How to Invest in Stocks: Quick-Start Guide for Beginners

rewrite this blog post so it becomes plagiarism free –

When you invest in a stock, you’re hoping the company grows and performs well over time. That’s how you end up making money.

One of the best ways for beginners to learn how to invest in stocks is to put money in an online investment account and purchase stocks from there.

You don’t have to have a lot of money to start investing. Many brokerages allow you to open an account with $0, and then you just have to purchase stock. Some brokers also offer paper trading, which lets you learn how to buy and sell with stock market simulators before you invest any real money.

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when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money.

How to invest in stocks in 6 steps

To invest in stocks, open an online brokerage account, add money to the account, and purchase stocks or stock-based funds from there. You can also invest in stocks through a robo-advisor or a financial advisor.

If you’re ready to invest in stocks yourself, this six-step process may help you get started.

1. Decide how you want to invest in the stock market

There are several ways to approach stock investing. Choose the option below that best how hands-on you’d like to be.

A. “I’d like to choose stocks and stock funds on my own.” Keep reading. This article breaks down how to choose the right account for your needs and how to compare stock investments.

B. I’d like an expert to manage the process for me.” You may be a good candidate for a robo-advisor, a service that invests your money for you for a small fee. Virtually all of the major brokerage firms and many independent advisors offer these services.

C. “I’d like to start investing in my workplace 401(k).” This is one of the most common ways for beginners to start investing.

This may be a great option for most people who have access to an employer-sponsored 401(k) because many plans offer a match. Employer matches are basically free money: If your employer offers a 4% match and you make $100,000 a year, if you contribute $4,000 to your 401(k) so will your employer. That means you get $4,000 for free.

2. Choose an investment account

Once you know how you want to invest, you’re ready to shop for an investment account, also known as a brokerage account. There are several types of investment accounts, and it’s a good idea to figure out which account is right for you. For example, a Roth IRA comes with significant tax benefits while a standard brokerage account does not.

For those who would like a little help, opening an investment account through a robo-advisor is a sensible option. We break down both processes below.

Keep in mind, an investment account is just an account, it’s not an investment. You have to add money to it and then purchase investments from there in order to have your money grow in value.

The DIY option: opening an investment account

An online investment account likely offers your quickest and least expensive path to buying stocks, funds and a variety of other investments. With a broker, you can open an individual retirement account, also known as an IRA, or you can open a taxable brokerage account if you’re already saving adequately for retirement in an employer 401(k) or other plan.

We have a guide to opening a brokerage account if you need a deep dive. You’ll want to evaluate brokers based on factors such as costs, investment selection and investor research and tools.

The passive option: opening a robo-advisor account

A robo-advisor offers the benefits of stock investing, but doesn’t require its owner to do the legwork required to pick individual investments. Robo-advisor services provide complete investment management: These companies will ask you about your investing goals during the onboarding process and then build you a portfolio designed to achieve those aims.

This may sound expensive, but the management fees here are generally a fraction of the cost of what a human investment manager would charge: Most robo-advisors charge about 0.25% of your account balance. And yes — you can also get an IRA at a robo-advisor if you wish.

If you choose to open an account at a robo-advisor, you probably don’t need to read further in this article — the rest is just for those DIY types.

3. Learn the difference between investing in stocks and funds

Going the DIY route? Don’t worry. Stock investing doesn’t have to be complicated. For most people, stock market investing means choosing among these two investment types:

Stock mutual funds or exchange-traded funds. Mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and ETFs are a kind of mutual fund that track an index; for example, a S&P 500 fund replicates that index by buying the stock of the companies in it.

When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.

Individual stocks. If you’re after a specific company, you can buy a single share or a few shares as a way to dip your toe into the stock-trading waters. Building a diversified portfolio out of many individual stocks is possible, but it takes a significant investment and research.

If you go this route, remember that individual stocks will have ups and downs. If you research a company and choose to invest in it, think about why you picked that company in the first place if jitters start to set in on a down day.

The upside of stock mutual funds is that they are inherently diversified, which reduces your risk. For the vast majority of investors — particularly those who are investing their retirement savings — a portfolio made up of mostly mutual funds is the clear choice.

But mutual funds are unlikely to rise in meteoric fashion as some individual stocks might. The upside of individual stocks is that a wise pick can pay off handsomely, but the odds that any individual stock will make you rich are exceedingly slim.

4. Set a budget for your stock market investment

New investors often have two questions in this step of the process:

How much money do I need to start investing in stocks? The amount of money you need to buy an individual stock depends on how expensive the shares are. (Share prices can range from just a few dollars to a few thousand dollars.) Some brokerages allow you to invest with fractional shares. Simply put, you can choose a dollar amount and invest that despite the fact that the share price might be greater than what you have (which means you can owe a fraction of a stock).

If you want mutual funds and have a small budget, an exchange-traded fund (ETF) may be your best bet. Mutual funds often have minimums of $1,000 or more, but ETFs trade like a stock, which means you purchase them for a share price — in some cases, less than $100).

How much money should I invest in stocks? If you’re investing through funds — have we mentioned this is the preference of most financial advisors? — you can allocate a fairly large portion of your portfolio toward stock funds, especially if you have a long time horizon.

A 30-year-old investing for retirement might have 80% of their portfolio in stock funds; the rest would be in bond funds. Individual stocks are another story. A general rule of thumb is to keep these to a small portion of your investment portfolio.

5. Focus on investing for the long-term

Stock market investments have proven to be one of the best ways to grow long-term wealth. Over several decades, the average stock market return is about 10% per year. However, remember that’s just an average across the entire market — some years will be up, some down and individual stocks will vary in their returns.

For long-term investors, the stock market is a good investment no matter what’s happening day-to-day or year-to-year; it’s that long-term average they’re looking for.

The best thing to do after you start investing in stocks or mutual funds may be the hardest: Don’t look at them. Unless you’re trying to beat the odds and succeed at day trading, it’s good to avoid the habit of compulsively checking how your stocks are doing several times a day, every day.

Markets, demystified

Register with NerdWallet or sign in to read our monthly stock market outlook, and keep up with the terminology, news and events investors should know about.

6. Manage your stock portfolio

While fretting over daily fluctuations won’t do much for your portfolio’s health — or your own — there will of course be times when you’ll need to check in on your stocks or other investments.

If you follow the steps above to buy mutual funds and individual stocks over time, you’ll want to revisit your portfolio a few times a year to make sure it’s still in line with your investment goals.

A few things to consider: If you’re approaching retirement, you may want to move some of your stock investments over to more conservative fixed-income investments. If your portfolio is too heavily weighted in one sector or industry, consider buying stocks or funds in a different sector to build more diversification.

Finally, pay attention to geographic diversification, too. Vanguard recommends international stocks make up as much as 40% of the stocks in your portfolio. You can purchase international stock mutual funds to get this exposure.

Best stocks for beginners

The process of picking stocks can be overwhelming, especially for beginners. After all, there are thousands of stocks listed on the major U.S. exchanges.

Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with stock market basics.

That generally means using funds for the bulk of your portfolio — Warren Buffett has famously said a low-cost S&P 500 ETF is the best investment most Americans can make — and choosing individual stocks only if you believe in the company’s potential for long-term growth.

The S&P 500 is an index consisting of about 500 of the largest publicly traded companies in the U.S. Over the last 50 years, its average annual return has been more or less the same as that of the market as a whole — about 10%.

The bottom line on investing in stocks

Learning how to invest in stocks can be daunting for beginners, but it’s really just a matter of figuring out which investment approach you want to use, what kind of account makes sense for you, and how much money you should put into stocks.

🤓Nerdy Tip

If you’re tempted to open a brokerage account but need more advice on choosing the right one, see our latest roundup of the best brokers for stock investors. It compares today’s top online brokerages across all the metrics that matter most to investors: fees, investment selection, minimum balances to open and investor tools and resources. Read: Best online brokers for stock investors »

Frequently asked questions

Enhance the uniqueness of this blog post by rewording it to offer a fresh perspective on the topic. Avoid repeating common phrases or ideas and strive to introduce new insights, examples, or viewpoints to engage the reader –

When you invest in a stock, you’re hoping the company grows and performs well over time. That’s how you end up making money.

One of the best ways for beginners to learn how to invest in stocks is to put money in an online investment account and purchase stocks from there.

You don’t have to have a lot of money to start investing. Many brokerages allow you to open an account with $0, and then you just have to purchase stock. Some brokers also offer paper trading, which lets you learn how to buy and sell with stock market simulators before you invest any real money.

Advertisement

NerdWallet rating 
NerdWallet rating 
NerdWallet rating 

Fees 

$0

per online equity trade

Promotion 

None

no promotion available at this time

Promotion 

None

no promotion available at this time

Promotion 

Get up to $700

when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money.

How to invest in stocks in 6 steps

To invest in stocks, open an online brokerage account, add money to the account, and purchase stocks or stock-based funds from there. You can also invest in stocks through a robo-advisor or a financial advisor.

If you’re ready to invest in stocks yourself, this six-step process may help you get started.

1. Decide how you want to invest in the stock market

There are several ways to approach stock investing. Choose the option below that best how hands-on you’d like to be.

A. “I’d like to choose stocks and stock funds on my own.” Keep reading. This article breaks down how to choose the right account for your needs and how to compare stock investments.

B. I’d like an expert to manage the process for me.” You may be a good candidate for a robo-advisor, a service that invests your money for you for a small fee. Virtually all of the major brokerage firms and many independent advisors offer these services.

C. “I’d like to start investing in my workplace 401(k).” This is one of the most common ways for beginners to start investing.

This may be a great option for most people who have access to an employer-sponsored 401(k) because many plans offer a match. Employer matches are basically free money: If your employer offers a 4% match and you make $100,000 a year, if you contribute $4,000 to your 401(k) so will your employer. That means you get $4,000 for free.

2. Choose an investment account

Once you know how you want to invest, you’re ready to shop for an investment account, also known as a brokerage account. There are several types of investment accounts, and it’s a good idea to figure out which account is right for you. For example, a Roth IRA comes with significant tax benefits while a standard brokerage account does not.

For those who would like a little help, opening an investment account through a robo-advisor is a sensible option. We break down both processes below.

Keep in mind, an investment account is just an account, it’s not an investment. You have to add money to it and then purchase investments from there in order to have your money grow in value.

The DIY option: opening an investment account

An online investment account likely offers your quickest and least expensive path to buying stocks, funds and a variety of other investments. With a broker, you can open an individual retirement account, also known as an IRA, or you can open a taxable brokerage account if you’re already saving adequately for retirement in an employer 401(k) or other plan.

We have a guide to opening a brokerage account if you need a deep dive. You’ll want to evaluate brokers based on factors such as costs, investment selection and investor research and tools.

The passive option: opening a robo-advisor account

A robo-advisor offers the benefits of stock investing, but doesn’t require its owner to do the legwork required to pick individual investments. Robo-advisor services provide complete investment management: These companies will ask you about your investing goals during the onboarding process and then build you a portfolio designed to achieve those aims.

This may sound expensive, but the management fees here are generally a fraction of the cost of what a human investment manager would charge: Most robo-advisors charge about 0.25% of your account balance. And yes — you can also get an IRA at a robo-advisor if you wish.

If you choose to open an account at a robo-advisor, you probably don’t need to read further in this article — the rest is just for those DIY types.

3. Learn the difference between investing in stocks and funds

Going the DIY route? Don’t worry. Stock investing doesn’t have to be complicated. For most people, stock market investing means choosing among these two investment types:

Stock mutual funds or exchange-traded funds. Mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and ETFs are a kind of mutual fund that track an index; for example, a S&P 500 fund replicates that index by buying the stock of the companies in it.

When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.

Individual stocks. If you’re after a specific company, you can buy a single share or a few shares as a way to dip your toe into the stock-trading waters. Building a diversified portfolio out of many individual stocks is possible, but it takes a significant investment and research.

If you go this route, remember that individual stocks will have ups and downs. If you research a company and choose to invest in it, think about why you picked that company in the first place if jitters start to set in on a down day.

The upside of stock mutual funds is that they are inherently diversified, which reduces your risk. For the vast majority of investors — particularly those who are investing their retirement savings — a portfolio made up of mostly mutual funds is the clear choice.

But mutual funds are unlikely to rise in meteoric fashion as some individual stocks might. The upside of individual stocks is that a wise pick can pay off handsomely, but the odds that any individual stock will make you rich are exceedingly slim.

4. Set a budget for your stock market investment

New investors often have two questions in this step of the process:

How much money do I need to start investing in stocks? The amount of money you need to buy an individual stock depends on how expensive the shares are. (Share prices can range from just a few dollars to a few thousand dollars.) Some brokerages allow you to invest with fractional shares. Simply put, you can choose a dollar amount and invest that despite the fact that the share price might be greater than what you have (which means you can owe a fraction of a stock).

If you want mutual funds and have a small budget, an exchange-traded fund (ETF) may be your best bet. Mutual funds often have minimums of $1,000 or more, but ETFs trade like a stock, which means you purchase them for a share price — in some cases, less than $100).

How much money should I invest in stocks? If you’re investing through funds — have we mentioned this is the preference of most financial advisors? — you can allocate a fairly large portion of your portfolio toward stock funds, especially if you have a long time horizon.

A 30-year-old investing for retirement might have 80% of their portfolio in stock funds; the rest would be in bond funds. Individual stocks are another story. A general rule of thumb is to keep these to a small portion of your investment portfolio.

5. Focus on investing for the long-term

Stock market investments have proven to be one of the best ways to grow long-term wealth. Over several decades, the average stock market return is about 10% per year. However, remember that’s just an average across the entire market — some years will be up, some down and individual stocks will vary in their returns.

For long-term investors, the stock market is a good investment no matter what’s happening day-to-day or year-to-year; it’s that long-term average they’re looking for.

The best thing to do after you start investing in stocks or mutual funds may be the hardest: Don’t look at them. Unless you’re trying to beat the odds and succeed at day trading, it’s good to avoid the habit of compulsively checking how your stocks are doing several times a day, every day.

Markets, demystified

Register with NerdWallet or sign in to read our monthly stock market outlook, and keep up with the terminology, news and events investors should know about.

6. Manage your stock portfolio

While fretting over daily fluctuations won’t do much for your portfolio’s health — or your own — there will of course be times when you’ll need to check in on your stocks or other investments.

If you follow the steps above to buy mutual funds and individual stocks over time, you’ll want to revisit your portfolio a few times a year to make sure it’s still in line with your investment goals.

A few things to consider: If you’re approaching retirement, you may want to move some of your stock investments over to more conservative fixed-income investments. If your portfolio is too heavily weighted in one sector or industry, consider buying stocks or funds in a different sector to build more diversification.

Finally, pay attention to geographic diversification, too. Vanguard recommends international stocks make up as much as 40% of the stocks in your portfolio. You can purchase international stock mutual funds to get this exposure.

Best stocks for beginners

The process of picking stocks can be overwhelming, especially for beginners. After all, there are thousands of stocks listed on the major U.S. exchanges.

Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with stock market basics.

That generally means using funds for the bulk of your portfolio — Warren Buffett has famously said a low-cost S&P 500 ETF is the best investment most Americans can make — and choosing individual stocks only if you believe in the company’s potential for long-term growth.

The S&P 500 is an index consisting of about 500 of the largest publicly traded companies in the U.S. Over the last 50 years, its average annual return has been more or less the same as that of the market as a whole — about 10%.

The bottom line on investing in stocks

Learning how to invest in stocks can be daunting for beginners, but it’s really just a matter of figuring out which investment approach you want to use, what kind of account makes sense for you, and how much money you should put into stocks.

🤓Nerdy Tip

If you’re tempted to open a brokerage account but need more advice on choosing the right one, see our latest roundup of the best brokers for stock investors. It compares today’s top online brokerages across all the metrics that matter most to investors: fees, investment selection, minimum balances to open and investor tools and resources. Read: Best online brokers for stock investors »

Frequently asked questions

Investing in stocks can seem daunting for beginners, but with the right knowledge and guidance, it can be a rewarding way to grow your wealth over time. This quick-start guide will walk you through the basics of investing in stocks, including how to get started, what to consider before investing, and tips for building a successful investment portfolio.

Understanding Stocks

Before diving into investing in stocks, it’s important to understand what stocks are and how they work. Stocks represent ownership in a company, and when you buy shares of a company’s stock, you become a partial owner of that company. As a shareholder, you have a stake in the company’s success and can potentially benefit from its growth through capital appreciation and dividends.

Getting Started with Stock Investing

1. Set Clear Goals: Before you start investing in stocks, it’s essential to define your investment goals. Are you investing for retirement, building wealth, or saving for a major purchase? Establishing clear goals will help you determine your investment strategy and risk tolerance.

2. Educate Yourself: Take the time to learn the basics of investing in stocks, including how the stock market works, how to analyze companies, and different investment strategies. There are plenty of resources available online, such as investing websites, books, and courses, that can help you enhance your knowledge.

3. Open a Brokerage Account: To buy and sell stocks, you’ll need to open a brokerage account. There are many online brokerage platforms available that offer low fees and user-friendly interfaces for beginners. Compare different brokerage options to find one that suits your needs.

4. Start Small: As a beginner, it’s wise to start with a small amount of money that you can afford to lose. Consider investing in index funds or exchange-traded funds (ETFs) to diversify your portfolio and minimize risk.

5. Develop a Diversified Portfolio: Diversification is key to reducing risk and maximizing returns in your investment portfolio. Spread your investments across different industries, sectors, and asset classes to protect against market volatility.

6. Monitor and Rebalance Your Portfolio: Regularly review your investment portfolio to ensure it aligns with your goals and risk tolerance. Rebalance your portfolio as needed by selling overperforming assets and reinvesting in underperforming ones.

7. Stay Informed: Stay up-to-date with market trends, news, and economic indicators that can impact the performance of your investments. Consider subscribing to financial news websites, following market analysts on social media, and attending investment seminars.

Factors to Consider Before Investing

1. Risk Tolerance: Understanding your risk tolerance is crucial when investing in stocks. Consider how much volatility and potential losses you’re willing to tolerate before making investment decisions.

2. Time Horizon: Your investment time horizon is the length of time you plan to hold your investments before selling them. Longer time horizons typically allow for more aggressive investment strategies, while shorter time horizons may require more conservative approaches.

3. Financial Situation: Evaluate your financial situation, including your income, expenses, debt, and emergency savings, before investing in stocks. Make sure you have a solid financial foundation in place before taking on investment risk.

4. Investment Strategy: Determine your investment strategy based on your goals, risk tolerance, and time horizon. Whether you prefer a passive index investing approach or an active stock-picking strategy, choose an investment strategy that aligns with your financial goals.

Tips for Successful Stock Investing

1. Stay Patient: Investing in stocks is a long-term game, and it’s essential to stay patient through market fluctuations and economic downturns. Avoid making emotional decisions based on short-term market trends.

2. Take Advantage of Dollar-Cost Averaging: Dollar-cost averaging is a strategy where you invest a fixed amount of money regularly, regardless of market conditions. This approach can help reduce the impact of market volatility on your investments.

3. Reinvest Dividends: If you invest in dividend-paying stocks, consider reinvesting your dividends to benefit from compound growth over time. Reinvesting dividends can accelerate the growth of your investment portfolio.

4. Seek Professional Advice: If you’re unsure about investing in stocks or need guidance on building a diversified portfolio, consider seeking advice from a financial advisor or investment professional. They can help you develop a personalized investment strategy based on your financial goals and risk tolerance.

In conclusion, investing in stocks can be a rewarding way to grow your wealth over time, but it’s essential to approach it with caution and diligence as a beginner. By understanding the basics of stock investing, setting clear goals, and following a disciplined investment strategy, you can build a successful investment portfolio that aligns with your financial objectives. Remember to stay informed, monitor your investments regularly, and seek professional advice when needed to navigate the complexities of the stock market effectively. Happy investing!

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