If you're not already in that group and don't have access to a 401(k) or other retirement account where you work, getting into stock investing is easier than you might think — especially if you let financial advisers help you plan out an optimized portfolio.

How to buy stocks 101

The first thing you’ll need to do before you can start to buy or sell is do a little research. Unless you plan to buy stocks directly from a specific company, you’ll also need to start by opening a brokerage account (more on this later).

Whatever amount of money you have to invest, if you’re brand-new to the stock market you won’t go wrong seeking professional advice before you jump in feet first.

Even if you just have $5 to invest, you can still make it work for you.

A financial adviser can help guide you through the process and make recommendations based on your personal risk tolerance as well as any preferences you may have about where you’d like to invest your money.

While you’re still in the genesis stage of this new venture, spend some time thinking about your purpose and intention for your stock portfolio.

Ask yourself:

  • What do I want to achieve through my portfolio?
  • Is there a specific industry that interests me?
  • Who are the leaders in that industry and how are they doing?

It’s helpful to think of investing as buying into a company rather than trying to predict how it will fare financially. As Warren Buffet once put it, invest in the companies you both understand and believe will offer long-term value.

Finally, keep in mind that a good portfolio should be diversified over multiple sectors. Investing in just one sector, like agriculture or energy can mean that if something goes wrong in that industry, all your investments will be impacted.

Fine wine is a sweet comfort in any situation — and now it can make your investment portfolio a little more comfortable, too. Now a platform called Vinovest helps everyday buyers invest in fine wines — no sommelier certification required.

Invest Now

Common stock trading terms

While you’re probably not considering a career change to become a trader, it’s helpful to become a little familiar with some common stock trading terms.

  • Buy: to buy shares or take a position in a company.
  • Sell: getting rid of shares (whether because you’ve reached your goal or to prevent losses).
  • Ask: what people who are looking to sell their shares are looking to get for them.
  • Bid: what you’re willing to pay for a stock.
  • Ask-bid spread: the difference between what people want to spend and what others want to get.
  • Bear market: market conditions where investors expect prices to fall.
  • Bull market: market conditions where investors expect prices to rise.
  • Blue chip stocks: shares of large and well-recognized companies that have a long history of solid financial performance.
  • Earnings per share: a company’s net profit divided by the number of outstanding common shares it has.
  • Dividend: the portion of a company’s earnings that is paid to shareholders.

How to start investing in stocks

Robinhood trading app
Photo courtesy of Robinhood Markets, Inc.
Presentation of a small fractional trade on the Robinhood app.

Buying individual stocks is risky, similar to going to the racetrack and putting all of your money on one horse.

But if you've done your research, have found a company you like and aren't going to wager all of your savings on it, you might buy some shares through a brokerage or a stock-trading app.

Brokerage accounts are offered by a variety of both longtime and newer financial institutions, including E-Trade and Ally.

Before opening an account, compare costs, including any regular fees and the commissions you'll pay on stock trades. Explore the minimum deposits needed to get started, and review each broker's tools (like calculators) and stock research resources.

You also don’t have to do your trading directly in person. There are also plenty of options for online brokers these days.

Stock-trading apps, such as Robinhood and Acorns, charge low or no trading commissions.

It's easy to link the apps to your bank account. Maybe too easy. You need to do your homework and understand what you're doing -— and be willing to lose your money if your stocks crash.

When you decide you’re ready, Robinhood will add a free stock to your account on sign-up. It works on a lottery system, so if you’re lucky the stock you get could be for a top brand like Visa or Apple.

Another option for buying individual stocks is through the companies themselves, if they have direct stock purchase plans. The costs tend to be lower than trading through brokerage services. Companies offering these plans include The Home Depot and Walt Disney.

How to invest in the stock market through mutual funds, ETFs

When you invest in stocks by buying mutual funds, you spread your risk around. A fund is a collection of different stocks, and you own portions of each. A mutual fund manager oversees the mix of investments in the fund.

The big advantage with mutual funds is that your investment is unlikely to suddenly become worthless, which could happen if you put all of your money on one stock.

A disadvantage is that your investment in a mutual fund is unlikely to make you a quick killing.

You can invest in mutual funds through a fund company, such as Vanguard or Fidelity, or through a broker.

ETFs, or exchange-traded funds, are similar to mutual funds, though they're traded on a stock exchange, similar to individual stocks. If you like the idea of following a single stock but don't feel confident in your stock-picking abilities, you might try an ETF.

ETFs are available through brokers, investment apps, or robo-advisors like Betterment.

Fine wine is a sweet comfort in any situation — and now it can make your investment portfolio a little more comfortable, too. Now a platform called Vinovest helps everyday buyers invest in fine wines — no sommelier certification required.

Invest Now

The final ruling on buying stocks

No matter how you choose to invest in stocks, the important thing is to just do it already. The market tends to go up over time, so you need to jump in and start making money.

And remember, there are tools on the market that ensure you don’t need to have thousands of dollars or years of expertise in order to invest.

One of them, an app called Acorns, is an automated micro-investing platform that will round up your debit and credit card purchases to the nearest dollar and invest the leftover change in the market.

Even top investors like Warren Buffet have bad days on the stock market. Don’t get discouraged if your investments go through a rough patch. Buffett himself discourages beginner investors from checking their investments every day for this very reason.

Remember your investing goals and keep them in mind. Do whatever you can to keep yourself on track and try not to sweat all the factors you can’t control.

If you’re making good returns on your investments, think about what you want to do with that money.

And be sure to continue to pay due attention to your mortgage, your savings accounts and retirement plans instead of putting all your money in investments.

Get a piece of commercial real estate

Enhance your portfolio with high-return commercial real estate

First National Realty Partners is the #1 option for accredited investors seeking superior risk-adjusted returns in the grocery-anchored necessity-based retail space.

While commercial real estate has always been reserved for a few elite investors, outperforming the S&P 500 over a 25-year period, First National Realty Partners allows you to access institutional-quality commercial real estate investments — without the leg work of finding deals yourself.

Invest with First National Realty Partners now.

About the Author

Doug Whiteman

Doug Whiteman

Former Editor-in-Chief

Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

What to Read Next

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.