors are buying, which can be educational (though you should always do your own research)
You have access to commission-free ETF trading on most offerings
eToro also offers fractional shares on many ETFs, allowing you to invest with smaller amounts
Mobile app is excellent for on-the-go investing
Cons:
Smaller ETF selection compared to some competitors
Withdrawal fees apply when moving money out, which can have a detrimental effect on your portfolio if you withdraw money often
Interactive Brokers
Interactive Brokers offers access to more than 13,000 ETFs globally, making it an excellent choice for investors who want international exposure. The platform provides some of the lowest costs in the industry.
Why we chose Interactive Brokers:
This broker stands out for its global reach and incredibly low cost
If you're interested in international ETFs or want access to markets beyond the U.S., Interactive Brokers is hard to beat
The platform offers sophisticated tools for portfolio analysis and risk management
While it has a steeper learning curve than eToro, the capabilities are worth it for serious investors
Cons:
Steeper learning curve than beginner-focused platforms
Interface can feel outdated compared to newer brokers
May be overwhelming for investors who just want simplicity
Step 2: Open and Fund Your Account
Once you've chosen a broker, opening an account is straightforward. The process typically takes 10-15 minutes and can be completed entirely online.
Here's what you'll do:
Provide personal information: Name, address, date of birth, Social Security number, and employment information
Verify your identity: Upload a photo of your driver's license, ID card, or passport
Answer financial questions: Your income, net worth, and investment experience (this helps the broker ensure you're suitable for investing)
Link your bank account: You'll need your bank's routing number and your account number
Make your initial deposit: Transfer money from your bank to your brokerage account
Most brokers allow you to start with no minimum deposit, though you'll need enough to buy at least one share (or fractional share) of an ETF. Funding methods typically include:
Bank transfer (ACH): Free, takes 1-3 business days
Wire transfer: Faster (same day) but may cost $25-30
Check: Slowest option, taking 5-7 business days
For most investors, a standard bank transfer works perfectly fine. There's no rush to get your money into the account immediately.
Step 3: Define Your Investment Strategy
Before you start buying ETFs, you need to know what you're trying to accomplish. This step is crucial because your goals will determine which ETFs you choose and how you allocate your money.
Ask yourself these questions:
What are my investment goals? (Retirement savings, buying a house, building wealth, generating income)
What's my time horizon? (How long until I need this money)
How much risk can I handle? (Both financially and emotionally)
You'll also need to decide on a portfolio approach:
All-in-one ETFs: Target-date funds or balanced ETFs that do the allocation for you
Core-satellite strategy: Broad market ETFs as your foundation (core) with sector or thematic ETFs for specific exposure (satellites)
Custom allocation: Building your own portfolio from scratch with specific ETFs for each asset class
We'll talk more about strategies later, but, for beginners, the core-satellite approach often works best. Start with broad market ETFs covering U.S. stocks, international stocks, and bonds, then add targeted exposure to sectors or themes you believe in.
For a comprehensive breakdown of proven portfolio strategies, specific ETF recommendations matched to different risk levels, and detailed implementation steps, check out our complete guide on ETF investing for beginners.
Step 4: Research and Select ETFs
Now comes the fun part: choosing which ETFs to buy. Your broker's screening tools will help you filter thousands of ETFs down to a manageable list.
Here are the key factors to evaluate:
Expense ratio
This is the annual fee charged by the ETF, expressed as a percentage of your investment. Lower is better. Index ETFs average 0.14%, while actively managed ETFs average higher.
For example, IVV charges an expense ratio of 0.03%, VOO charges 0.03%, and SPY charges 0.095%. All three track the S&P 500, but SPY costs more than three times as much as the other two.
Assets under management (AUM)
Larger ETFs are generally more stable and liquid. Look for ETFs with at least $100 million in assets, preferably much more.
Tracking error
This measures how closely the ETF follows its underlying index. Lower tracking error means the ETF is doing its job well.
Liquidity
Check the average daily trading volume and bid-ask spread. Higher volume and tighter spreads mean you can buy and sell easily without losing money to spreads.
Holdings composition
Look at what the ETF actually owns. Does it align with your goals? Are you comfortable with the level of concentration in top holdings?
Historical performance
Past performance doesn't guarantee future results, but it can show you how the ETF behaved during market downturns and rallies.
For most investors, starting with broad market index ETFs makes sense. These provide instant diversification across hundreds or thousands of companies. Popular examples include:
VTI (Vanguard Total Stock Market ETF): 0.03% expense ratio, covers entire U.S. stock market
VOO (Vanguard S&P 500 ETF): 0.03% expense ratio, tracks 500 largest U.S. companies
VXUS (Vanguard Total International Stock ETF): 0.07% expense ratio, covers international stocks
BND (Vanguard Total Bond Market ETF): 0.03% expense ratio, provides bond exposure
Step 5: Place Your First Trade
Once you've selected your ETFs, it's time to place your first trade. The mechanics are simple:
Enter the ticker symbol: Type the ETF's ticker (like VOO or VTI) into the search box
Choose your order type: Market order (buys immediately at current price) or limit order (only buys if price reaches your specified level)
Specify the number of shares: Decide how many shares you want to buy based on your available funds or how much money you want to invest in the asset
Review the trade details: Double-check everything before submitting
Submit your order: Click the buy button, and that is all you need to do
For beginners, market orders during regular trading hours (9:30 AM to 4:00 PM Eastern) work fine. The price you see is very close to what you'll pay.
ETFs trade throughout market hours like stocks, unlike mutual funds that only trade once per day at market close. This gives you flexibility, but it also means you can see prices fluctuate throughout the day. Don't obsess over these short-term movements.
Step 6: Monitor and Rebalance Your Portfolio
After you've invested, your job isn't done. You need to periodically review your portfolio and make adjustments.
Here's what monitoring involves:
Check your portfolio quarterly or annually (not daily or weekly)
Review whether your asset allocation has drifted from your target
Stay informed about major changes to your ETF holdings
Rebalance when allocations drift more than 5% from targets
Rebalancing means selling some of what's grown and buying more of what's lagging to return to your target allocation. For example, if stocks have had a great year and now represent 80% of your portfolio instead of your target 70%, you'd sell some stock ETFs and buy bond ETFs.
The key is maintaining a long-term perspective. Don't panic when markets drop. Don't get overconfident when markets soar. Stick to your strategy, rebalance periodically, and let time do the heavy lifting.
Frequently Asked Questions About ETF Investing
How much money do I need to start investing in ETFs?
You only need enough money to buy one share of an ETF. Some ETFs trade for $50-100, while others trade for $300-500.
Most brokers have eliminated minimum account balances, so you can start with whatever amount you're comfortable investing. Some brokers even offer fractional shares, allowing you to invest with as little as $1.
The key is to start investing consistently, even if you begin with small amounts. A person investing $100 per month starting at age 25 can accumulate over $500,000 by age 65 assuming 8% annual returns.
Can I lose money investing in ETFs?
Yes, you can lose money investing in ETFs. ETFs are subject to market risk, meaning their value fluctuates based on the underlying securities they hold.
If the stock market declines, stock ETFs will decline. If bond values fall, bond ETFs will fall. This is normal and expected.
However, diversification through ETFs reduces the risk compared to owning individual stocks. If one company in an ETF goes bankrupt, it has minimal impact on your investment because you own hundreds or thousands of other companies too.
The key is maintaining a long-term perspective. The stock market has always recovered from downturns over time. Investors who panic and sell during declines lock in losses. Those who stay invested participate in the recovery.
How often should I check my ETF investments?
Check your ETF investments quarterly or annually, not daily or weekly. Frequent monitoring leads to emotional decision-making and overtrading, both of which hurt returns.
Research shows that investors who check their portfolios frequently are more likely to panic during downturns and sell at the wrong time. Set up a schedule to review your portfolio once per quarter or once per year. During these reviews, check whether your asset allocation has drifted from your targets, rebalance if necessary, and ensure your holdings still align with your goals.
Between reviews, ignore the daily noise. Market volatility is normal and expected. Your long-term strategy matters far more than short-term fluctuations. The best investors often do the least trading and the least monitoring.
Key Takeaways From This ETF Investing Guide
You've covered a lot of ground in this guide. Before you start investing, here's what you need to remember:
ETFs are one of the most cost-effective ways to build wealth. With average expense ratios of just 0.15% for index ETFs, you keep more of your returns compared to actively managed mutual funds that charge 0.89% on average.
You don't need thousands of dollars to start. Many brokers now offer fractional shares and commission-free trading, which means you can begin with as little as $10 or $20. The key is to start consistently investing, even if it's small amounts.
Diversification happens automatically. When you buy a single ETF, you're instantly spreading your money across dozens or hundreds of companies. That's powerful risk management without the hassle of picking individual stocks.
Time in the market beats timing the market. The most successful ETF investors use dollar-cost averaging, investing the same amount regularly regardless of whether the market is up or down. This strategy smooths out volatility and reduces your average cost per share over time.
Choose your broker carefully. Look for platforms with zero commission fees, a wide selection of ETFs, user-friendly interfaces, and solid educational resources. The broker you pick will be your partner for years, so it's worth taking time to compare your options.
Understand what you're buying. Read the ETF's fact sheet. Know what index it tracks, what sectors it covers, and what the expense ratio is. Five minutes of research can save you from costly mistakes.
Your investment horizon matters. If you're investing for retirement in 30 years, you can handle more volatility with stock-heavy ETFs. If you need the money in five years, consider adding bond ETFs to reduce risk.
Taxes are part of the equation. ETFs are generally tax-efficient, but you'll still owe capital gains taxes when you sell for a profit. Keep records of your purchases and understand how your gains will be taxed.
Rebalance periodically. Over time, some ETFs in your portfolio will grow faster than others, throwing off your target allocation. Once or twice a year, review your holdings and adjust if needed.
The best time to start was yesterday. The second best time is today. ETF investing isn't complicated once you understand the basics, and the sooner you begin, the more time compound growth has to work in your favor.
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