Investing in stocks: The basics

Investing in stocks means buying shares of ownership in a public company. Those small shares are known as the company’s stock, and by investing in that stock, you’re hoping the company grows and performs well over time. When that happens, your shares may become more valuable, and other investors may be willing to buy them from you for more than you paid for them. That means you could earn a profit if you decide to sell them.

Investing in the stock market is a long game. A good rule of thumb is to have a diversified investment portfolio and stay invested, even when the market has ups and downs. One of the best ways for beginners to get started investing in the stock market is to put money in an online investment account, which can then be used to invest in shares of stock or stock mutual funds.

With many brokerage accounts, you can start investing for the price of a single share. Some brokers also offer paper trading, which lets you learn how to buy and sell with stock market simulators before you invest any real money.

» Don’t have a brokerage account? Learn what it is and how to open one.

How to invest in stocks in six steps

1. Decide how you want to invest in the stock market

There are several ways to approach stock investing. Choose the option below that best represents how you want to invest, and how hands-on you’d like to be in picking and choosing the stocks you invest in.

A. “I’d like to choose stocks and stock funds on my own.” Keep reading; this article breaks down things hands-on investors need to know, including how to choose the right account for your needs and how to compare stock investments.

» See our roundup of the best online brokers

B. “I’d like an expert to manage the process for me.” You may be a good candidate for a robo-advisor, a service that offers low-cost investment management. Virtually all of the major brokerage firms and many independent advisors offer these services, which invest your money for you based on your specific goals.

» View our picks for the best robo-advisors

C. “I’d like to start investing in my employer’s 401(k).” This is one of the most common ways for beginners to start investing. In many ways, it teaches new investors some of the most proven investing methods: making small contributions on a regular basis, focusing on the long-term and taking a hands-off approach. Most 401(k)s offer a limited selection of stock mutual funds, but not access to individual stocks.