How to Invest in the Index Funds & ETFs
If you are looking for an easy and low-cost way to invest in the stock market, index funds and ETFs can be excellent choices. Both ETFs, or exchange-traded funds, and index funds have very low operating costs and little overhead, and this means that more of your money can go to work for you. Exchange-traded funds also have another important advantage--they can be purchased in real time throughout the trading day, making them an excellent trading vehicle in fast-moving markets.
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Instructions
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Open an account with a brokerage firm if you plan to purchase ETFs. If you plan to use index funds instead, open an account with a low-cost mutual fund such as Vanguard or TIAA-Cref.
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Examine your fund choices and determine which funds or ETFs best meet your needs. For broad diversification, you may want to choose the ETF with the ticker symbol VTI. This ETF invests in the total U.S. stock market. You could also choose the ETF with ticker symbol SPY, which tracks the performance of the Standard and Poor's 500. Vanguard and other mutual funds also provide index funds that track both the total stock market and the S&P 500.
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Make sure you check the minimum required investment for each mutual fund you are considering. The minimum investment will vary from fund to fund. The minimum investment for many Vanguard index funds is $3,000, but the minimum may be lower for IRAs and other retirement accounts.
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Log on to your online brokerage account to purchase the ETFs you plan to purchase. Since ETFs trade like stocks, you can set the price at which you want to buy. This can be an excellent way to maximize your returns in a volatile market. To specify your purchase price, log on to the brokerage account, go to the trading menu and enter a limit order with the price you want to pay.
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