Where to buy your first ETF?

Where can you buy your first exchange-traded fund?

In order to buy your first exchange-traded fund, you must first open up a brokerage account. A brokerage account allows you to purchase individual Securities such as ETFs or stocks. Robinhood, Vanguard, TD Ameritrade, Morningstar, ETrade are all examples of brokerages.

Imagine, opening up your first brokerage account so you can finally start investing.  Investing is one of the first steps towards building wealth.

Exchange-traded funds are one of the best assets to own for new investors.

Luckily for you, I’m going to show you where to buy your first exchange-traded fund. I’ll even show you some of the best ETFs to buy and how much it costs to purchase one. Starting your investing journey can be an exciting time!

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Where to buy ETF funds?

To purchase your first exchange-traded fund, you must open a brokerage account with a brokerage. A brokerage is a financial institution which allows you to purchase individual securities through your brokerage account. Examples of brokerages include Robinhood, Vanguard, TD Ameritrade, Morningstar, and ETrade.

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Robinhood

Robinhood is one of the best brokerages for new investors. The Robinhood app has a simple interface making your first purchase as easy as a few swipes. Most new investors gravitate towards the Robinhood app as their investing platform.

The main problem with Robinhood is how easy it is for people to use. Most investors should buy Securities with the intention of buying and holding. However, a lot of new investors tend to frequently trade stocks and ETFs because buying and selling is so easy.

What most new investors don’t realize is that frequently buying and selling securities causes most investors to lose money. 

Therefore,I suggest you act like a serious investor if you are going to use the Robinhood app. Rather than frequently buy and trade, invest for the long haul and find securities you don’t mind holding onto.

Vanguard

Vanguard is one of many people’s favorites because they offer low-cost exchange-traded funds. The ETFs that they offer include some of the best prices available. Most serious long-term investors turn towards Vanguard to manage their assets.

Purchasing individual exchange-traded funds is easy, but not as easy as it is on Robinhood. Therefore, Vanguard provides a platform that doesn’t glorify frequent trading like Robinhood does. It is not as tempting to buy and sell frequently on Vanguard.

Personally, I think Vanguard is one of the best places to hold your money for the long term.

TD Ameritrade

TD Ameritrade was built with traders in mind. However, they have some of the best charting and technical research tools around. The app makes it simple to set up different watch lists and set alerts for when some of your favorite funds drop in price.

For example, you might have a particular exchange traded fund that you want to buy, but only at a certain price. You can set an alert to notify you whenever the price drops below your specific purchase price.

I particularly like the setup of the watch lists. For example, you can create a list with your favorite exchange-traded funds or stocks. You can filter by certain technical data to find when purchasing makes sense for you.

Personally, I like to use TD Ameritrade to research my stock picks. I can filter by relative strength index to find which funds have taken a hit in stock price. 

As you can imagine, TD Ameritrade is a little bit more advanced and might not be suited for all beginners. However, I think TD Ameritrade is something that everyone should have an account with. Eventually, you might grow into all the extra research tools that TD Ameritrade can provide. 

Morningstar

Morningstar has another brokerage that includes easy to use stock analysis. The platform has a 5-star rating program which allows you to easily see which funds have historically performed the best.You can also find analyst commentary on different funds, so they’ve done the majority of the research for you.

I always advocate for doing your own due diligence and research on companies or ETFs. However, Morningstar has done a really good job about providing a rating system for new investors.

Some new investors will simply stick to the five star rating system. Ultimately, you have to determine what your investment strategy is going to be. I like to think of the five star rating system as a good starting point. 

ETrade

ETrade is another brokerage which is slightly more advanced than Robinhood, but still perfect for beginners. Like most investing apps, ETrade offers $0 commissions on trades which makes them perfect for anyone wanting to trade. Additionally, ETrade offers educational resources for new investors to learn more about investing.

Which is the best ETF to buy?

Most individual investors would be better off purchasing an S&P 500 Index Fund. The majority of ETFs cannot outperform the performance of the S&P 500. Therefore, it is important for you to invest in a low cost S&P 500 Index Fund like VOO. 

VOO is one of the best exchange traded funds for the S&P 500. Created by Vanguard, the cost is minimal and you’ll hardly notice the fees. Since inception, VOO has an annualized return of 15% as of writing this article.

Most investors make the common mistake of purchasing expensive exchange-traded funds. When you purchase an expensive exchange-traded fund, a good portion of your returns goes to fees. Over time, the amount of money you lose to exchange-traded funds can be hundreds of thousands of dollars.

How much does it cost to buy an ETF?

Exchange traded funds have expense ratios ranging from 0.03% to all the way over 1%. The annual fee is assessed on the total value of your ETF. For example, owning $100,000 of an ETF with an expense ratio of 1% would cost you $1,000.

You should also be aware that the expense ratio varies depending on which brokerage is offering the ETF. One company might offer an S&P 500 fund with an expense ratio of 1% while the other company offers a S&P 500 fund for 0.03%.

In both cases, you are purchasing an index fund which tracks the performance of the S&P 500. Therefore, the returns will be relatively similar. However, one of the funds will cost you more than the other.

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Summary: Where to buy ETF funds?

You can see, there are many different brokerages to open a brokerage account. Once you have a brokerage account, you may buy an exchange traded fund. Research each brokerage and determine which brokerage will match your investing style.

When you are first starting out, it might be wise to invest in the S&P 500. Most exchange traded funds cannot outperform the S&P 500. VOO is one of the best S&P 500 funds around, because of the low cost.

Exchange traded funds can be purchased for free. However, there is an annual expense ratio which costs between 0.03% to over 1% depending on the ETF.