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Stock Market Investing for Beginners — A Guide to Getting Started

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Learn how to get started investing in stocks, even if you know nothing about the market. We explain what you need to know and offer step-by-step instructions for getting started.

Stock Market Investing for Beginners -- A Guide to Getting Starting

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If you plan on building wealth throughout your lifetime, you’ll need to do more with your money than just stick it in a savings account.

Instead, you want to invest your money into places that offer a higher return than your savings account.

Stock market investing lets you invest in a way that builds wealth over your lifetime — and you don’t need to spend years learning it to get started!

In this article, we show you how to get started with stock investing right away — even if you’re an absolute beginner.

Here’s what you’ll learn:

Understanding Stocks

Stocks are shares of a company that you can purchase to become part-owner of the company, allowing you to receive a portion of the profits it earns.

When a business does well, more people buy its stocks, causing the stock prices to increase. Likewise, when a company does poorly, fewer people invest in it and its share prices drop. 

Eventually, some companies want to take their business to the next level, which costs a lot of money, so they sell some ownership or equity in their company — essentially handing over some ownership to the public — in an initial public offering (IPO).

How Investors Make Money From Stocks

Successful stocks earn their owners (called “shareholders”) a profit through appreciation and dividends.

Appreciation happens when your stocks increase in value, allowing you to sell them at a profit.

Dividends are quarterly payments made to shareholders when a company is doing well. They can be paid in cash or by providing additional stocks to shareholders.

Successful investing is buying shares in companies that make you money over time.

M1 finance pie picksSource: M1 Finance

m1 Finace pie chart Gif

Source: M1 Finace

What is Stock Trading

Stock trading is the process of buying and selling shares of companies. 

For every stock buyer, there is a seller. 

For example, you buy stocks from someone who’s selling them or sell to someone who’s buying.

What Is The Stock Market

The stock market is where people buy and sell shares, investing their money in companies they think will earn profits.

Most people do their stock trading online, but the stock market does have a handful of physical locations across the globe — the largest is the New York Stock Exchange (NYSE), located on Wall Street in New York.

Until September 11, 2001, the NYSE building was a tourist destination where people could go to watch stock traders, but it has been closed to the public since 2001.

What Are Stockbrokers

You can’t buy stocks at the corner store.

Stocks are bought and sold through licensed professionals called “stockbrokers.” You must use a broker to buy and sell shares.

All financial market transactions must take place through a stockbroker.

We at Minority Mindset recommend using Webull or M1 Finance as your stockbrokers. Both provide you with the software you need to get started – and both are commission-free.

Webull is an excellent platform for active investors, and M1 provides trading opportunities for passive investors with the option to purchase fractional shares.

Stock Investing Versus Stock Trading

There are two ways to invest in the stock market: stock trading and stock investing.

Stock Trading VS Stock Investing

Passive Stock Investing

Stock investing is generally a more passive activity that takes a long-term approach to building wealth. Passive investors follow strategies that usually involve ignoring short-term losses in exchange for long-term earnings.

Find out everything you need to know about stock investing before you get started and learn how to open an account with a reputable stockbroker.

If you’re interested in passive stock investing, you’ll want to check out M1 Finance. M1 offers customizable, free investing with pie-based software that makes investing easy to understand. 

Open a commission-free account at M1 Finance today

Active Stock Investing

Stock trading is an active form of investing. 

Trading means investors use short-term strategies (daily, monthly, or annually) to maximize their returns. In other words, traders look for stocks they can purchase at low prices so they can turn around and sell them at higher prices later.

Active investing is for people who want to immerse themselves in the market and trade stocks directly.

If you’re interested in becoming an active stock trader, consider opening an account at Webull.

Webull offers commission-free trading and a blog with helpful resources for people who want to learn the ins and outs of stock trading.

Become a stock trader — Open an account at Webull today!

Stock Investment Options

There are several types of stock investment products you can purchase, including:

  • Stocks: shares that you purchase in specific companies
  • Bonds: a loan you grant to a company or the government that’s paid back to you with interest
  • Mutual Funds: a large collection of investments paid for with money pooled from multiple investors, managed by a professional.
  • Index Funds: passive investments whose rise and fall follows an index (like the S&P 500)
  • Exchange-Traded Funds (ETFs):  a type of fund that has a stock ticker symbol and can be traded electronically (on the stock market). Most popular index funds are ETFs.
  • Options: a high-risk investment that involves a contract agreeing to buy and sell stock by a specific date

Index funds are one of the easiest, most inexpensive ways to begin investing because you don’t need to spend hours researching and analyzing individual companies. 

Instead, index funds provide a low-risk method of building wealth over time by diversifying your investment across a large collection of stocks.

How Index Funds Work

If someone doesn’t want to put in the work to find the best stocks/companies to invest in, they can look into investing in index funds. 

An index fund is a group of stocks that you put your money into that will mimic the returns of general markets. 

Index funds come with lower fees because they don’t require the services of a professional manager, so they’re less expensive to own.

Index funds are a lower-risk form of investing. However, their earning potential is also lower since their wins and losses are averaged together.

The most popular index fund is called the S&P 500. If you invest in the S&P 500 (through the common ETFs VOO or SPY), your money will experience profits or losses according to what the biggest 500 companies in America do.

For example, if you put all your investments into one company and that company fails, or if their shares drop, you lose all your $$$. 

Even though index funds carry lower risk, that doesn’t mean you can’t lose money

For example, in 2008, the entire market dropped more than 50%.

The market, by nature, goes up and down, which means you’ll experience both gains and losses over time — which is why it’s essential to have an investing strategy.

When markets bounce up and down, people tend to buy and sell based on what they think will happen next. That makes market highs and lows an emotional experience for many people. 

How the Stock Market Gets Emotional And What You Can Do About It

The stock market is a place where investors go to bet their money on what they think will happen in the economy.

You might assume that bad news about the economy would push stock prices lower. Sometimes, though, the opposite is true.

Looming recessions can sometimes cause investors to purchase more stocks, thinking they’ll buy low now and sell high later.

This emotional buying and selling is part of why the stock market is unpredicatble. 

When you invest in the stock market it’s essential that you don’t allow your emotions to distract you from making good financial decisions. This doesn’t mean you can’t take advantage of market activity, but that when you do, you should do it with a plan.

Please note: The following examples are for educational purposes only, and are not a recommendation of what you should buy.

For example, drip buying is one strategy that can help investors make rational buying decisions, even when the stock market becomes highly emotional.

What is drip buying? Drip buying means you stagger your purchases. Here’s an example of how it works:

If you keep a list of the companies you’d like to invest in, and the economy takes a nosedive, you might ask yourself “Which of these companies are still going to be a good investment 10 years from now?”

You might consider purchasing some shares from those companies when the market drops and their share prices go down.

Then, if stock prices drop even lower, you might purchase a few more shares of those companies.

Staggering your purchases like this, with drip buying, helps you avoid “going all in” and losing all of your money when emotions enter into the picture.

Investing in index funds, such as VOO or SPY, is another way to avoid making emotionally-influenced financial decisions.

Index funds help take the emotion out of stock investing because you’re buying into a group of stocks with the intention of hanging onto them through all the market’s ups and downs.

Emotion can play a significant role in people’s stock investing decisions. On occasion, this can pay off with high profits. Most of the time, though, it results in people losing a lot of money.

Don’t treat the stock market like a Las Vegas casino

Instead, develop a plan for how you’ll handle your investments when emotions come into play, tempting you to go for a “big win” or pull out entirely due to fear.

If you’re new to the stock market, consider investing in index funds to lower your risk. You can open an account today at M1 Finance, and start investing with a commission-free account that doesn’t have a minimum deposit requirement.

Open a commission-free account at M1 Finance right now!

How To Get Started Investing in Stocks

Investing in stocks is easier than you might think. Before you begin investing, you should:

Once you’ve completed these three steps, you’re ready to begin investing in the stock market.

Step #1: Decide Whether You Want To Invest Actively Or Passively

Passive investors usually allow their investments to build wealth over time, and purchasing index funds is an easy way for passive investors to get started. 

Passive investing requires very little time and allows you money to grow while you’re doing other things.

Open an account with M1 Finance

Active investors buy and sell stocks based on when they think shares will rise and fall. Active investing requires a lot of learning and often takes years to master the concepts. However, no amount of mastery or understanding guarantees wealth or promises that you won’t lose money.

webull active account

Who you choose to act as your stockbroker is influenced by whether you decide to become an active or passive investor. 

Step #2: Find A Stockbroker

You need a stockbroker (financial company) to be able to buy and sell stocks.

We recommend M1 Financing for passive investing and Webull for active investing.

M1 Financing provides pie-based software that makes it super-easy for beginners to get started investing.

investment pie chart

At M1 Financing, you choose the companies or funds you want to invest in. And, if you want to invest in one of your favorite companies whose stock prices are too high, you can purchase fractional shares instead of full shares.

Or, you can choose from professionally-designed pies to meet specific goals and risk factors or even invest in a particular industry.

Best of all, you pay no commission fees when you sign up with M1 Finance. So, it’s easy and affordable to begin stock investing.

Open an account at M1 Finance today!

Webull for active investors: Webull is an excellent option for people who want to invest in stocks actively.

Webull offers several advantages:

  • ZERO commissions
  • No minimum deposit
  • Extended trading hours
  • Free access to Webull Desktop 
  • Webull Desktop allows you to consolidate watchlists, analyze charts, place orders, and check your positions across all of Webull’s platforms (mobile, PC, and web).

Webull market Example

Once you sign up for an account, you’re ready to get started investing!

Open a zero-commission, no-minimum-deposit, account at Webull today!

Step #3: Invest Regularly

Once you’ve begun investing, you’ll want to continue investing on a steady basis for many years.

The more money you invest, and the longer you keep your money invested, the more money you’ll earn.

Consider automating your investments, so you contribute a specific portion of your income every month.

Building Wealth Through Long-Term Stock Investing

By allocating a portion of your earnings to stock investing, you can build wealth over time — even if you don’t have much time to put into it.

Start by opening an investing account with a reputable financial company. Then, build your portfolio and consider automating your contributions. 

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