How to Start Investing in Stocks for Beginners: From Opening an Account to Achieving Investment Success

Learn how to start investing in stocks with this comprehensive guide for beginners. Many people think of stocks as “gambling,” but with proper knowledge and systematic strategies, investing can become the most effective way to grow your wealth over the long term.

This guide explains step-by-step how to begin investing in stocks, covering everything from choosing a brokerage, opening an account, understanding trading methods, to investment analysis—all essential for beginners.

How to Start Investing in Stocks

Understanding the Nature of Stocks

Stocks are securities representing ownership in a company. Buying stocks means owning a part of that company. For example, holding one share of Samsung Electronics gives you approximately 0.0000018% of the company’s total equity (as of February 21, 2025).

As the company grows and profits increase, the stock price tends to rise. Investors profit from capital gains due to stock price increases and dividends paid by the company.

Why Consider Investing in Stocks?

Compared to real estate, bonds, or savings accounts, stocks offer much higher potential returns. The S&P 500 index has averaged about 10% annual return since 1957. By leveraging compound interest, your assets can grow exponentially over time.

Additionally, stocks are highly liquid—you can sell them anytime you need cash. This is a stark contrast to real estate, which can be difficult to sell quickly.

However, before learning how to start investing in stocks, keep in mind that stock prices can be highly volatile in the short term. For example, during the COVID-19 pandemic in March 2020, the S&P 500 dropped about 34% in just one month. Therefore, emotional stability and risk management skills are essential.

Guide to Opening an Account for Successful Investing

Choosing a Brokerage and Types of Accounts

The first step in learning how to start investing in stocks is selecting a brokerage firm and opening an investment account. Nowadays, you can open an account in just 5 minutes via smartphone apps.

Different account types have distinct features:

• Discretionary Account: The most basic trading account used for domestic and international stocks and various financial products.
• ISA (Individual Savings Account): A long-term investment account with tax benefits, suitable for wealth management.
• CMA (Cash Management Account): Pays interest on deposits and allows short-term cash management alongside stock trading.

Account Opening Procedure

If you already have a bank account with deposit and withdrawal records, you may need to wait about 20 business days to open a new account with another financial institution. This regulation aims to prevent financial crimes. However, brokerage firms partnered with banks like Kakao, K-Bank, or Toss Bank are exempt from this restriction.

Typical steps to open an account:

1. Choose a brokerage
Consider fees, mobile app usability, customer service, and overall reputation.

2. Install the app and verify identity
Download the brokerage’s dedicated app, scan your ID, and complete mobile identity verification.

3. Enter personal information
Accurately input details such as personal info, income sources, and investment experience.

4. Sign documents and agree to terms
Review and digitally sign the account application, trading agreements, and proof of financial transaction purpose.

5. Complete account opening
Once you receive the account opening notification, you can start trading.

Tips to Reduce Trading Fees

Phone trades via staff can incur high fees (~0.5%). Using online trading platforms like PC-based HTS (Home Trading System) or MTS (Mobile Trading System) can significantly lower costs.

Since most investors tend to stick with their initial brokerage, choosing a low-fee broker from the start is wise. Check fee comparison services provided by the Korea Financial Investment Association to compare brokerage fees beforehand.

Understanding Trading Methods and Analysis Techniques

Various Stock Trading Methods

When learning how to start investing, choosing a trading style is crucial. Broadly, there are direct and indirect investments.

Direct Investment: Buying and selling individual stocks of specific companies. Potentially high returns but also higher risks.

Indirect Investment: Investing through ETFs (Exchange-Traded Funds) or mutual funds, which diversify across many stocks, reducing risk.

Fractional Trading: Slightly higher fees but allows investing small amounts in high-priced stocks, popular among beginners.

Dollar-Cost Averaging: Investing a fixed amount regularly (e.g., monthly), which is effective for long-term wealth accumulation.

CFD (Contract for Difference): Allows high leverage and profit from price movements with small capital, but is very risky. For example, if you expect Nvidia’s stock to rise, you can buy a CFD contract to profit from the increase. Conversely, you can short-sell if you expect a decline.

Two Main Approaches to Stock Analysis

Making informed investment decisions requires thorough analysis.

Technical Analysis: Analyzing past price movements and trading volume to forecast future prices. Uses indicators like moving averages or MACD to time trades. Mainly used by short-term traders.

Fundamental Analysis: Evaluating a company’s financial statements, management performance, and industry trends to determine intrinsic value. Key metrics include PER (Price-to-Earnings Ratio), PBR (Price-to-Book Ratio), and ROE (Return on Equity).

Using both methods appropriately can lead to better investment choices.

Balancing Profitability and Stability: Developing an Investment Strategy

Short-term Trading vs Long-term Investing

A key decision in learning how to start investing is choosing your investment horizon.

Short-term Trading: Engaging in day trading or frequent buying and selling to seek quick profits. High potential returns but also high risks and transaction costs.

Long-term Investing: Holding quality stocks for over five years, leveraging compound growth. Warren Buffett’s value investing approach exemplifies this. Over time, returns can compound significantly, and many countries offer tax benefits for long-term holdings.

For beginners, starting with a long-term strategy is recommended. It’s less affected by short-term market volatility and psychologically easier to manage.

Reducing Risks and Increasing Returns

Importance of Diversification

The investment adage “Don’t put all your eggs in one basket” underscores diversification.

Holding stocks of multiple companies like Samsung Electronics, Hyundai Motor, and Naver can significantly reduce sector-specific risks. This is portfolio diversification.

Practical Risk Management Techniques

Stop Loss: Setting a price point at which your stock will automatically be sold to limit losses.

Periodic Portfolio Rebalancing: Regularly reviewing and adjusting your holdings to maintain target allocations, responding proactively to market changes.

Dollar-Cost Averaging: Investing fixed amounts over time rather than all at once, which lowers the average purchase price and mitigates timing risks.

Long-term Holding: Avoiding knee-jerk reactions to short-term market fluctuations by holding promising stocks for the long haul.

Tips for Beginner Investors to Succeed

Core Tips for Learning How to Start Investing

Start Small
Don’t invest large sums initially. Begin with modest amounts to gain experience and understand your investment style.

Avoid Market Hype
Be cautious of speculative trends like “theme stocks” or “double rise” phenomena. Rely on objective analysis and your own principles.

Continuous Learning and Monitoring
Spend about 30 minutes daily reading economic news, and weekly review earnings reports and key economic indicators of your interest stocks.

Keep an Investment Journal
Record reasons for each trade, entry and exit points, target prices, and outcomes. Analyze your patterns and improve your decision-making.

Three-Step Approach to Getting Started

Step 1: Choose a brokerage and open an account
Select a firm aligned with your investment style and needs.

Step 2: Deposit funds
Use various methods to quickly fund your account.

Step 3: Begin trading
After thorough analysis, identify opportunities and execute orders.

Conclusion

Learning how to start investing in stocks doesn’t happen overnight. For beginners, thorough analysis, systematic risk management, and a long-term perspective are key to success.

Treat investing like a marathon—be consistent, cautious, and keep learning. Continuously improve your portfolio, and over time, you will achieve your goal of long-term wealth growth.