How to Buy Stock for the Beginner

Everybody is new at something once. You never thought you'd learn to juggle, balance a spoon on your nose or attract a mate without a criminal record or stamp collection. But, you did your research, took your lumps and accomplished all of the above and more. Or, maybe you're close. Don't let investing in stocks intimidate you. There are more entrances into the stock market these days than you might think. And while not a breeze, picking stocks is not exactly the work of rocket scientists.

Open a brokerage account. While the minimum amount of money you need to start an account varies by firm, many brokerages use low minimums -- typically between $100 and $1,000 -- or reduce or waive minimums if you agree to automatically put money in your account on a regular basis. With a brokerage account, you simply chosen the logistical piece of what you need -- the middleman you'll deal with to buy stocks.

Go to your brokerage's research page. Practically every brokerage offers an abundance of research, ranging from basics on how to invest to current prices and market news to stock recommendations from analysts. By immersing yourself in this type of information, you'll pick up ideas and become more comfortable with the jargon and mechanics associated with stock trading. It's like anything else -- hard work and practice go a long way.

Make practice trades. You can jot down pretend stock purchases on paper or in a spreadsheet. You can also access one of the many websites that facilitate hypothetical stock trading. Don't rush into the market for real. Calm your nerves by seeing how things might go when you're playing with Monopoly money.

Diversify. While it makes sense to buy Ford stock if you've always owned a Thunderbird or Apple because you see everybody zoned out to their iPod, it doesn't make sense to only own Ford and Apple. In investment-speak, this is called putting all of your eggs in one basket. Instead, own stocks that cover several areas. This means you should a couple picks that does business in different parts of the world and different parts of the economy as well as companies of different sizes.

Start small. Don't invest your whole nest egg, entire savings or all of Grandma's birthday checks the first day your account is open. The stock market will be there tomorrow. And so will that winning trade. Just like you should spread your money across several stocks -- or other appropriate holdings -- you should practice prudence entering the market.

Invest regularly. Some brokerages make this process easy, particularly if you don't have a lot of money. Others charge commissions that make it necessary to invest at least $100 or $200 a pop. Regardless of how much you have to invest, try to put a little bit of cash in the market weekly, monthly or quarterly. As the Motley Fool points out, if you invest just $166 a month, you'll have $1 million within 39 years, assuming an annual 10 percent rate of return.


  • Choose an online brokerage and conduct your research and trades online. Not only is the information you need to make good choices online, the commissions you'll pay to trade are generally cheaper online. If you want access to a live broker or investment advice just in case, go with a large brokerage -- you know the big names like Charles Schwab and Fidelity -- that provides these services.
  • Some brokerages, such as ShareBuilder, cater to small or beginner investors. They allow you to purchase small amounts of stock at periodic intervals for relatively low fees. Just because you're a novice doesn't mean you have to go with one of these firms, but it's good to know they're out there.
  • Use stock screeners, such as the one available at Morningstar's website, to search for stocks that fit your criteria in terms of size, risk and performance.
  • If you aren't comfortable selecting individual stocks, you can own stocks indirectly through stock mutual funds. Owning a few mutual funds, particularly one fund that attempts to mimic the return of a key stock index such as the S&P; 500, another that invests in small companies and another that invests in international stocks, often makes it easier to put together a diversified portfolio.

About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.