How to Invest In Stocks: Best Ways for Beginners to Get Started

Tyler Philbrook
Tyler Philbrook

Investing in stocks is a tried-and-true way to put your money to work making money for you, while you’re busy making more money.

The legendary investor Warren Buffett defines investing as forgoing consumption in the present to be able to consume more later. Put another way, if I don’t buy that coffee today, I can live in a mansion later.

Invest in stocks is a long-term financial planning than a skill or strategy.

Investing money regularly is like planting a seed and watching it grow over time. That is why it is important to start investing your hard-earned money as early as possible to get the most returns.

Learning how to invest in stocks can be daunting for most people, especially if they do not know money and the stock market. This guide explains the steps anyone can follow to start investing in the stock market.

Open a brokerage account.

You cannot simply buy stock. If you want to buy a share of Target, for instance, you can’t walk into a target and ask to buy a share of their stock. You must use stock brokerage firms that permit you to trade using their platform or brokers that are licensed to deal on the market for this.

Think of them like a middleman, or even a store that the only item they sell is stocks.

So, the first step in how to start investing in stocks is to open a brokerage account. The procedure is easy:

You must open a trading account with a broker or stock brokerage platform before you can start investing, such as Webull, Robinhood, or MooMoo.

Your account is opened by the stockbroker or stock brokerage platform. Your money is kept in that account, and dividend payments are deposited into these accounts. These accounts are then linked to your bank account allowing you to withdraw or add money whenever you like.

Define your risk tolerances

There are various types and categories of stocks, such as large capitalization stocks, aggressive growth stocks, small-cap stocks, and value stocks. All of them have different levels of risk associated with them.

That is why it is essential to know your risk tolerance so that you can invest in the relevant stocks with the level of risk you can tolerate.

For example, people at a young age have a high-risk tolerance because they have a long time to make money back if any is lost. While people above 40 years of age should invest in low-risk stocks, and by the time your in your 60s you may only want to be in index and mutual funds to mitigate your risk.

Decide how much you want to invest.

When deciding how much you want to invest it’s important to think about how long until you’ll see that money again.

If you’re planning on needing that money 6 months or even in just a few years, it may be better to put that money elsewhere.

Investing is a long-term plan, and some consider a lifetime one. Many investors never sell their stocks until it comes time to live off the proceeds in retirement, or the dividend amounts cover their bills.

Choose the type of account.

The two types of accounts you’ll need to choose from are a basic brokerage account and an individual retirement account (IRA).

You can buy mutual funds, ETFs and stocks using either type of account. The primary factors to consider here are your investment goals and how simple you want it to be to access your funds.

A conventional brokerage account will give you faster access, with less fees to your money. This is good if you are saving for a rainy day or wish to invest more than the yearly IRA contribution maximum.

Most employers offer an IRA through them, often giving company matches as well, typically we refer to them as 401ks. You may already have one through work, and if you do, then a typical brokerage account may be something you do in addition to that.

An IRA is a terrific choice if your objective is to amass a large retirement nest egg.

Traditional and Roth are the two types of these IRAs, and there are also some specialized IRAs for self-employed people and small business owners, such as the SEP IRA and SIMPLE IRA.

Although IRAs offer excellent tax advantages for stock purchases, it may be challenging to access your funds until you reach retirement age. In fact, taking money out before 59 ½ can lead to some hefty fees.

Create a diversified portfolio.

But, How do I invest in stocks?

This is the question in the mind of every newbie investor. The fundamental guideline for creating any portfolio is to make investments in a variety of assets. This is because it lessens the effects of a specific asset performing poorly. Diversification encompasses asset class, industry, and cycle differences.

For example, investing all of your funds in a sector that is seeing growth could be tempting. However, it is usually preferable to spread investments across industries, balance market cap exposure, and counteract the risk of equity shares with stable but lower-yielding bonds.

An example would be to buy stock in Apple, a stable company that’s been around for a while and is very likely to continue to be around. Instead of also investing in Samsung or Microsoft you invest in Walmart, Target, or Best Buy. Your third investment may be Railroads, electric, or oil companies.

Essentially what you’re doing is ensuring that a bad quarter or year in one industry does not equal a bad quarter or year in your portfolio.

Continue to build your portfolio.

You must invest consistently if you want to have a solid portfolio that will help you in reaching your long-term financial objectives.

Over time, increase your stock investments and keep expanding your portfolio. Especially when you start making more money, instead of increasing your lifestyle now, add more to your lifestyle in the future by investing more.

Be careful not to over-diversify. Having a little bit of everything means that you won’t get huge gains when those stocks do increase. So, keep your portfolio diversified in each type of market, but not so much that you own 4 different companies all doing the same thing in every industry.

Check your portfolio.

Spend some time periodically checking on your portfolio. Watch to see if the stock performance matches your expectations.

If any business is continuously functioning poorly, think about selling those shares and purchasing in a different company that has been more stable. However, don’t sell just because a stock is going down, understand the market, take time to find out why it’s going down. It may be best to hold on to it for a time as it will go back up.

You may also sign into your account and find that you’ve made not only the amount of money you want to, but even more so.

Though it’s important to keep an eye on your portfolio and check regularly, you don’t want to check every day, or worse multiple times a day. A stock price will change so many times a day, your portfolio can swing by hundreds or even thousands of dollars in day depending on how much you have invested. Checking it every day can be emotionally taxing, so set a day that you check it every month and you should be fine.

Research and Study

It is important to do as much research on the chosen investment as possible to stay away from losses and enhance the potential of profits.

Research the stocks in which you are going to invest your hard-earned money by studying their history, past performance, present trends, and past returns.

Watch videos of experts, or read their books or blogs, on how to invest in stocks to learn the right strategy of investing.

Keep up with the trends and fluctuations.

The price of listed securities frequently fluctuates due to changes in the stock market. By keeping abreast of the most recent developments in the stock market, it is crucial to comprehend the market's direction (trend).

By keeping up to date with what’s going on, you can make better decisions on what to do now, and in the future.

Conclusion

The stock market is open for investment for people from all fields. Investing in stocks is a skill, and it needs to be learned just like any other skill. It takes patience and a solid long-term strategy to make profits in the stock market.

With the right strategy and long-term goals, it is possible to get good returns by investing in the stock market. All you need is to choose the right stocks that can grow over the years and stay profitable in the long term.