Stock mutual funds or exchange-traded funds. These mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and ETFs are a kind of mutual fund that track an index; for example, a Standard & Poor’s 500 fund replicates that index by buying the stock of the companies in it. When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.
There are risks associated with investing in a public offering, including unproven management, and established companies that may have substantial debt. As such, they may not be appropriate for every investor. Customers should read the offering prospectus carefully, and make their own determination of whether an investment in the offering is consistent with their investment objectives, financial situation, and risk tolerance.
That said, learning the logistics of how to buy stocks and earmarking a small sliver of your investable assets to buying individual stocks online can be fun and profitable. And at worst? As long as you don’t put money you can’t afford to lose on the line, stock trading will be a temporary diversion that leads to limited losses, lessons learned and a few self-deprecating stories to entertain dinner guests.
That’s because there are plenty of tools available to help you. One of the best is stock mutual funds, which are an easy and low-cost way for beginners to invest in the stock market. These funds are available within your 401(k), IRA or any taxable brokerage account. An S&P 500 fund, which effectively buys you small pieces of ownership in 500 of the largest U.S. companies, is a good place to start.
The capital gains tax rate favors long-term investments. An investor who buys and sells their stocks within a few months will face a higher capital gains tax rate (25%) on their profits than an investor who buys and holds their stocks for a full year (15%). The larger your investment, the bigger the difference. Granted, there’s a risk to holding an investment for longer, but if you’re close to that one-year cutoff, it might be worth it to sit tight for a few more weeks.
The most recent annual report – While reading the annual report, you'll want to pay special attention to the letter from the Chairman, CEO, and sometimes CFO or other high-ranking officers to see how they view the business. Not all annual reports are created equally. Generally, the best in the business is considered to be the one written by Warren Buffett at Berkshire Hathaway, which you can download from free on the holding company's corporate site.
A mentor could be a family member, a friend, a past or current professor, co-worker, or any individual that has a fundamental understanding of the stock market. A good mentor is willing to answer questions, provide help, recommend useful resources, and keep spirits up when the market gets tough. All successful investors of the past and present have had mentors during their early days.
History has shown that investing in stocks is one of the easiest and most profitable ways to build wealth over the long-term. With a handful of notable exceptions, almost every member of the Forbes 400 list of the wealthiest people got there because they own a large block of shares in a public or private corporation. Although your beginning may be humble, this guide to investing in stocks will explain what stocks are, how you can make money from them, and much more.
Find a good online stock broker and open an account. Become familiarized with the layout and to take advantage of the free trading tools and research offered to clients only. Some brokers offer virtual trading which is beneficial because you can trade with play money (see #9 below). A great tool for comparing online brokers can be found at StockBrokers.com.
Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web. Here on the site we have a full list of 20 great stock trading books for investors to consider. My personal all-time favorite is How to Make Money in Stocks by William O’Neil, founder of CANSLIM Trading which is pictured below.
History has shown that investing in stocks is one of the easiest and most profitable ways to build wealth over the long-term. With a handful of notable exceptions, almost every member of the Forbes 400 list of the wealthiest people got there because they own a large block of shares in a public or private corporation. Although your beginning may be humble, this guide to investing in stocks will explain what stocks are, how you can make money from them, and much more.
Passive investing is what long-term investors do — and the intent behind their actions is very different. Their approach to buying and selling stocks is considered passive in that they tend not to transact often. Instead of relying mostly on technical analysis (as active traders do) and trying to time the market, passive investors use fundamental analysis to carefully examine the strength of the businesses behind the ticker symbols and then buy shares with the hope that they’ll be rewarded over years — decades, even — through share price appreciation and dividends.

Overall commission costs can also be affected by new customer promotions. Brokers may give you a chunk of free trades based on your deposit amount. If your deposit gets you a substantial number of free trades, that can write off otherwise higher per-commission costs. Ally Invest offers small incentives for deposits as low as $500. Fidelity Investments, meanwhile, has a higher barrier for entry — it takes a $50,000 deposit, but then you'll get 300 free trades.
“I know stocks can be a great investment, but I’d like someone 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 offer these services, which invest your money for you based on your specific goals. See our top picks for robo-advisors.
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