Home > Investing > How to Invest in Stocks: A Guide to Getting Started

Comments 0 Comments
Advertiser Disclosure

Disclaimer

In 2020, around 55% of American adults invest in the stock market. That’s down from a peak of 65% in 2007 but around the average over the past 10 years. Do you want to get a piece of the action? Before you jump all in, make sure you know the basics of how to invest in stocks. 

A quick note before we dive in: we’re not investment experts or advisors. So if you’re seriously considering investing, you should work with professional brokers, financial advisors or other knowledgeable experts when you invest. That’s especially true if you plan on investing a lot. 

1. Decide on a Budget for Investing

Start by deciding how much you want to use to invest in stocks. Here’s a good starting place—make the potential stocks you’d invest in a percentage of your portfolio. A rule of thumb that many advisors go by is to take 110 or 120 and subtract your age. That’s how much of your investment portfolio you should keep in stocks.

For example, if you’re 30, then you’d keep between 80 and 90% of your portfolio in stocks. If that feels a little aggressive for your financial goals, start with 100 and subtract your age from that.

You also need to decide how much you can invest overall. That depends on your own income, what financial obligations you have and your overall budget. While investing is important, you shouldn’t invest money at the sake of paying your bills, for example.

2. Open an Account for Making Your Investments.

Stocks aren’t like retail goods. You can’t just buy them here and there when you see one you like on display on an ecommerce site. You typically need an account to purchase your stocks through. Some options you can choose include:

  • Opening a brokerage account. This lets you buy and sell stocks through a professional service. You can opt for a brokerage where you do your own research and push the buttons on buying and selling, or you can choose a managed option where someone provides advice or handles these things on your behalf.
  • Using a robo-advisor. This is an app or software program that lets you set goals for your investments and uses machine learning, AI and algorithms to handle your investments. One popular robo-advisor is Acorns, which is an app that lets you round up your purchases with connected debit cards and put the change into investments. While you’re making many micro investments, the total can add up over time.

3. Get Help Creating an Investment Plan

An investment plan is a comprehensive approach to wealth building. Stocks may play an important part in that, but you typically want to ensure you’re well diversified. A diversified portfolio just means you have various types of investments. This way if one isn’t performing well, the others might offer some protection.

One option for getting investment advice is by signing up for an Ellevest account. You pay a monthly membership for this robo investment app, but you gain access to investment and other financial coaching and educational materials.

4. Learn More About Stocks

You don’t have to be a stock expert or financial advisor to have success investing in stocks. But you do have to know a bit about what you’re investing in, especially if you’re going to make very specific stock choices.

You might be familiar with the concept of buying and selling stocks as seen in television and movies. While you canbuy and sell specific stocks because you want to invest in a specific company, you don’t have to invest like that. You can also invest in groups of stocks via stock mutual funds. When you invest in a stock mutual fund, you’re actually buying many different stocks or pieces of stocks. That spreads your risk out over a wider range of assets.

ExtraCredit, Reward Smart Financial Decisions. Learn More

You should also understand the trends associated with the stock market, at least in general. For example, stocks do tend to rise over time barring big economic downturns. On any particular day, the chance that stocks will rise is around 53%. The chance that they will fall is around 47%. But if you look at the long-term, such as a 12-month period, stocks typically have a chance of rising of 75%. 

5. Use Other Tools to Make Investing Easy as You Get Started

Start by getting your immediate financial house in order. Understand what your budget is, and check your credit to ensure there are no surprises looming. You can sign up for ExtraCredit to get a comprehensive understanding of where your credit score is. Once you know where you stand, you can start creating an investment plan with confidence. You can even rely on ExtraCredit’s Reward It feature for cashback offers when signing up for Credit.com partners that provide investment apps and other financial services.

Start Investing in Stocks Today 

So, should you invest? Honestly, that’s up to you. Take a good look at your finances and, if you need guidance, try working with a professional. If you do decide to start investing, start easy and slow. There’s no need to jump all in right at once. Hopefully, if investing works out, you’ll reap some serious rewards. 

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team