How to Buy and Sell ETFs

You Need a Brokerage Account and About Five Minutes

To buy an ETF you need a brokerage account with money in it. Fidelity, Schwab, and Vanguard all charge $0 commission on ETF trades, have no account minimums, and support fractional shares, so $50 buys a slice of a fund trading at $500. Opening an account takes 10 to 15 minutes and requires your Social Security number, a government ID, and your bank details for the transfer. If you have not done this yet, start with how to start investing with ETFs, which walks through account types and brokerage choice.

Once funded, the order screen is the same almost everywhere. You enter five things:

• Ticker: thefund's symbol, like VOO or SCHD. Search it in your brokerage's trade box.
• Buy or sell: theaction.
• Amount: a number of shares, or a dollar amount if your brokerage supports fractional shares.
• Order type: market or limit (covered next).
• Time in force: leave it on "day," which means the order expires at the close if it does not fill.

Review, submit, done. During market hours, 9:30 a.m. to 4:00 p.m. Eastern, a market order for a liquid fund fills in seconds. Outside those hours the order queues until the next session.

Market Orders Fill Now. Limit Orders Let You Name Your Price.

There are two order types you actually need, and the choice between them depends entirely on how liquid the fund is.

A market order buys immediately at the best available price right now. You give up control of the exact price in exchange for a guaranteed, instant fill. For a fund trading millions of shares a day, the price you see and the price you get are effectively identical, so a market order is clean and simple.

A limit order sets the maximum you are willing to pay (when buying) or the minimum you will accept (when selling). It only fills at your price or better. You give up the guarantee of an instant fill in exchange for control over price. For a thinly traded fund, that control matters, because a market order can briefly fill at a bad price if the spread widens for a moment.

The Bid-Ask Spread Is the Real Cost of a Trade, Not the Commission

Commissions on ETFs are mostly gone. The cost that remains is the bid-ask spread: the gap between the highest price a buyer will pay (the bid) and the lowest price a seller will accept (the ask). You buy at the ask and sell at the bid, so the spread is a small toll you pay on every round trip.

On a giant fund the toll is trivial. VOO might show a spread of one cent on a roughly $500 share, about 0.002%. On a thinly traded niche fund the spread can be 50 cents or more on a $40 share, over 1% per round trip, which dwarfs the fund's expense ratio. Two funds tracking nearly the same thing can cost very different amounts to trade purely because of liquidity.

The spread also connects to a fund's NAV, the true per-share value of its underlying holdings. A liquid ETF trades within a hair of NAV all day. A less liquid one, or an international fund whose underlying markets are closed, can trade at a noticeable premium or discount to NAV, which is another reason to use a limit order on anything narrow.

Don't Trade in the First or Last 15 Minutes

The US market opens at 9:30 a.m. and closes at 4:00 p.m. Eastern. The 30 minutes split across the open and close are the worst time to place an ETF trade, especially a market order.

At the open, many of the individual stocks inside an ETF have not begun trading in an orderly way, so the fund's market makers widen their spreads to protect themselves. Prices can briefly drift from the fund's real value. The final minutes before the close carry similar volatility as large institutional orders settle for the day. In both windows you risk paying a wider spread or a worse price for no reason.

The fix is simple: trade in the calm middle of the day, roughly 10:00 a.m. to 3:30 p.m. Eastern. For a long-term investor buying and holding for years, the exact minute is close to irrelevant, but avoiding the open and close is a free habit that sidesteps the worst spreads. This is also why automatic investing plans, which typically execute mid-session, quietly protect you from bad timing.

Buying Is Easy. Selling Is Where People Make Mistakes.

The mechanics of selling mirror buying: enter the ticker, choose sell, set the amount, pick an order type, submit. The trade executes in seconds. Settlement, when the cash officially lands and becomes withdrawable, takes one business day (T+1) for US ETFs as of 2024. Sell on Friday and the cash settles Monday. Most brokerages let you reinvest the proceeds immediately, but moving money to your bank waits for settlement.

The hard part of selling is not mechanical. It is behavioral and tax-related, and both cost real money.

The behavioral mistake is panic-selling in a downturn. The S&P 500 has fallen 20% or more nine times since 1950 and recovered to new highs every time. Investors who sold during the decline locked in the loss and then had to guess when to buy back, which almost no one does well. If your plan is long-term, a falling market is not a sell signal.

The tax mistake is selling without checking how long you have held the shares. In a taxable account, selling a fund you have owned for one year or less means the gain is taxed as ordinary income at your full rate. Hold for longer than a year and the same gain is taxed at the lower long-term capital gains rate. Selling a winner a few weeks early can cost you a meaningfully higher tax bill. In a Roth IRA or traditional IRA, selling triggers no tax at all, which is part of why those accounts are so valuable. For the details on fund-level tax treatment, see the guide to dividend ETF taxes.