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   ETF Investing found in Money & Business  :  Investing A   A   A
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How to Buy ETFs for Your Portfolio

The process of buying ETFs works just like that of buying individual stocks. The main steps are choosing to work with a broker or a brokerage house, setting up an investment account, and placing orders for ETFs within that account.

Choose a Broker or Brokerage House

As an individual investor, you can buy and sell stock only if you have an account with a broker or brokerage house, who serves as the middleman between you and the market.
  • Broker: A broker is either an independent local professional or an employee of a brokerage house whom you call to place orders to buy or sell investments. A broker works with you one-on-one via phone or in person to make investment decisions and personally places buy and sell orders for you.
  • Brokerage house: Called brokerages for short, these firms specialize in providing various investment services. Most brokerages have websites that allow investors to place orders to buy or sell investments online without having to speak to a representative. Some of the most popular brokerages include Fidelity, Charles Schwab, Vanguard, and TD Ameritrade.
Whether you choose to work with a personal broker or brokerage is up to you. In general, you’ll pay much lower commissions by investing on your own through a brokerage website, but you won’t get the personal attention that brokers provide. If you already have a broker or brokerage house, you can buy ETFs through that service.

Set Up an Investment Account

Once you’ve chosen a broker or brokerage house to work with, you’ll need to complete a couple of steps:
  1. Fill out an account application. This typically includes a few basic forms that ask for personal information, such as your name, address, and Social Security number.
  2. Make an initial deposit into your account via cash, check, or wire transfer. The amount required to establish an account varies but usually starts at $1,000.
Most major financial institutions allow you to set up an account in person (if they have retail locations) or by mail, phone, or online. If you complete your application by phone or online, you’ll still likely have to complete and mail in physical forms with your signature to establish your account.

Buying and Selling ETFs in Your Account

Once you decide to trade (buy or sell) a particular ETF, your next steps will differ slightly depending on whether you’re working with a personal broker or a brokerage. For example, if you want to buy 20 shares of the iShares Dow Jones Select Dividend Index ETF (symbol: DVY) at $70 per share:
  • With a personal broker: Call your broker, tell him or her the symbol of the ETF that you’d like to buy (DVY), the number of shares you want (20), and the highest share price you’d be willing to pay ($70). Your broker will then place the order with a brokerage. Usually the trade will execute (be filled) immediately. If you’re buying, cash in your account will convert to 20 shares of DVY. If you’re selling, your order will take effect right away, but the shares of the ETF you sell will take about three days to convert to cash.
  • With a brokerage: Follow the same steps as if working with a broker, but place the trade via the brokerage’s website or by calling the brokerage’s toll-free number.
 
 
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