How to Start Investing in Stocks: A Beginner's Guide to Getting Started

Stock Investment: Can it truly be a means of asset growth? Many people see it as a ‘gamble,’ but with the right knowledge and strategies, how to start investing in stocks is more systematic than you might think. In this article, we will explain step-by-step from choosing a securities firm, analyzing stocks, to specific investment strategies for those new to stocks.

The Meaning of Owning Stocks

Stocks are not just a price chart moving up and down numbers. Buying stocks is like owning a part of a specific company. For example, holding 1 share of Samsung Electronics means owning about 0.0000018% of the entire company( as of February 21, 2025).

When a company grows and makes profits, investors benefit in two ways. First is capital gains—profits from rising stock prices. Second is dividends—profits shared with shareholders. Most importantly, stocks boast high liquidity. Unlike real estate, you don’t need to wait months; you can cash out anytime you need.

Stock Investing Is Not for Everyone

Holding stocks of high-quality companies long-term? The history of the S&P 500 proves it. Since 1957, it has recorded an average annual return of about 10%. That’s enough to outpace inflation.

However, stocks are not suitable for all investors. You must honestly assess your investment style, financial situation, and psychological capacity to handle losses. Because stock prices can fluctuate sharply unexpectedly. During the COVID-19 pandemic in March 2020, the S&P 500 plummeted nearly 34% in just one month. You need emotional readiness to withstand such volatility.

Understanding Different Trading Methods

How to start investing in stocks begins with choosing a trading type.

Direct trading of individual stocks: Buying and selling shares of specific companies directly. Potentially high returns but also high risk. For example, investing in Samsung Electronics, Hyundai Motor, Naver, etc.

ETFs and Funds: Investment products that pool stocks of multiple companies. Diversification reduces risk.

Fractional trading: Investing in expensive stocks in small units. Very useful for beginners.

Dollar-cost averaging: Automatically investing a fixed amount every month. Effective for long-term asset growth and psychologically less burdensome.

Leverage products(CFD-like products): Can aim for high returns with small capital, but losses can also be large, so approach carefully after thorough understanding.

Choosing a Securities Firm and Opening an Account

Criteria for selecting a securities firm

Review fees, service quality, and usability of mobile apps comprehensively. Since the first account opened tends to be maintained long-term, choosing carefully from the start is important. Using the fee comparison service provided by the Korea Financial Investment Association allows you to compare fees across multiple firms at a glance.

Realities of fees

Orders through staff cost about 0.5%, which is relatively expensive. However, nowadays, online HTS(Home Trading System) or mobile MTS(Mobile Trading System) are the mainstream.

Account opening procedure

Step 1: Download the securities firm’s dedicated app for account opening.

Step 2: Scan your ID(Resident Registration Card, Driver’s License, Passport) and verify your identity via your phone.

Step 3: Enter personal information and source of income accurately.

Step 4: Agree to the account application, proof of financial transaction purpose, terms, and sign digitally.

Step 5: After completing all steps, receive an account opening notification.

Choosing account type

• General Custodial Account: For trading domestic and international stocks and various financial products
• ISA: Tax-advantaged account for mid- to long-term investments, with possible income deductions
• CMA: For deposit interest payments and short-term fund management

Note: If you have recently opened a deposit/withdrawal account, you can open another account at a different financial institution after 20 business days. However, securities firms partnered with Kakao Bank, Toss Bank, etc., are exempt from this restriction.

Two Analysis Methods for Investment Decisions

Technical Analysis vs Fundamental Analysis

Thorough analysis is essential before making investment decisions.

Technical analysis involves analyzing past price movements and trading volume through charts to predict future stock prices. It uses indicators like moving averages, MACD to determine buy/sell points. It’s popular among short-term traders.

Fundamental analysis involves in-depth analysis of a company’s financial statements, management performance, and industry trends to evaluate the true value of stocks. Metrics like PER(Price-to-Earnings Ratio), PBR(Price-to-Book Ratio), ROE(Return on Equity) help assess a company’s economic value. This is the core approach of value investors like Warren Buffett.

Strategy Selection Based on Investment Duration

The appeal and risks of short-term trading

Day trading, known as short-term trading, aims to buy and sell stocks within days or hours for quick profits. It employs tactics like real-time news monitoring, technical analysis, momentum trading. While profit potential is high, risks are significant, and trading fees can accumulate rapidly.

The power of long-term investing

Investing in quality companies over five years or more. The magic of compound interest works here. Over time, investment returns grow exponentially. Many countries also offer tax benefits for long-term investments.

Risk Management Strategies to Minimize Losses

Principle of diversification

There’s a saying in investing: “Don’t put all your eggs in one basket.” Investing in multiple companies like Samsung Electronics, Hyundai Motor, Naver, and across sectors can significantly reduce shocks from declines in specific stocks or industries.

Specific risk management techniques

• Stop-loss: Automatically sell when stock price falls below a certain level to limit losses.
• Periodic portfolio rebalancing: Regularly review holdings and adjust to target ratios.
• Dollar-cost averaging: Invest gradually over months instead of all at once. For example, investing 20 million won over 5 months by putting in 4 million won each month.
• Long-term holding: Avoid being swayed by short-term market volatility and hold trustworthy stocks for the long haul.

Practical Tips for Beginners

Start with small amounts

No need to invest large sums initially. Starting with small amounts to learn and gain experience is wise.

Avoid being swept up in the ‘theme stock’ craze

Stocks everyone follows or the so-called ‘Dda-sangju’ (hitting the limit-up stocks) promoted by media are risky. Make investment decisions based on objective analysis and reasoning.

Consistent learning and monitoring

Spend 30 minutes daily reading economic news, and weekly check the earnings reports of your interest stocks and key economic indicators.

The value of keeping an investment journal

Record your investment rationale and results for each trade. It helps objectively analyze your investment patterns and identify areas for improvement.

Conclusion: Patience is Essential

If you’ve learned how to start investing in stocks, now it’s time to execute. Stock investing is not a sprint but a marathon. Thorough analysis, disciplined risk management, and emotional control are key to success. For beginners, proceed cautiously and steadily. As you take step by step toward long-term asset growth, you will gradually become a wise investor.