A good friend of ours suggested that I post a step-by-step guide on how to buy index funds through Vanguard (we officially have one reader!). Their objective was to purchase index funds within their rollover IRA.
Step 1: Login
Login into your Vanguard web account. If you don’t have one, you can create an account here.
Step 2: Select the account that you want to purchase funds in
In this example, I purchased funds in my brokerage account. You may have an IRA or a Roth IRA that you are using; just be sure you select the account that you would like to purchase funds in.
Step 3: Select the fund that you want to purchase
Click on the “Buy and sell” tab, and then select the action that you want to complete. In this case, I selected “Trade Vanguard ETF’s” because I want to buy a fund called VTI (Vangaurd Total Stock Market ETF).
If you want to buy Vanguard mutual or index funds, then select “Buy Vanguard funds”. If you want to buy individual stocks, select “Trade stocks and listed securities”. If you want to buy mutual funds that are not operated by Vanguard, select “Trade non-Vanguard funds”.
Side note: An Exchange Traded Fund (ETF) is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.
For more information on what types of funds we buy read this post on why we buy mutual funds.
Step 4: Purchase the fund
You can see from this screenshot that there are several fields to fill out.
Enter the symbol of the fund that you want to purchase (you can search for the symbol by clicking on the “look up symbol” link). Next, select the “Get Quote” button and you’ll notice the fund name and a price appear on the right hand of the screen. (I took my screenshots when the market was closed so the Bid and Ask prices show $0.00)
Enter the number of shares that you want to purchase. In my example, you can notice on the right side that I have $5,000 available to trade, so I used the quoted price and determine how many shares I could buy with $5,000 ($5,000/$125.05=39.98 shares). ETF’s are only sold in whole shares so I was able to buy 39 shares. You may also have your money sitting in a money market account, no worries Vanguard treats that as funds avaialbe to trade so it will pull that money out of the money market for youwhen you place the order.
When buying funds you will have 4 options:
- Market: this means that the transaction will be immediately executed at the best possible price. I typically buy when the stock market is open, so I use this option.
- Limit: this option allows you to set a limit price that you are willing to transact the shares at. The only time I really ever use this option is if I am placing a large order when the market is closed (which is very rare).
- Stop: We are going to ignore this for now
- Stop Limit: Same as above
If you select a “Limit” order, then it will ask you to select Duration as well. You’ll have two options:
- Day: The order will expire at the end of the day if your order price is not met
- 60 Days: The order will expire at the end of 60 days if you order price is not met
**Duration doesn’t apply to a “Market” order.
My order summary:
- Order type: Buy
- Symbol: VTI
- Shares: 39
- Order Type: Market
Step 5: Confirm your order
Step 6: Watch your money grow over time and do not panic when the market goes down (because at some point it will)
**Remember I am not a financial advisor, any views expressed in this article are my own and are subject to change at any time.