How To Start in Stocks

A quick look at Forbes’ 400 wealthiest Americans will tell you how vital investing in stocks is. Nearly every member on the list has a diverse portfolio of shares. They’re all able to efficiently build wealth and buy large chunks of shares in numerous corporations.
Taking the first steps in the stock market can be tricky, especially if you’ve never invested before. If you’re wondering how to start in stocks, you’ve come to the right place.
In this article, we’ll walk you through four steps to set up a brokerage account and start buying shares in no time. We’ll cover the fundamentals of the stock market, which investment account to choose, and expert tips to maximize your gains while minimizing your losses.

How To Start in Stocks

You can start buying shares the second you set up a brokerage account. However, you need to familiarize yourself with a couple of terms before you start.

Learn the Basics

Starting in stocks carries an inherent risk. In order to cut your losses and efficiently build up your net worth, you need to have a solid grasp of the mechanics of the stock market.
We already know that stocks represent a small share of a company. However, there are two types of stock you can buy.

Common Stock

Common stock is what people refer to when they talk about buying stocks. This type of stock offers two advantages.
Firstly, shareholders get voting rights based on the number of shares they own. These votes ultimately decide who gets elected for the board of directors in the corporation. This means that the stockholders can indirectly influence the management’s policies and other decisions.
Secondly, common stock has a higher potential to grow if the company is performing well. Consequently, if the company performs poorly, the common stock will be the first to take the hit.
The common stock pays out dividends. Dividends are the distribution of the corporation’s profits that goes out to the shareholders. For common stock, dividends aren’t guaranteed as with preferred shares. We’ll explain this further below.

Preferred Stock

Preferred stocks don’t pay out variable dividends nor come with voting rights. The dividends are usually calculated as a small fraction of the market price and are guaranteed.
Common stock dividends, on the other hand, are never guaranteed. Many companies choose to allocate the dividends to the growth of the corporation instead of paying the shareholders.

Open an Investing Account

Once you learn the basics and decide on your investing strategy, now it’s time to open an investing account. You can choose to open an online brokerage account or a Robo-advisor account.

Brokerage Account

Opening an online brokerage account is the DIY option. You get a wide range of brokerage services when you sign up. This includes opening an IRA, receiving healthcare and retirement counsel, and more.
Full-service brokerage accounts usually require a minimum of $25,000 and charge ridiculous fees. This may not be for everybody. Instead, you can go for discount brokerages.
Discount brokerage accounts give you complete control over managing your investments at a reduced commission rate. They don’t offer you any financial advice but generally require less capital to get you started.

Robo-Advisor Account

Robo-advisors rose to popularity after the 2008 Financial Crisis with a streamlined investment service at lower costs. Americans are now leaning towards Robo-advisor companies for long-term wealth building.
These companies are responsible for managing your money and making investment decisions on your behalf. They charge a small percentage of your account balance but offer numerous benefits in return.
Opening a Robo-advisor account is as simple as signing up and setting your budget and investing goals. We strongly recommend going with Robo-advisors if you’re a complete beginner.

Buy Some Stocks

Now that you have a brokerage account set up, you can start buying some stocks.

There are several ways you can do this. Of course, if you’ve decided to go with Robo-advisors, then they’ll do the hard work for you. However, if you’re planning on going with the DIY option and buying individual stocks, things will become a little more complicated.
As a general rule, try to look for stocks from the index funds. These include stocks in the S&P 500 index, which contains 500 of the biggest companies in the U.S. It’s generally a great starting point, as these stocks are usually well-performing.
Next, look for mutual funds and ETFs. These securities use advanced algorithms to track sectors that have a positive outlook.
Finally, avoid stocks that promise short-term gains. These investments are usually far too unrealistic and never deliver on these promises. Look for stable, well-performing stocks that have great potential for growth. Blue-chip companies are usually the most stable, and they also pay dividends.

Grow and Diversify

We highly recommend you only update your portfolio two or three times a year. Frequent rebalancing of your portfolio can cause you to lose track of your goals. Emotional investors are inconsistent, and the constant fluctuation of the stock market will make your performance unpredictable.
Diversifying is one of the fundamental approaches for a healthy portfolio. Experts say your portfolio should consist of stocks, bonds, and other securities. Vanguard says you should even consider buying international stocks.
So, when do you sell a stock? There isn’t an absolute answer on the perfect time frame to let a stock go. Warren Buffett says the winning strategy comprises holding stocks for several decades before selling. Other financial experts say you should sell when your profit is at 20%.
The takeaway? Conduct your market research and trust your gut. Keep up with the companies’ earnings per share and other financial trends. The more you understand the company, the more you’ll predict the performance of its stocks.


Warren Buffet says that successful investing is only about developing wealth over a long time. If you’re looking for overnight success or generating short-term profits, you won’t find it here.
The winning formula is to lay out an investment strategy that suits your budget and goals. Set realistic expectations and get ready to invest for the long-term future. Soon enough, this will all be worth the venture.
Note: This is not financial advice.