A Beginner’s Guide to Stock Investment

Building lasting wealth through stock investment is a commendable strategy, provided it is executed correctly. Investing in shares of public companies offers an avenue for financial growth, but the multitude of approaches may appear daunting for beginners.

This comprehensive guide aims to simplify the process by assisting you in defining your financial objectives and providing a step-by-step roadmap to initiate your stock investment journey.

Step 1: Choose Your Investment Approach

Your initial decision as a novice stock investor revolves around selecting your preferred investment method.

1. Robo-advisor: Utilize online investment platforms employing algorithms to craft an investment portfolio tailored to your goals, timeline, and risk tolerance. Ideal for those seeking a hands-off approach.

Learn more about Robo-advisors

2. Human advisor: Opt for a traditional brokerage offering access to a Certified Financial Planner (CFP) to manage your investments. Be mindful that this service often comes with a higher fee compared to robo-advisors.

Explore traditional brokerages

3. DIY (Do It Yourself): If you prefer a hands-on approach and have the time for research and active management, consider using a brokerage account to independently invest in stocks and index funds.

Discover more about DIY investing

Step 2: Select Your Investment Account

After determining your preferred investment approach, the next step is choosing where to invest. Before you can start trading stocks, it’s crucial to open an account, and you have two primary options: a brokerage account or a robo-advisor account.

Both these choices offer the flexibility of either a taxable brokerage account or an individual retirement account (IRA). Both account types grant access to stocks, ETFs, and mutual funds, but the decision between them hinges on your financial goals.


If you’re already contributing to a workplace retirement account and prioritize accessibility to your funds at any age, a brokerage account is likely the better fit. On the other hand, if your focus is specifically on retirement savings and you’re not concerned about immediate liquidity, an IRA presents an excellent choice.

To delve deeper into these options, explore the links below:

Learn more about Brokerage Accounts

Explore the benefits of Robo-Advisor Accounts

Step 3: Select Your Investment Platform

Your next crucial step is choosing the right brokerage. Follow these steps and consider the following factors when comparing online brokers:

⇒ Look at fees: While many online brokers have eliminated commission fees, carefully review the fine print for any account management fees.

Explore fee structures

Check out features: Examine the research, tools, and educational resources each broker provides. Take note of the range of securities available for trading and whether fractional shares are offered.

Explore broker features

Consider customer support: Read reviews, assess customer service options, and determine if there are local branches if in-person assistance is essential for you.

Learn about customer support

Evaluate user experience: Some brokerage platforms are more user-friendly than others. Opt for a platform that is easy to navigate, ensuring a stress-free experience when accessing your account and managing your portfolio.

Check user experience

See what others are saying: Review feedback from fellow investors and explore our reviews of online stock brokers for beginners.

Read investor reviews

Step 4: Decide on Your Investments

As a beginner, it’s prudent to adopt a conservative approach. Focus on stocks from well-established companies with a history of regular dividends. This strategy allows you to earn a steady income while patiently waiting for your investments to appreciate.

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Consider exploring dividend aristocrats, a specific list of stocks from recognizable names such as AFLAC, Cardinal Health, Clorox, Chevron, General Dynamics, Johnson & Johnson, Kimberly-Clark, and Coca-Cola. To qualify as a dividend aristocrat, a stock must be an S&P 500 company with at least 25 consecutive years of dividend increases and meet specific size and liquidity requirements.

In essence, these stocks represent the bluest of “blue chips,” historically outperforming the general market and demonstrating resilience during market downturns. Initiate your investment journey with these dividend aristocrats, gradually incorporating more speculative stocks as your confidence grows.

Discover dividend aristocrats

5. Determine Your Investment Amount

The ideal amount to invest in the stock market is subjective and hinges on your specific goals and timeline.

Asset Allocation:

Determine the breakdown of your portfolio between different assets.

Younger investors can generally hold a higher percentage of stocks. As you age, consider scaling back stock allocation for more stable investments like CDs and bonds.

Some experts suggest subtracting your age from 110 to ascertain the percentage of funds to invest in stocks. For instance, if you’re 30, you might consider allocating 80% to stocks, adjusting based on your risk tolerance.

Learn more about Asset Allocation

Initial Investment:

There’s no fixed magic number; it depends on your individual circumstances.

Ensure you can live without the invested funds for three to five years due to stock market volatility.

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Avoid using a stock brokerage account for emergencies or short-term goals like a wedding or down payment.

Most online brokerages have low or no account minimums, enabling you to start with just a few dollars.

Fractional shares allow you to invest in portions of stocks, providing flexibility with smaller amounts.

Explore Initial Investment Strategies

Ongoing Contributions:

Decide on a regular contribution plan for future investments.

Avoid a one-time approach; commit to a consistent savings plan.

Gradually move into your investments rather than making sporadic trades, even in a commission-free environment.

For example, if you start with a $1,000 initial investment, consider adding a regular monthly contribution, such as $250, based on your budget.

Step 6: Monitor and Adjust Your Investments

After defining your goals and initiating your stock investments through your selected broker, it’s crucial to actively manage your portfolio. If you opted for a robo-advisor or a human financial advisor, this step is relatively straightforward.

For those actively overseeing their portfolios, additional decisions arise, such as determining when to buy or sell to stay aligned with your objectives. This involves relying on market data and research tools provided by your chosen brokerage.

Regardless of your approach, regular check-ins on your investments are essential. Reevaluate your goals, recognizing that they may evolve as you age and reach various life milestones.

It’s important to note that market fluctuations are common, so resist the temptation to excessively monitor your performance or make impulsive decisions.

Explore Investment Management Strategies