Updated: Jan 03, 2024

How & Where to Buy Your First Investment Stock

Deciding to invest money in the stock market can be a scary proposition. So what do you need to know about buying your first stock?
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Deciding to invest money in the stock market can be a scary proposition. After all, it can feel like you must learn an entirely new language to understand what is happening. And then there is the question of risk.

Anyone who watches the news even occasionally knows that the stock market is usually very volatile, with prices of stocks rising and falling suddenly and unpredictably.

Investing makes it possible to earn money through an alternative means to working or owning a business.

When you commit money to an investment, you expect to earn a profit. While most people understand the reasons for investing and the benefits of successful investing, it can be difficult to figure out how to get started.

But with a little knowledge to demystify the process, responsible investing in stocks can be an interesting, fun, and lucrative way to make money. This guide will teach us the basics of investing in your first stock.

What is Investing?

Investing refers to using your money to buy some asset in the hope and expectation that the product will grow in value after you buy it.

If the product does increase in value, you can sell it for a profit. 

The time frame to hold an investment and realize the value increase can vary greatly. Some investments can yield gains in seconds, while others can take years.

This can be especially true for stocks as they are highly volatile, and you may never know when they'll bring in a profit (if ever).

Types of Investments

There are several different types of investments. As a beginner, you will want to understand the options, their tax implications, and the risk level of each type of investment.


Investing in stocks is the equivalent of buying a small percentage of ownership in a business.

You can vote during shareholders’ meetings, and you will receive profits the company allocates to company owners, which are called dividends. Stocks are considered high-risk investments, and their values fluctuate daily.

The stock must increase in value to earn a profit on a stock investment.

While you risk losing your investment in stocks, there is also a potential for a relatively high return if the stock you purchase does well. 

The goal for investors in the stock market is to select stocks that are likely to rise in value over time.


Bonds are fixed-income securities that allow you to earn interest on your money and the original amount of money you lent.

When you purchase a bond, you lend the money to the government or companies for interest.

Bonds are a very low-risk investment opportunity as they are almost guaranteed risk-free -- meaning you will get back the amount you invest. In exchange for offering a risk-free investment opportunity, bonds offer very little return on your money.

Mutual funds

Mutual funds are collections of stocks and bonds purchased by investors.

When you buy mutual funds, you give a professional mutual fund manager the ability to select the specific mix of bonds and stocks purchased within the fund.

You can invest without spending time and effort researching all available investments since the manager will have more knowledge of the market and potential for the fund to earn a return than you would have.

The prices for mutual funds are determined at the end of the trading day. So, if you put in a buy order in the middle of a trading day, the trade will happen at the price close of the stock market.

Index funds

An index fund is a single investment that allows you to buy partial ownership in several companies traded on the stock exchange.

It is a mutual fund that tracks a certain stock market index, such as the S&P 500.

It ensures you have a diversified investment portfolio to limit your risks and gives people with a small amount of money to get started with investing.

Exchange-traded funds (ETFs)

ETFs can be considered a basket of stocks that trade similarly to stocks. It is a mutual fund that experiences price fluctuations by the second.

Therefore, you can trade ETFs at any time during the trading day. This allows you to take advantage of drastic price changes throughout the trading day.

Alternative investments

The majority of investments fall under either stocks or bonds (or a combination, like mutual funds); but there are other opportunities for investments including FOREX, real estate and gold,  among others.

As a beginning investor, these alternative investments are probably not the best place to get started.

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7 Investing Terms You Should Know

When investing your cash, it is important to have a thorough understanding and a clear expectation of how the investment world works.

For those just starting, there can be tremendous confusion regarding the dialog with investing.

Here are seven investing terms every beginner investor should know:

1. Portfolio

The assortment of investments a person or business owns.

2. Broker

A third party who serves as a middleman between those selling stocks and those buying stocks. A broker earns a commission amount on each transaction that is made between buyer and seller.

3. Ask

When a seller is selling a security, the ask price is the lowest price the seller will be willing to agree on for the sale.

4. Bid

When a buyer is purchasing a security, the bid price is the highest price the buyer will agree to pay for the sale.

5. Bear market

A bear market is when stock prices drop for a considerable amount of time in the stock market. The opposite of this type of market is known as a bull market.

6. Blue-chip company

An international or national company whose stock maintains a solid history of consistent growth.

7. Dividend

The amount of money paid out to shareholders by companies for their stocks, typically using cash payments.

Where to Buy Stocks

As recently as twenty years ago, most people had to contact a professional stockbroker to buy or sell stock. Today, thanks to the Internet, anyone with a computer can buy or sell stocks from home.

You can buy stocks through a brokerage - many of them.

Many websites will, for a fee, place orders for shares of stock, sell shares of stock you own, and track the value of your entire portfolio. Each website has its rules and regulations, so be familiar with them before you start.

The more knowledgeable you are, the more comfortable you will hopefully be with the entire process.

And finally, know how much you can afford to spend (and lose) in the stock market and stick to that amount.

To make your first investment, consider an Index Fund or purchase a bond directly from the U.S. Treasury.

Index Fund Companies and Roboinvesting Costs

Company General cost
Vanguard $20 annually for each account if your total Vanguard assets are under $10,000
Fidelity Investments No annual fees
TD Ameritrade No annual fees
TIAA $25 annually for accounts with less than $25,000 in cash-sweep accounts
Charles Schwab No annual fees
Etrade No annual fees
Empower 0.89% annually on the first $1 million (billed monthly) and decreases with larger assets (down to 0.49% at $10 million)
FutureAdvisor 0.5% annually
Betterment 0.25% to 0.40% annually
Wealthfront 0.25% annually

How to Pick Which Stocks to Buy

In investing, figuring out which stocks to buy is a million-dollar question.

The reality is:

Trying to predict which stocks will rise in value is extremely difficult, even for professional stockbrokers and money managers.

Factors that affect value include a company’s earnings, growth and losses, the economy, the political climate, and even the weather.

You can research companies that interest you to see what the experts say about their outlook.

If there is a particular industry that you think has growth potential, look for newer companies, and you might get a bargain.


If a company is already doing well, the price of a share of its stock is likely to be high.

After finding an industry you’re interested in, determine if it is publicly or privately traded.

There are several things to consider when researching a stock:

Last trade

The close is the price the shares sold for when the markets last closed. Open is for what they started at the beginning of trading.

Sometimes, the prices may vary as they may change even after trading hours. The markets will adjust the price when it opens again.

Bid/Ask: the prices that dealers and market shakers pay and sell the shares for

The bid or offer price is what the dealer pays when a shareholder sells their shares, and the ask is the price they wish to sell their shares on the open market.

Yearly Target Estimate: the average estimated worth of the shares in one year

Daily Range highlights the lowest and highest prices for which shares are traded on a particular trading day.

Market Capitalization: look at what others would pay if the company were for sale

The number is figured by taking the quoted price per share and multiplying it by the number of shares.

If there are 3 million shares and the quoted price is $40 per share, the market capitalization is $120 million.

Compare companies with similar caps and see who is making a larger profit.

Earnings Growth

Look at the stock carefully and its earnings and determine whether or not this is something that you will still have faith in years down the line.

Look at certain factors — such as if the growth is steady and how much the company has grown and been sustainable.

Growth Oriented Industries

It’s reasonable to assume that the two industries that will do well in the future will be the healthcare and pharmaceutical sectors.

International Investing

If you’re thinking about taking your investments overseas, investigate the region’s internal stability, as events such as a coup can cripple a country’s economy.

P/E Ratio

This can give you an idea of what the value might be. You can compare the ratios of different stocks, which reflect the stock price relative to its earnings.


A reputable company with a healthy financial history can afford to pay out dividends with increasing payouts over time.

Look out for companies that offer high dividend yields that haven’t been around for long. This may not bring a long-term stock investment.

Study the company’s financial statements and prospectus to help you make a better decision.

How to Know When to Sell Your Stock

Stocks are generally meant to be long-term investments. Some experts even recommend holding a stock for at least 15 years to make money from it.

This amount of time may seem extensive, but history has shown that the overall value of the stock market will rise over time, even if it suffers periodic drops in value.

You may have heard of the Dow Jones Average, the NASDAQ index or the S&P 500. These are indexes of specifically selected stocks whose performances are carefully watched by financial experts as an indication of the health of the stock market in general.

When these indexes rise and stay high, we say we are in a “bull market.” When the numbers drop for a long period of time, it is called a “bear market.”

The goal is to buy stock when the price is low and sell it when the price is high so you earn a profit.

Are There Risks Associated with Investing?

Almost all investments carry some risk that the product or item will lose value instead of gain over time. Some investments, such as bonds, are very low risk because they have set terms governing their payout.

Buying individual stocks is riskier because their value depends on the stock market's volatility, which is very difficult to predict.

Mutual funds are somewhere in between, depending on the fund and the type of stocks.

Generally, riskier investments have a greater potential for growth or loss. Low-risk investments do not earn the investor as much money, but the money they earn is predictable and secure.

If you want your money to grow substantially, you should invest.

How to Avoid Common Mistakes

Investing allows your money to appreciate and grow over time. People invest to prepare for retirement, education, or recreation. 

Before you begin investing, it's important to recognize your goals to avoid common pitfalls.

A primer on Stocks

Although there is no guarantee that the stock market will go up following your investment, the average return of the S&P 500 index since 1926 is slightly more than 10% per year.

Even in this era of a high-risk economic climate, investing is a good bet because just allowing your money to stagnate will not provide for a comfortable retirement.

Even if you could not begin investing at 20 (or even 30), starting late is better than not starting at all. You can make up for some of your lost time through compounded returns.

One very important tip: You shouldn't start investing while paying off credit card debt. It's much smarter to pay off your debt (which accrues interest) than to put the same amount into the market.

Choosing the right way to save

Once you're debt-free and ready to invest, the next step is to know how much money you'll need in the next few years and what money you can afford to set aside and let grow. Once you have evaluated your situation, you must choose how to split up your assets.

The stock market is typically better for longer-term investments, while CDs usually better suit short-term investments. A Money Market fund might work better than stocks if you need money for a down payment on a house or vacation next summer.

While not every expense can be planned, it is not financially viable to continuously trade in and out of the market. Fees for frequent withdrawals could offset returns, and gains from long-term investment could be missed if you don’t display the patience necessary to let them mature.

Play it safe or take some risks?

The biggest question you must ask when developing an investment strategy is if you want to play it safe or take a riskier approach.

As a strategic rule, always take advantage of programs offered through your benefits package, such as a 401(k) with matching contributions — essentially free money.

Beyond programs like those, there's no such thing as a safe bet, so remember that long-term stock investments will offer long-term rewards and that daredevil opportunities with high rewards will likely come with some high risks.

The math is simple:

If you start with time, add patience, and multiply by the funds you possess now, you could be better off in 10, 20, or 30 years than you are today.

Why You Should Invest Your Money

As a child, you probably kept your money in a piggy bank or a container in your bedroom.

You dropped coins or stuffed bills on top and shook them out of the bottom whenever you needed a little cash.

If you put every cent of your allowance into your bank and did not spend it, over time, you might have saved a couple of hundred dollars, but the only money inside was you put in yourself.

Putting your money into a savings account at your local bank is not much different than keeping it in a piggy bank at home.

While a bank will pay you interest on the money in your account, interest rates on savings accounts are low, and your money will increase at a very slow rate.

Related: Saving or Invest Money in Stocks: Which is Better?

Put Your Money to Work for You

Most people are taught to make money; they have to go to work or run a business. In other words, you have to work more hours to increase your income.

Even if you are successfully able to work more and make more, you no longer have time to enjoy any of the money you earn if you are tied to your job all week long!

Investing your money in stocks, bonds, or mutual funds allows you to earn a return for the money you commit to the investment. Through the power of compounding interest, the money can continue to grow without you trading your labor hours for a profit.

While working in your job or running your business, your investments can also earn money.

Compound interest generates earnings on your asset’s reinvested earnings. The longer your money remains in a particular investment, and the more frequently the interest is compounded -- the more money you will earn.

This is why the younger an individual is when he or she begins investing, the greater their potential for earnings will be.

You're Never Too Old to Start Investing

There is often panic among those who have not saved enough for retirement.

Their saving ability has not been at the level they had hoped, and they have not been able to invest in their retirement as they should.

Many people will give up too easily and figure that if they haven’t started early, why to bother starting?

Being too old to invest is a complete myth that many people buy into and, as a result, fail to make the right financial choices for their future, no matter how close it is.

The good news is being too old to invest is a myth, and you can start investing right now to prepare for a better future.

Look at the realities of today

You are responsible for your financial future, and you can no longer depend on Social Security funds to be there for you when you plan to retire to ensure your financial needs are taken care of after you stop working.

As many people are living paycheck to paycheck, finding it hard to have ‘extra’ money to save, there is less saving and investing in one’s future.

Even if this has been your situation for much of your working life, you still have time to turn things around.

Start planning now

To properly budget your income, you should start including retirement savings in your daily plans.

Even if you have to cut out some of your current expenses, the sacrifice will be worth it in the long run.

Experts recommend putting your cash into retirement vehicles before you save for other things like college tuition. As there are loans and financial aid available for prospective students, no such financial help exists for retirees.

Working individuals are encouraged to start stashing $5,000 into their retirement savings each year, starting with their first job to ensure they retire with upwards of a million dollars.

As a young worker, you have many more options for saving towards retirement, with smaller amounts being put into savings and the ability to take more risks with your investments.

As an older worker headed towards retirement, you will have to invest more of your cash and likely will be advised to take less risk with your money.

It is no excuse to do nothing if you feel completely overwhelmed with the prospect of investing and retirement savings.

Consulting with a financial advisor can help get you on the right path towards your future retirement goals.

Investing for Beginners

Buying Your First Stock

Why You Should Invest