Practical Investment Guide for Stock Beginners

Many people are looking for a beginner’s guide to stocks. Stock investing is an attractive way to grow wealth but is often misunderstood as mere “gambling.” However, with proper knowledge and strategies, it can be a powerful method to significantly increase your assets. This guide systematically explains everything from choosing a brokerage to opening an account and analysis techniques to help beginners take their first steps.

You need to understand exactly what stocks are before you start

When you buy stocks, you own a partial share of a company. Stocks are securities representing ownership in a company, and you can earn returns in two ways: dividends and capital gains.

Specifically, owning one share of Samsung Electronics is like owning a tiny fraction of the entire company (as of early 2025). It’s similar to holding a small piece of a giant corporation. As the company grows and profits increase, the stock price also rises, allowing investors to profit from trading gains.

You must first understand your investment personality

Stock investing isn’t suitable for everyone. Before starting, you need to clearly understand your financial situation, risk tolerance, and investment goals.

Let’s look at the positive aspects of stock investing first. Historical data shows that the S&P 500 index has averaged about 10% annual return since 1957, providing returns that outpace inflation over the long term. Additionally, stocks are highly liquid, meaning you can cash out anytime when needed. Unlike real estate, it doesn’t take a long time. Investing in quality stocks long-term benefits from compound growth, steadily increasing your capital.

But there are also risks. 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. You must be psychologically prepared for such rapid fluctuations, and continuous learning and market analysis are essential.

Choosing your investment method is the first step

The core of this beginner’s guide is finding an investment approach that suits you. There are mainly two ways to trade stocks:

Individual stock investing involves directly buying and selling shares of specific companies. It offers high potential returns but also carries significant risk. ETFs (Exchange-Traded Funds) and mutual funds are diversified products that invest across multiple stocks, effectively reducing risk.

Recently popular methods include fractional trading and dollar-cost averaging. Fractional trading allows investing small amounts in expensive stocks despite higher fees, while dollar-cost averaging involves automatically investing a fixed amount each month to grow assets over time.

There are also leveraged products like CFDs (Contracts for Difference). These can generate large returns with small capital but come with high risk of losses, so understanding the product thoroughly before investing is crucial. For example, if you expect NVIDIA’s stock to rise, you can buy a CFD contract to profit from the increase; if you expect a decline, you can take a short position to profit from falling prices.

Mitrade is a CFD trading platform suitable for cryptocurrency beginners as well. It offers a user-friendly interface and abundant liquidity. Approved and regulated by the Australian Securities and Investments Commission (ASIC), it provides a safe trading environment.

From choosing a brokerage to opening an account in 5 steps

Opening a stock account is similar to opening a bank account but is done through a brokerage firm. Nowadays, it can be completed in just a few minutes via a smartphone app.

Step 1: Choose a brokerage Consider fees, services, and mobile app convenience. Using comparison services provided by the Korea Financial Investment Association can help. Generally, trading via PC’s HTS (Trading System) or mobile’s MTS (Mobile Trading System) offers the lowest fees. Orders through staff are usually about 0.5%, which is more expensive.

Step 2: Install the app and verify identity Download the brokerage’s dedicated app, scan your ID, and verify your identity via your mobile phone.

Step 3: Enter personal information Accurately input required personal details and income sources.

Step 4: Agree to terms and sign digitally Consent to account opening, submit proof of trading purpose, agree to online trading terms, and complete digital signing.

Step 5: Complete the process Once done, you will receive a notification that your account is ready.

Account types include general custody accounts (for domestic and international stocks and financial products), ISA accounts (for tax-advantaged long-term investments), and CMA accounts (for deposit interest and short-term funds management).

A key tip: If you have recently opened a deposit or withdrawal account, you must wait 20 business days before opening accounts with other financial institutions. This is a regulation to prevent financial crimes. However, brokerage accounts linked with banks like Kakao, K-Bank, or Toss Bank are exempt from this restriction.

Understanding two essential analysis methods that determine your returns

Before making trading decisions, thorough analysis is essential.

Technical analysis predicts future stock prices based on past price movements and trading volume patterns. Indicators like Moving Averages or MACD help determine entry and exit points. It focuses on chart analysis and pattern recognition.

Fundamental analysis evaluates a company’s intrinsic value by analyzing financial statements, management performance, and industry trends. Metrics like PER (Price-to-Earnings Ratio), PBR (Price-to-Book Ratio), and ROE (Return on Equity) are used. This approach emphasizes assessing the real value of a company.

Beginners should understand both methods but choose the one that fits their investment style, gradually deepening their knowledge over time.

Long-term investing vs. short-term speculation: choosing your strategy

Your investment horizon influences your strategy.

Short-term speculation involves buying and selling stocks over brief periods to seek quick profits. Day trading is a typical example. It offers high returns but also high risk. Short-term traders often use technical analysis, real-time news monitoring, and momentum trading. However, frequent trading incurs higher transaction costs.

Long-term investing involves holding stocks for over five years. Value investing, popularized by Warren Buffett, exemplifies this approach. It leverages compound growth, with profits increasing significantly over time. Many countries also offer tax benefits for long-term investments.

Risk management strategies to minimize losses

Diversification and risk control are key to success.

The core of diversification is “not putting all eggs in one basket.” Holding stocks of various companies like Samsung Electronics, Hyundai, and Naver reduces the risk of sector or stock-specific declines.

Effective risk management techniques include:

• Stop-loss orders: automatically sell when prices fall below a set level to limit losses.
• Periodic portfolio rebalancing: review and adjust your holdings regularly to maintain target allocations.
• Dollar-cost averaging: invest fixed amounts over time rather than all at once.
• Long-term holding: keep promising stocks over extended periods to reduce impact from short-term volatility.

8 practical tips for successful stock beginners

1. Start small
Begin with a modest amount to gain experience.

2. Beware of market hype
Avoid blindly following themes or “double-up” stocks driven by hype. Base decisions on objective analysis.

3. Continuous learning and monitoring
Spend 30 minutes daily on economic news and review quarterly earnings and key economic indicators of your interest stocks.

4. Keep an investment journal
Record reasons for each trade and its outcome to analyze and improve your strategy.

5. Manage your psychology
Success depends more on emotional control than on technical skills. Avoid impulsive decisions and stick to your plan.

6. Gather diverse information
Collect data from multiple trusted sources for comprehensive judgment.

7. Be prepared for losses
Accept that losses are part of investing and focus on minimizing them.

8. Avoid common beginner mistakes
Don’t get overconfident after a single win or blindly follow others’ advice. Prioritize your own analysis and judgment.

A beginner’s guide: start with a marathon mindset

Stock investing is a marathon, not a sprint. For beginners, thorough analysis and risk management are the foundation of success, along with choosing strategies aligned with your personality.

Start small, keep learning, and gradually build your skills. Stay calm amid market volatility and aim for long-term wealth growth. Keep these principles in mind, and embark on your investment journey with patience and prudence.