How to Invest in Stocks [2025] Stock Investing 101  

Investing in the stock market is one of the most efficient ways to grow your wealth. The S&P 500 saw an impressive 24.23% return in 2023. Although exact returns vary from year to year, stocks can be a highly effective way to work toward your long-term financial goals. 

But when you’re just starting out, learning how to invest in stocks can be daunting. Luckily, there are many tools you can use to make the process easier. Here’s everything you need to know when investing in stocks for the first time. 

What Are Stocks?

A stock is a portion of ownership in a publicly traded company. When an investor purchases a stock, they own a very small piece of the company until they decide to sell that stock. 

Stocks are traded on the stock market, and anyone can invest. There are many different exchanges around the world, with the New York Stock Exchange being one of the largest. 

A stock’s share price goes up and down depending on trading supply and demand. If a stock is in high demand, with many investors wanting to buy it, its price will go up. If many investors start selling the stock, pushing demand down, the price will go down as well. 

Stocks are a popular financial tool used to build wealth and are considered by many to be the best way to invest money. The goal is to purchase stocks that will make you money by growing in value over time. 

How to Invest in Stocks 

If you’re wondering how to invest in stocks, there are many ways to get started. While you could take an entirely DIY approach, many people prefer to use stock investing tools or even work with a team of professional investors. Here’s a look at what to consider when building your stock portfolio. 

Determine Your Investment Method

The first decision you’ll need to make is what platform or service you want to use to invest in stocks. Investment technology has improved at a rapid pace over the last several years, so there are many accessible ways to get started with your investments. 

Many people’s first exposure to stock investing is through their 401(k) account. A 401(k) is a retirement account provided as a benefit by an employer. You’ll decide how much you want to contribute to the account each month, and in many cases, your employer will match those contributions. 

A 401(k) account is a very efficient way to get started with investing, and being able to invest in a 401(k) with pretax dollars means a tax break for you. But it does come with some limitations. For example, you typically can’t withdraw from the account without penalty until you’ve reached retirement age. Additionally, your investment options will be limited, as most employers limit your options to low-risk mutual funds or ETFs (more on those in a minute). 

If you’re interested in investing on your own, one of the easiest ways to get started is by using an app or a robo advisor. These tools will give you some guidance and may even automate aspects of your investment, but you’ll still have control and flexibility over the investments you make. 

One of the most popular investment apps is Robinhood, which makes it easy to invest even small amounts of money from your smartphone and build a portfolio manually. In our Robinhood review, we found that the app has many beginner-friendly features that help you learn how to invest in stocks, although it also works well for experienced investors. 

Apps like Acorns or Stash focus on automating the investing process by automatically taking small amounts from your bank account to invest in your portfolio. You can opt to curate a portfolio yourself or opt for personalized investment suggestions from these robo advisors, automated tools that provide personalized suggestions similar to what a professional would. Other popular robo advisors include Wealthfront and Public.

When you’re just getting started, you might prefer to let a professional handle your investment decisions. If this is the case for you, you might prefer to work with a professional financial advisor. This is someone who will get to know you, your financial goals, and your risk tolerance and will help you curate a personalized investing portfolio. They may also recommend alternative investments in addition to stocks. 

Decide What Types of Stocks to Invest In

Once you’ve chosen an investment platform, the next step is to decide what types of stocks you want to invest in. The most straightforward option is to invest in stocks individually. This is when you purchase a share of just one company at a time. Some platforms also allow you to invest in fractional shares of a single company, which can be a good option when stock prices are high and you’re on a limited budget. 

Another option with slightly less risk is investing in an exchange-traded fund (ETF) or mutual fund. A mutual fund is a company that invests in many different types of assets, such as stocks, bonds, commodities, and more. Investors then buy shares of the mutual fund. 

An ETF is a collection of stocks that is traded on an exchange. The stocks in an ETF typically have one underlying factor in common. For example, they might focus on companies from a specific industry or companies that meet sustainability standards. Other ETFs are geared toward diversification and hold stocks in many industries.

By investing in a mutual fund or an ETF, you expose your portfolio to many different types of stocks and other investments at once. This also reduces your risk level. If one company’s stock drops significantly, it won’t necessarily cause a huge change to the mutual fund or ETF’s share value. 

Decide How Much to Invest in Stocks 

When you’re learning how to invest in stocks, you might wonder exactly how much of your earnings to put toward your portfolio. The answer will ultimately depend on your financial goals and your investment strategy. 

If you’re learning investing for beginners and are just building a portfolio for fun, it may be best to start small. This will give you the chance to experiment with different strategies and learn how the market works without taking on a major financial risk. Then, once you’ve found an investment strategy that works for you, you can ramp up your portfolio contributions and invest more. 

If you’re investing to save for retirement or hit other big financial goals, you may need to invest more. A common rule of thumb is to invest 10% to 20%of your income while saving for retirement. However, it’s important to make sure those investments are diversified, rather than focusing on single stocks or ETFs. This helps reduce the risk associated with stock investing. 

It’s also a great idea to set a budget, if you haven’t already, to be sure how much you can afford to invest. Check out our Rocket Money review to learn how a budgeting app could make it easy to set a budget and track your progress toward your goals. 

Commonly Asked Questions About How to Invest in Stocks

Best Way to Invest in Stocks for Beginners? 

If you’re learning how to invest in stocks, there are many ways to get started. These include: 

• Practicing with paper trading: also known as simulated trading, this lets you learn investing basics without risking your real money. 
• Investing on your own: If you want to DIY your portfolio, you can open an account directly with a broker. Robinhood is a popular option due to its intuitive, accessible app. 
• Using a robo advisor: Robo advisors are digital tools that provide investing guidance and support. Many robo advisors use automation and AI features to handle certain aspects of your portfolio for you. 
• Working with a professional financial advisor: If you want a hands-off approach, you can hire a financial advisor to handle your portfolio for you. 

How Should a Beginner Start Investing in Stocks?

Investing in stocks comes with some financial risk, so it’s important to start slow. Many beginners prefer to work with a financial professional or use a robo advisor. With these options, you can start investing right away without having to curate a portfolio on your own. 

If you want to learn how to invest in stocks on your own, look for paper trading platforms and other digital tools that allow you to master key investing concepts without risking any money. 

When you do start investing, take the time to research the stocks you’re investing in. Ideally, you should look for stocks with relative stability and the potential for growth, although everyone has their own unique risk tolerance. An increasing number of investors are also prioritizing investing in companies demonstrating values that align with their own. 

Investing in Stocks With Little Money? 

Even if you have a limited budget, you can enjoy the benefits of investing in stocks. The best way to do this is to look for a broker or robo advisor that allows you to invest in fractional shares. This way, you can invest in part of a share regardless of its price. 

Should I Invest in Popular Reddit Stocks? 

Every so often, a specific stock will start trending on Reddit and other social media platforms. This is called a meme stock. While these stocks may seem promising, it’s typically not a good idea to go all-in on them. Meme stocks tend to crash hard when their initial popularity wanes, which could result in serious losses.