30 Day Investing Challenge, Day 23: Buying an investment
One thing people find confusing is the actual act of buying investments in your self directed accounts (meaning, an account owned solely by you and not provided by your workplace or business). I created a step-by-step guide that walks you through buying investments in a brokerage account. This can also be applied to your Traditional IRA, and Roth IRA accounts. Your action step for today is to go through these steps in one of those accounts and buy an index fund or ETF. Here are the steps:
Step 1: Open The Account
You’ve already done this one, but it bears repeating: you can’t buy investments without the account to house them in. So make sure you have your brokerage and IRAs open at either Vanguard, Fidelity or Schwab
Step 2: Transfer Cash Into Your New Account
To buy funds you need money (duh). If you want to dip your toes into investing, try transferring $20 into your account to start. Even $5 will work! These accounts don’t have minimums.
Step 3: Start a “Trade”
Okay here comes the more complicated step. When you buy investments in a self directed account, you’re technically trading stocks. Yep, like a stock broker would. So the first thing you want to do is login to your brokerage firms site and find the “Transact” or “Trade” button on the account you want to buy investments in. Here are some examples from Fidelity and Vanguard:
On Fidelity’s website the Transact button is towards the top on the left-hand side.
Clicking the Transact button opens up a modal where you can buy and sell stocks/ETFs or mutual funds from specific accounts.
On Vanguard’s site you can select Transact from the top menu, or you can select it from the individual account view.
Just know that each Transact button opens a different menu — this is the one that opens from the top button…
And this is the one that opens at the account level. I love Vanguard, but their website’s user experience is not the most intuitive (their mobile app is better, though the functionality is limited).
From the Transact dialog you’ll want to choose either “buy mutual fund” or “buy ETF.” Vanguard has very high minimums for their mutual funds, so unless you have $3000 you’ll want to choose the ETF option for them. Remember: index funds are mutual funds and ETFs and index funds are basically the same thing. I’ll continue with this example using Fidelity, since their platform is easier to use. See below how I set up my transaction:
Here I’ve chosen the Mutual Fund option because I know I can buy Fidelity’s index funds with any amount of money. Then I chose the account I want to buy them from, my Health Savings Account (this is where you’ll see the option for your IRA or brokerage account).
Step 4: Lookup the Fund’s Ticker Symbol
In the “Symbol” field this is where you’ll want to put the ticker symbol we talked about on day 13 when we learned all about stocks. Some great examples of funds you could buy are:
VTSAX: Vanguard Total Stock Market Index Fund
VTI: Vanguard Total Stock Market ETF
VFIAX: Vanguard S&P 500 Index Fund
VOO: Vanguard S&P 500 ETF
FSKAX: Fidelity Total Stock Market Index Fund
FZROX: Fidelity ZERO Total Stock Market Index Fund
FXAIX: Fidelity S&P 500 Index Fund
SWTSX: Schwab Total Stock Market Index Fund
SWPPX: Schwab S&P 500 Index Fund
Step 5: Choose Dollar Amount to Invest
Remember: you can choose to invest $5 if you want to. In the below example I chose to buy $25 worth of FZROX:
This is how it should look when you’re ready to buy. You have a trade type and account selected, you’ve entered the ticker symbol and dollar amount, you’ve chosen the “buy” option.
Step 6: Buy Your Investment
Now it’s time to smash that “Preview order” button and buy your first investment! Go on, you know you want to. BAM! You’re not an investor! Not so bad, is it?
I’ll see you here tomorrow for your next challenge: Setting up automatic investments.
Want to dive in deeper? My investing workbook “Your Journey to Freedom” will show you how to build the life of your dreams and teach you the fundamentals of the investing world.
Not sure where to start when it comes to investing? My FREE step-by-step investing guide will help build your confidence by walking you through buying your first index fund (this is a paired down version of this post).
