Getting started with stocks

Historically, in the long run, the performance of stock investment has easily surpassed investment in bonds, Treasury bills, gold or cash. In the short term, one or more other assets may outperform stocks, but overall, stocks have historically been winners.

However, there are many ways to invest in stocks. When choosing among domestic or foreign individual stocks, mutual funds, index funds or ETFs, investors may be overwhelmed by the many different choices.

Key points

  • Stock investment has historically been superior to other types of investment, such as bonds, cash, gold or Treasury bills.
  • Before deciding how to invest in stocks, it is important to assess your risk tolerance.
  • You should ensure that you have enough time to properly manage and monitor your inventory.
  • Diversification is an excellent way to reduce the risk of stock investment.
  • If you need help with investment, be sure to consult a broker online or at your local office.

As an adventurer

You may be eager to start working so that you can also generate positive returns, but please consider some simple questions: What kind of person are you? Are you an adventurer, willing to spend money to make a lot of money, or do you prefer something more “certain”? If a stock drops 10% in a day or 35% in a few weeks, how might you react? Would you sell it in a panic?

The answers to these and similar questions may lead to consideration of different types of stock investments, such as mutual or index funds and individual stocks. If you are not ready to take risks, but still want to invest in stocks, the best choice may be mutual funds or index funds-both are very diverse and contain a variety of stocks. This reduces risk and does not require individual stock research.

Before making any major stock investment decisions, it is important to understand your personal risk propensity and different stock investment styles.

Time commitment

Should you invest in funds, stocks, or both? The answer depends on how much time you can invest. Choosing a mutual fund or index fund carefully allows you to invest your money, leaving the hard work of picking stocks to the fund manager. Index funds are even simpler because they move up and down based on the type of index they are designed to track.

Investing in individual stocks is the most time-consuming, because it requires you to make judgments about management, earnings, and future prospects. As an investor, you are trying to distinguish between profitable stocks and financial disasters. You need to know what they do, how they make money, risks, future prospects, etc.

So, ask yourself how much time you have for investing. Would you like to spend a few hours or more per week reading different companies, or is your life too busy to spare time? Investing in individual stocks is a skill, and like other skills, it takes time to develop.

Diversify your investment portfolio

It is best to have various investments or assets, which is called diversification. For example, don’t put all your money in small biotech companies. Yes, the potential gains may be high, but what if these stocks plummet rapidly when the US Food and Drug Administration (FDA) begins to reject a higher percentage of new drugs? Your entire investment portfolio will be negatively affected.

It is better to diversify in several different areas, such as real estate (real estate investment trusts are a possibility), consumer goods, commodities, and insurance, rather than focusing on one or two areas. You can also consider diversifying asset classes by depositing some funds in bonds and cash, instead of investing 100% in stocks. How much you have in these different sectors and categories is up to you, but a broader investment can reduce the risk of losing everything at any time.

Beginner Portfolio

If you are just starting out, please seriously consider investing most of your capital in several index funds, such as one that tracks the broader market, such as the Standard & Poor’s 500 Index, and another that provides some international exposure. Adding another index fund that tracks small companies, such as the Russell 2000, will increase returns but increase risk.

The investment portfolio composed of various index funds will provide diversification, provide more stable performance for large companies, and provide upside space for international companies and small-cap stocks.

Build a stock portfolio

If you invest in individual stocks, 12 to 20 carefully selected portfolios will provide you with sufficient diversification without overwhelming you with too many companies that need attention and research. However, you need to ensure that you fully understand each company, from business to risk. If you plan to invest in stocks separately, diversify your funds to different industries, such as healthcare, technology, small-cap stocks, and large-cap stocks.

If you don’t have time or don’t want to choose multiple stocks, please consider investing in a combination of index funds and individual stocks. Another consideration, especially when funds are limited, investing in 12 to 20 stocks may not be feasible. Therefore, putting most of the money into funds will provide the stable returns they tend to generate.

Find a broker

Once you have determined the shape of your portfolio, you can invest. Find the broker you think is suitable online or through a local office. If necessary, call and talk to this person. Then fill in the documents, deposit some money, and open an account.

After deciding what to buy-don’t buy all at once-enter slowly through the dollar cost averaging method (DCA). What if you invested all your capital before the market downturn? Being at a loss quickly will not have much impact on your confidence. Plan to spend a few months to invest all your funds to minimize any market timing risks. Finally, remember to set aside time each week to check or learn about the news about your investment.

Pros and cons of using Roboadvisor

One of the latest innovations that allow ordinary individuals to start investing in stocks is the emergence of so-called “robot advisors.” These are digital platforms that can automate portfolio and trading decisions on behalf of users through mobile applications or web interfaces. By following sophisticated formulas such as modern portfolio theory (MPT), roboadvisors’ algorithm optimizes portfolio allocation based on time frame and risk tolerance, allowing users to forget it just by setting it. This automation can not only translate into the best investment strategy, but also save costs: many robo-advisors charge far less than human advisors, and the minimum investment amount at the beginning is usually very low.

Of course, automation also means giving up control over portfolio decisions and can minimize interpersonal or personal contact with the people who manage your funds. If you want to buy popular stocks or IPO stocks, short stocks, or if you want to sell certain call options held, robo-advisors will not allow you to do so. Nevertheless, for most new investors, these speculative or high-risk strategies may not be appropriate, so robo-advisors who insist on index investment strategies may be a better choice.


  • Low cost and low minimum requirements for entry

  • Usually follows an index strategy, which is best for most long-term investors

  • Automation eliminates human error and allows continuous monitoring of the portfolio

  • Expand the range of options, such as ESG-focused investment portfolios


  • Reduce personal contact or interpersonal interaction

  • Little control over investment portfolio or trading decisions

  • Limited investment options; cannot trade as you wish

Regularly adjust the investment portfolio

As your experience grows, your asset allocation decisions may change. You can adjust your investment portfolio regularly, such as every year or so-by selling some investments and buying more of another investment. You can also adjust your portfolio by adding additional funds to areas where you want to increase exposure.

These additional funds can be used to expand the number of securities you hold, or they can be added to your existing holdings. Do this regularly, and before you realize it, you will have a large portfolio of investments that will help pay for your retirement, pay for a second home, or achieve any financial goals you set when you started your investment journey .

Frequently Asked Questions About Introducing Stocks

How much money do I need to start investing?

Today, most individual investors can start from very few places. Many financial experts recommend starting early, especially long-term investments for goals such as college savings or retirement. Adding weekly or monthly contributions to your portfolio can help grow smaller seeds planted early into a large tree.

How do you start investing in stocks with very little money?

Today, ordinary people can start investing at literally one dollar. Online brokers such as Robinhood or E-Trade offer commission-free trading and fractional stocks, which means that the unit price of stocks is no longer a limiting factor. Similarly, roboadvisors for automated long-term portfolios are low-cost, and many can be used for as little as $5-100 or less, depending on the provider you choose. Any of these options requires opening an account online and transferring money from your bank, which can be done in just a few clicks.

How do I start using penny stocks?

Penny stocks are high-risk stocks of companies that sometimes have problems, with a stock price of less than $5 and usually less than $1. Usually, penny stocks are traded on so-called pink sheets or over-the-counter bulletin boards (OTCBB). Penny stocks should be approached with extreme caution. This is especially true for pink sheets, because unlike OTCBB stock, companies trading on it do not need to file with the SEC. Some online brokers will restrict the trading of penny stocks.

What is the CAN SLIM method of investing in stocks?

CAN SLIM, by Investor Business Daily William J. O’Neil is an aggressive system that uses a combination of fundamental and technical analysis techniques to select growth stocks. It is suitable for investors with high risk tolerance and relatively short time horizons.

Bottom line

Before you enter the stock market, take some time to think about what you want to accomplish and how to do it while maintaining risk tolerance. In addition, please consider how much time you have to invest. Doing this before investing your first capital will greatly help protect you from the emotional roller coaster of investing.

Thinking carefully before and during your investment career is more beneficial to your results than trying to chase the latest hot stocks. After all, this is your money, which means you should know what you do with it and why.


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