How do I start placing money in an index fund?

I've recently come into a little bit of money, and would like to place the money in an index fund like the S%26amp;P 500. This is the first time I've really invested, so I would like to start small, say around $500, but I'm unsure how I would go about actually doing it. Can I do it myself, or is a middle man necessary?

How do I start placing money in an index fund?
There are two ways to invest in an index fund:





1. Buy shares in an index fund. (ex. Vanguard 500 Index Fund, tracks S%26amp;P 500)


2. Buy shares in a ETF. (ex SPY, tracks S%26amp;P 500)





In practice, these two ways are very similar. The difference is that index funds usually have no transaction costs for buying/selling, but can only be bought through certain authorized brokers and might charge a fee if you have a low account balance. ETFs are traded on the stock market and can be bought through *any* brokerage (ex. etrade), but you will almost certainly be charged a fee for buying/selling.





In general, it's better to go with an index fund if you'll be making regular investments and with an ETF if you'll be buying/selling less frequently. Some brokerages offer ways to purchase stock monthly (ex. Sharebuilder)





Also, both mutual funds and ETFs have an "expense ratio." Shop around to find low expense ratios; For example, Vanguard has funds and ETFs with expense ratios below .25%.
Reply:You can also trade index options at discount brokers like Sharebuilder, Optionsxpress and Scottrade as well. Check them out and see what features fit you best. While you're setting up an account you can always track the index that you want to buy. The S%26amp;P is Spyders (SPY); the Nasdaq symbol is QQQQ and the Dow Jones Ind. Avg is Diamonds (DIA). You can track these for free in Yahoo Finance. Just type in the symbol I just gave you and you'll see the price, volume, etc. Good Luck.
Reply:To buy an index fund, just visit any brokerage site such as fidelity or vanguard. You can call the toll free number or just open the account online. You dont have to pay any trading fee for mutual funds, but you may have to pay a transaction fee in some cases.