A step-by-step guide (with photos!) to investing your first $150

Since this is a question I’ve gotten twice in the last week, today we’ll go through the nitty gritty details about how to get between $150 in your bank account to $150 invested in a total stock market index fund. Let’s begin.

So, you’ve read this blog, played some Defense, and now you’re ready to take the next step with the money you’ve saved. You’ve got 150 extra dollars and the world is your oyster. You know how the stock market works and how/when to invest in it. Now is the time.

First, go to www.investor.vanguard.com. When you get there, this is what you’ll see.

So pretty.

On the top of the screen, click open an account. Since we’re creating a new account from scratch, rather than rolling over an existing retirement account, we’ll then choose Open a new account:

Then check the option for funding this account by electronic bank transfer and hit continue.

The next page tells you what you’ll need and what types of accounts you’ll be able to choose from. Observe and click continue.

Now they’ll need your information. The first question is why are you investing. This question is less philosophical than you might imagine. If you’re interested in opening an IRA, choose the Retirement option. In this case, we’re going to just open a regular, taxable brokerage account to keep it simple and general. But the process for opening an IRA is very similar, so hopefully this guide will work for that too. Since we want a regular brokerage account, we’re going to check “general savings”. If you’re doing this as an individual, rather than with a spouse, check the corresponding option.

Next they’ll ask you about your “goal”. This question is not so important. I selected growth and moved on. Since I’m investing money I made from my job for this account, I checked the “Salary” option below.

Next they’ll gather some personal information. Fill that out and click continue.

Then some more info…

Then some info about your job/employer, and some strange questions that you will probably answer “no” to…

Next step is to link the bank account you’d like to transfer money from. I linked my checking account.

And now comes a question that’s actually very very important. You have the option to either reinvest your dividends or have them essentially sit in your account as cash. That’s what “your money market settlement fund” means. There is a right answer to this question. Hint: it’s selected below and the consequences of making the wrong choice are in the photo below that.

This graph shows the effect of investing $1 in the stock market in 1950 if you don’t reinvest your dividends (yellow line) vs if you do (blue line). Are you convinced that you should reinvest your dividends??

Even though dividends are currently pretty low, the compounding effect of reinvesting them over many years will be significant. When you choose to do this, your dividends will be automatically used to buy fractional shares of your investment. In other words, even if your dividends are only several cents or dollars, those cents or dollars will be used to buy another small slice of the stock market.

 

Anyway, the next step is to just review and confirm your information.

And now the fun begins. You can do some “research”, or just jump to your account overview, which is what I did.

If you’ve already got other accounts with Vanguard, which is my case, it’ll give you options of which account you’d like to go to. Either way, let’s go to the brokerage account we just opened.

Once your account is all set up, you’ll see your $150 hanging out there. Note that because things are still processing, this money hasn’t made it into the “money market” fund yet. But that’s ok, we can still invest it even before that happens. So let’s do that! Click on “transact”, then from the drop down menu choose “Trade Vanguard ETFs”.

A quick note: we could also buy the total stock market index fund in mutual fund form, in which case we’d have chosen “Buy Vanguard funds.” But you need $3,000 to do that, and since the ETF and mutual fund are pretty much exactly the same, we’re going to go with the ETF. We only need <$150 for that. Perfect!

Once you’re on the next page, you’ll see the menu below. For transaction type, we want to buy. Then we type in the symbol VTI, which is the symbol for Vanguard’s Total US Stock Market fund. Since this is an exchange traded fund (ETF) rather than a mutual fund, it essentially trades like a stock. So we have to figure out how many shares we want. After typing in VTI we can see that the price per share, as of yesterday morning, was $145.64. Looks we can afford…1 share! Let’s do it!

The next thing on the menu is order type. Honestly, just selecting “market” will be faster and easier. But since I’m somewhat obsessive I choose “limit”, which basically allows you to say, “This is the maximum amount of money I want to pay for my share.” Then I put that amount in the limit price box. I usually choose the current price of the stock. Not doing a limit order may result in a slightly higher buy price, but honestly we’re talking about cents right now so just pick either one and move on! Duration means how long you want Vanguard to try to execute this order. If you’re placing a market order it doesn’t matter. If you’re placing a limit order and you don’t want to accidentally forget about an order that never went through, just pick “Day”. If your order doesn’t go through by the end of the current or next trading day they’ll send you an email.

After clicking continue, you’l review and submit your order. Note that if you’re doing this after hours or on a weekend, it’ll notify you that your order will be placed during the next trading session. That’s fine, you can still submit it now and it’ll execute then, even if you’re logged off.

Then you can see the status of your order. I placed a limit order which took a minute to go through. So my status was “open”. If you placed a market order it’ll probably say “executed” right away.

When you’re order goes through, this changes to “executed”.

Congratulations! You now own a small slice of every single publically traded company in America! Good work, boss.

Then you can log off, or view your account “balances and holdings” for a nice overview of everything you own. Right now we have $4.36 in cash and one share of VTI. And look! I’ve made 40 cents already! The magic of the stock market…

Of course, Vanguard will send you email confirmations of everything.

 

Man, that was longer than I thought it would be! In reality, this whole process should take about 5 minutes. In the future, when you just want to add more money to your account and buy more VTI, it’ll take less than a minute.

Hopefully this has been helpful and can be used as a resource. And comment below if you have any questions!

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