Steps to Buy an ETF at Fidelity

Purpose And Scope Of This Post

I want to help answer the question, "How, exactly, do I buy an ETF?  What buttons do I click?  What options do I choose?   What numbers do I enter, especially for things like quantity and limit price?".  There seems to be lots of written material about how to choose an ETF and the different types of buy orders, but very little written material that tries to answer the questions in quotes above.  The best I can find is stuff like the "ETF Best Trading Practices" section of this pdf from Vanguard, which still leaves things at the abstract level of "use a limit order that is likely to be executed instantly".

This post will go, click-by-click, through the process of transferring money into a Fidelity account and submitting a buy order for an ETF.  Hopefully, this click-by-click will help make people's first time easier and less scary (especially due to clear statements of which clicks have real-world consequences).  Also, this post will give the exact logic/calculations I use for coming up with the quantities and limit prices for my buy limit orders.  The logic/calculations for quantity and limit price are applicable at all brokerages, not just Fidelity.

If you are wondering what ETF to buy, see this long post or this short post.

2022-Jan update: Fidelity now has a quantity calculator, which helps with a lot of the calculations mentioned below.  Also, Fidelity now lets you buy fractional amounts of ETFs where you specify how many dollars you want to spend.  The "Explanation Of How We Calculate Desired Quantity And Limit Price" could use some updating..

How To Transfer Money In To A Fidelity Account From External Bank Account

This section will walk through how to transfer money from an external bank account to one of your Fidelity accounts (like a Roth IRA account or a normal brokerage account).  Once you have submitted the transfer request, the money should be immediately available for making purchases of ETFs.


Step01: Once you've logged in to Fidelity, click the "Transfer" link near the top left of the page.

[Step01] Click the "Transfer" link indicated by the purple rectangle.

Step02: A Transfer window should pop up within the Fidelity web page.

[Step02] Wait for the Transfer window to load.

Step03: If you have not already set up an external bank account, click the "Add a bank account" link at the bottom of the Transfer window and follow the instructions (details not given here).

[Step03] If you have not already set up an external bank account, click the "Add a bank account" link indicated by the purple rectangle and follow the instructions.

Step04: For the "Transfer From" drop-down option, select the external bank account.  For the "Transfer To" drop-down option, select the appropriate Fidelity account.  Remember that you might have multiple accounts with Fidelity, so choose the right one.  For instance, I have a brokerage account, Roth IRA account, and a cash management (checking) account with Fidelity.

[Step04] Select "Transfer From" and "Transfer To" accounts.  Picture shows how things look just before I choose the "Transfer To" account.

Step05: Once selecting the accounts, the Transfer window will grow to display options for date and amount.  The date defaults to the current date, and I've never had need to change the date. Do enter the desired transfer amount and then click the "Continue" button to proceed to the "Review & Submit Transfer" stage.  Clicking the "Continue" button does not submit the transfer request.

[Step05] Enter desired transfer amount (see purple rectangle) and then click "Continue" button.  This picture shows a desired transfer amount of $100.

Step06: The Transfer window should progress to the "Review & Submit Transfer" stage.  Review the details of the transfer.  Once you are satisfied with the details of the transfer, clicking the "Submit" button will submit the transfer request (this is the crucial button click that has real-world consequences).

[Step06] Review the details of the transfer.  Once you click the "Submit" button, the transfer request will be submitted.  I have put a red rectangle about the "Submit" button to emphasize that clicking the "Submit" button has real-world consequences.

Step07: After clicking the "Submit" button, the Transfer window should show you a "Transfer Confirmation" set of information.

How To Buy An ETF Using a Buy Limit Order

This section will walk through how I buy an ETF during trading hours.  For the steps below, I will be trying to buy as many shares of ITOT as possible with our "cash available to trade" (the amount of money Fidelity says is okay for us to use right now to buy stuff), and we will be using limit orders to guarantee we don't submit a buy order that exceeds our "cash available to trade".

Explanation Of How We Calculate Desired Quantity And Limit Price

I use a limit order because I want to make sure that my order gets filled at a price low enough for my "cash available to trade" to cover the order, or to not get filled at all.  If I were to use a market order, Fidelity will try to fill the order at whatever price the market is providing at the time, which might be greater than the price I saw when I submitted my order, which might lead to the order being for an amount greater than my "cash available to trade".

For a limit order, I will calculate the greatest integer of shares (Quantity) I can buy at the current Ask Price. Then I will calculate a Limit Price that is above the Ask Price (so that the order should get filled immediately assuming no sudden increases in Ask Price), but low enough to make sure that Quantity * LimitPrice < CashAvailableToTrade.

Fidelity does not allow buy limit orders where the limit price is more than 30% away from the last trade price.  (Last trade price should be very close to Ask Price, so we will use Ask Price instead of last trade price in our calculations.)  This restriction means that we might have to decrease our LimitPrice such that Quantity * LimitPrice is substantially less than CashAvailableToTrade.

To put it in very minimal, Excel-like terms...

• Quantity = floor( CashAvailableToTrade / AskPrice );
• LimitPrice = min( CashAvailableToTrade / Quantity, 1.3 * AskPrice );

Here are the calculations as we work through an example...

• Assume I have CashAvailableToTrade = $175.55;
• Assume that ITOT's current AskPrice = $62.51;
• That means I can buy at most 2 shares of ITOT;
• Quantity = floor(CashAvailableToTrade / AskPrice) = floor(175.55 / 62.51) = floor(2.808) = 2;
• Given that I am going to try to buy 2 shares of ITOT, the maximum LimitPrice I can choose while making sure that the order can't exceed CashAvailableToTrade is $87.77;
• AffordableLimitPrice = CashAvailableToTrade / Quantity = 175.55 / 2 = 87.775 = basically $87.77
• I can afford 2 shares at up to $87.77 per share, but Fidelity doesn't allow limit prices greater than 30% away from the last trade price ($62.51 * 1.3 = $81.26 for this scenario);  let's choose a LimitPrice that is a few dollars or percentage points greater than the current AskPrice while still under $81.26; I'm going to choose $65.00;
• At this point, we have our desired Quantity (2) and LimitPrice ($65.00);  let's do a sanity check that our order value can't possibly exceed our CashAvailableToTrade;  MaximumOrderValue = Quantity * LimitPrice = 2 * 65.00 = 130.00, which is less than our CashAvailableToTrade ($175.55);

Buy Steps

Step01: Once you've logged in to Fidelity, click the "Trade" link near the top left of the page.

[Step01] Click the "Trade" link indicated by the purple rectangle.

Step02: A "Trade" window should pop up within the Fidelity web page.

Step03: Make sure to select the correct account for the purchase you are about to make.  Use the drop-down menu near the top of the Trade window to change the account if needed.  Also, make sure that the "Cash Available To Trade" amount makes sense.

[Step03] Verify the selected account and "Cash Available to Trade".  Locations indicated with purple rectangles.

Step04: Fill in the ticker symbol for the ETF you wish to buy (ex: ITOT).  For "Action", select "Buy".  For "Order Type", select "Limit Order".  For "Time in Force", it should already be "Day" and that is what we want.

[Step04] Choose Symbol (ITOT), Action (Buy), Order Type (Limit Order).  See purple rectangles for where these choices are made.

Step05: Choose a "Quantity" and "Limit Price $" that follow the logic discussed above.  Quick reminder: we want "Limit Price $" above the current "Ask" price, and we want the multiplicative product of "Quantity" and "Limit Price $" to be less than our "Cash available to trade".

[Step05] Choose "Quantity" and "Limit Price $" at locations indicated with purple rectangles.

Step06: Click the "Preview Order" button to proceed to the "Trade: Preview" window where you can see wrap-up information about your possible order.  Clicking the "Preview Order" button does not submit your order.


Step07: Look over the contents of the "Trade: Preview" window to make sure everything is satisfactory.  Do the ETF symbol and description make sense?  Did you mistype quantity or limit price?  Look at and understand all warnings.  Make sure that the "Estimated Commission" is $0.00.  Make sure that the "Estimated Total Value" of the order is less than or equal to your "Cash available to trade".  A warning about the limit price being above the last trade price is perfectly okay and in fact we want the limit price to be above the last trade price.  A warning about Fidelity offering the ETF at $0 commission is perfectly okay and in fact we want $0 commissions.

[Step07] Review information in "Trade: Preview" window, especially the information indicated with purple rectangles.  I have put a red rectangle around the "Place Order" button to emphasize that clicking the "Place Order" button has real-world consequences.

Step08: Once you are satisfied the order is what you want, you can click the "Place Order" button to submit your order (this is the crucial button click that has real-world consequences).  A confirmation window should pop-up saying that Fidelity has received your order (note that Fidelity receiving your order is not the same as the order being filled).  In the confirmation window, you can click the "Manage Orders" button to see the status of the order you just submitted.

[Step08] Pop-up window confirming that order was received by Fidelity.  You can click the "Manage Orders" button (emphasized by a purple rectangle) to see the status of your order.

Step09: If you submitted the order during trading hours, the order should be filled almost instantly.  Clicking the "Manage Orders" button from the trade confirmation window should let you see your order status.  You can also go to the "Activity & Orders" tab and expand the "Orders" section.  You should see an entry for your recent order.  Hopefully the "Status" cell says "Filled at $[ExecutionPrice]".

[Step09] You can check order status in "Orders" section under the "Activity & Orders" tab, as indicated by purple rectangles.