Stocks for Beginners: 4 Easy Steps to Get You Started

Investing in stocks for the first time is a daunting task. It can be scary because real money is at risk of loss. However, equities are the path to building wealth because they represent ownership of a company and a claim on future profits and earnings. An investor buys stock now, hoping that it is worth more later.

Some investors buy stocks to create a growing passive income stream, or a dividend growth strategy. The idea is simple and works, and many real-life stories exist of people building wealth from equities. The question then is how to buy stocks for beginners? What steps are essential to know? What follows is a step-by-step guide that answers those questions and put you on a path to build wealth.

Basics of Stocks

A beginner must first understand the basics of stocks. A stock is also known as a share and represents the percentage ownership of a company. For example, if you own ten shares of a company with 100,000,000 total shares, you own 0.00001% of the company.

Risks for Stocks

Stocks are not risk-free. Most people are familiar with low-risk savings accounts and Certificates of Deposit (CDs) that are, in many cases, insured by the Federal Deposit Insurance Corporation (FDIC). On the other hand, stocks have more risk and investors can lose money because stock prices may decline during a correction or a bear market. For example, in 2022 the broader stock market was down more than (-10%). This decline is considered a market correction.

Steps on How to Buy Stocks for Beginners

Pick a Brokerage Firm Start buying stocks by picking a brokerage firm. In the past, an investor had to deal with a broker who placed a buy or sell order. Today, orders are placed directly by the investor online. Therefore, a person should start the process by selecting an online broker and creating an account.

Open an Account Online

Opening an online account is simple and easy. First, a person must complete the application, provide the necessary identity information, and wait for approval. Lastly, an investor needs to add money to the account by directly linking a bank account and transferring funds or mailing a check.

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