Buying Index Funds: A Step-by-Step Walkthrough with Screenshots
I’m a firm believer in the 80% rule. Imperfect action in the general right direction is far better than doing nothing. Avoid analysis paralysis and just go for it.
Well, investing in equities (stocks) was one of those areas for me. Over decades, equities have performed well. I didn’t grow up in a household that invested in the stock market, so I lacked familiarity through my early years.
It wasn’t until just prior to starting anesthesia school where I became interested in exploring such an investment avenue. I read plenty of content validating low-cost, passively managed index funds were the way to go. So, me being me, I did even more research, then finally pulled the trigger.
I calculated how much I had to invest, then went to seek assistance from one of the major personal finance firms. I knew this was an expensive way to invest—185 basis points to be exact. This was my way of heading in the general right direction.
This was my first major investment of $40,000. Much of which went to index funds. I had $10,000 left over that I may have needed during my last semester of anesthesia school, so I held onto that amount.
Instead of just “holding onto” that $10,000, I elected to try my hand at self-managing. I opened a Vanguard brokerage account and purchased a few index funds and individual stocks. It was pretty daunting at first.
The whole account setup process was new. Online investing was new. And spending thousands of dollars on index funds was new.
TL;DR
Investing for the first time is terrifying.
Investing isn’t really that bad.
I’ll walk you through the investing process—just look at the screenshots.
In November, I wrote an entry comparing a few index funds, Which is Best? VTSAX, VT, VTI, or VOO? Read that post if you want to learn why those are viable investments and what the differences are. Please don’t buy anything you don’t understand.
I would like to walk you through the process of buying Vanguard Total Stock Market Index Fund (VTI), so I don’t have to hear about any more CRNAs wondering what to do with extra money or not investing because they don’t know how to invest.
If one wanted to, they could load a portfolio exclusively with VTSAX or VTI and do just fine. Mix in a few bonds down the road and call it a career. Buying VTSAX or VTI may be your way of adhering to the 80% rule of moving in the right direction.
VTI is an exchange traded fund (ETF) that comprises 3,800 stocks. A single share of VTI is essentially owning a super small sliver of 3,800 publicly traded companies. It’s diversity in a single entity. That’s all we need to know for now. Check out the link above for more details on VTI, VTSAX, VT, and VOO.
I have no sponsorship or ownership with Vanguard or any other stock. I simply chose a commonly recommended brokerage ETF to use in this example. Please do your research and make investment decisions based on your own findings.
For this blog entry, I will use my personal brokerage account through Vanguard to buy 10 shares of VTI. I consolidated most everything with Vanguard. It’s my Norwegian style of managing investments.
Feel free to use any brokerage account such Fidelity, Charles Schwab, or Robinhood. Similarly, use the account that best fits your purpose. Again, I’ll be using my personal brokerage account since that is where I do most of my investing. You could use these steps for a solo 401(k), IRA, HSA, 529, or almost any account. All brokerages and accounts are similar.
Start by opening an account with a brokerage if you don’t already have an account:
If you are opening an account for the first time, don’t worry. Vanguard walks you through the process. This screen provides all of the options you may want. Simply select the desired account and click “continue.”
After selecting an account, Vanguard will request bank account information which facilitates the transfer of funds to and from Vanguard. I linked my personal checking account to Vanguard.
To confirm the account is correct, Vanguard will deposit a few cents into your linked account, withdraw those few cents, and ask you to verify the transaction amount. This may take a day or two, but for most accounts, it’s a matter of hours.
After approval and logging back into your account, you will arrive at the home screen. This has everything you need.
Here is a list of Vanguard “Products & Services.” Most brokerages offer similar options. Opening any of these accounts is pretty straight forward. Simply select which you would like and Vanguard walks you through it. Link a bank account and away you go!
All of your accounts will display along the left side of the “Dashboard.” You can see basic information from this screen. There is an option at the bottom to “Transfer money & transact.” That’s where to go so you have trading dollars. Clicking the three dots next to “Transact” will also provide options to “send money to Vanguard“ or “send Vanguard money”.
Deposits find themselves in a money market account—currently earning 5% as of February 2024. So if you don’t trade dollars for stocks, they are still doing some work. Think of this money market account functioning as a checking account. I wrote a blog about it here.
With money in the account, we can continue with the objective—purchasing VTI. Hover over the “Transact” tab. Click, “Buy & Sell.”
Ticker symbols are a unique shorthand given to a publicly traded company or fund. They may be up to 5 characters in length. Vanguard Total Stock Market Index Fund ETF carries the ticker VTI.
Most of Vanguard’s funds start with “V”. Fidelity funds typically start with “F”. Apple incorporated— AAPL. Microsoft Corporation—MSFT. You get the idea. Sounds complex at first, but once you see a few ticker symbols, it starts to make sense.
Enter the desired ticker symbol and click “Get quote.”
Vanguard will populate a quote for the security VTI. The current price is $252.00 per share. Select “buy” to buy. Don’t worry about the other stuff; however…
Change - Price change throughout the day
Volume - Number of VTI bought/sold in a day
Open - Opening price
Prev Close - Price at end of last trading day
bid/ask x size - Number of offers to buy or sell and at what price
Day - Price range of VTI throughout the trading day
52 Wk - Range over the past 52 weeks
Div Date - Dividend date
Ex Div Date - Purchases on or after do not qualify for next dividend
Because I selected “Buy & Sell” under the “Transact” tab instead of selecting via an account, Vanguard is asking which account I would like to use. For this purchase, I want to use my personal brokerage account.
On to the intimidating part. Stay with me here. It’s not as bad as it looks.
To purchase VTI, follow the red circles noted below. Begin by selecting “BUY.”
The ticker symbol “VTI” auto populated because we already searched for VTI and requested a quote.
Next, enter the number of shares. One may purchase a dollar amount of VTI, but I find shares to be easier. I entered “10”.
“Order Type” is a bit confusing at first. “Market” means you want to buy VTI at whatever price someone is currently selling. The order will likely execute for just higher than the quoted price. If placing an order after hours, the order will execute the moment the market opens during the next trading day. It will execute at the opening asking price.
The duration of “Day” auto populates with a “Market” order type because the order is guaranteed to fill during the trading day.
For buy and hold investors, the pennies don’t matter. Just go with a “market order.”
“Limit” allows you to set a cap on how much you are willing to pay. Say you will pay no more than $250 for a share of VTI. If the stock goes up from the current price of $252, your order will not fill. The moment an investor offers to sell VTI for $250.00 or less, your order will fill.
Benefit—you will limit expenses. Risk—it may never fill. “Limit orders” at Vanguard stay active for 60 days.
“Stop” and “Stop Limit” are selling orders. We are buying today.
The account balance is listed in the top right. Ensure adequate funds. Look under “Trade Details” to see the estimated total. Again, estimated because the order may not execute for exactly $252.00 per share.
As you can see in the middle column, there is an ask price of $251.93 per share. That’s how they calculate the “estimated amount” of $2,519.30 for 10 shares.
The final click of the screen goes to “Preview Order.”
It’s a summary. One last chance to verify everything is correct. “Submit Order” when ready!
YOU DID IT! This is an order confirmation. Note the open orders at the bottom right. I placed this order on a Saturday when markets are closed. This order will execute Monday morning when trading resumes.
“Pending” will change to “executed” when the trade is completed.
If you wish to admire your VTI purchase, click either of the links noted.
The three dots next to an account will provide options to transfer money into or out of an account. Transfer more dollars to repeat the process and build yourself a nest egg.
Hope this helped. For the sake of the profession and looking like the good guy, please share with that coworker who suffers from analysis paralysis. Thanks for reading!
