You need a brokerage account, money to invest, and a basic understanding of what stocks are before you can buy them
Opening a brokerage account is the first step. A brokerage is a company that lets you buy and sell stocks through their platform — think of it as the middleman between you and the stock market. You create an account online (usually takes 10 to 15 minutes), link a bank account, and deposit money. Once the money clears, you can place your first trade.
The amount you need to start varies by brokerage. Some have no minimum deposit at all. Others ask for $500 or $1,000 to open an account, though many have dropped these minimums in recent years. You can start with as little as $50 or $100 if you find a brokerage with no minimum — what matters more is that you can afford to leave the money invested without needing it back soon.
Before you open an account, understand what you are actually buying. A stock is a small piece of ownership in a company. When you buy one share of Apple, you own a tiny fraction of Apple. The price of that share goes up and down based on how the market values the company. You make money if the price rises and you sell it for more than you paid. You lose money if the price falls.
Key Takeaways
- You need a brokerage account (opened online in minutes), a bank account to fund it, and enough money to invest that you will not need for several years.
- Stock prices move daily based on market conditions, and there is no may provide your money will grow — you can lose what you invest.
- Most brokerages now charge zero commission per trade, so the cost of buying or selling a stock is the price difference between what you pay and what you sell for.
- Starting with index funds or ETFs (which hold many stocks at once) is less risky than picking individual stocks, especially if you are new to investing.
- The longer you leave money invested, the more time it has to recover from price drops, so stock investing works best for money you will not need for at least five to ten years.
How to choose a brokerage and open an account
Popular brokerages include Fidelity, Charles Schwab, E-Trade, Robinhood, and Webull. Each has a different interface, different research tools, and different educational resources. None is objectively "best" — the right one depends on whether you want simple or detailed, whether you plan to trade often or hold for years, and what kind of stocks or funds you want to buy.
To open an account, you will need your Social Security number, a government ID, your address, and your bank account information. The brokerage will verify your identity and ask you basic questions about your investment experience and financial situation. These questions are required by law — they help the brokerage understand your risk tolerance and make sure you understand what you are doing.
After you are approved (usually within a day), you link your bank account and deposit money. The deposit takes one to three business days to clear. Some brokerages let you start trading before the deposit fully clears, but the money you can trade with is limited until it does.
Understanding the difference between stocks, funds, and ETFs
A stock is one company. You pick the company, buy shares, and hope the price goes up. This is higher risk because your money is tied to how one business performs.
A mutual fund is a basket of many stocks (or bonds) managed by a professional. You buy one share of the fund, and that share represents a tiny piece of all the stocks inside it. Mutual funds charge a fee (called an expense ratio) every year, usually between 0.1% and 1% of what you have invested. Some mutual funds are actively managed (a person picks the stocks) and some are index funds (they track a list like the S&P 500).
An ETF (exchange-traded fund) works like a mutual fund — it holds many stocks — but it trades like a stock. You can buy and sell it during market hours, and the price changes throughout the day. Mutual funds only trade once per day after the market closes. ETFs often have lower fees than mutual funds and are popular with beginners because they spread risk across many companies at once.
What happens when you place your first trade
Once your account is funded, you search for the stock or fund you want to buy. You enter the ticker symbol (a short code like AAPL for Apple or SPY for an S&P 500 ETF), the number of shares you want, and the type of order. A market order buys immediately at whatever the current price is. A limit order lets you set a maximum price you will pay — the trade only happens if the stock drops to that price or lower.
For beginners, a market order is simpler. You click buy, the trade executes in seconds, and you own the shares. The shares appear in your account immediately, but the settlement (the official transfer of ownership) takes two business days. During those two days, the shares are yours, but you cannot sell them yet.
You can hold the shares as long as you want. You do not have to sell them on any timeline. If the company pays a dividend (a cash payment to shareholders), it goes into your account. If you want to sell, you search for the stock, enter how many shares to sell, and place the order the same way you bought it.
Costs and fees you should know about
Most brokerages charge zero commission per trade — you do not pay a fee to buy or sell a stock or ETF. This was not always true; ten years ago, a single trade could cost $5 to $10. That changed around 2019 when major brokerages dropped commissions to compete.
What you do pay is the bid-ask spread. This is the difference between what buyers are willing to pay and what sellers are asking. When you buy a stock, you pay the ask price (slightly higher). When you sell, you get the bid price (slightly lower). The difference is tiny for popular stocks (a few cents) but wider for less-traded stocks. This spread goes to market makers, not to your brokerage.
If you invest in mutual funds or ETFs, you pay an expense ratio — a yearly percentage fee. An S&P 500 index fund might charge 0.03% per year, meaning if you have $10,000 invested, you pay $3 per year. An actively managed fund might charge 0.5% to 1%, which is $50 to $100 per year on the same $10,000. These fees are automatic; they come out of your account balance.
Why time in the market matters more than timing the market
Stock prices move every day. They go up, they go down, sometimes they crash. New investors often worry about buying at the wrong time — paying too much right before a price drop. This worry is natural but usually counterproductive.
History shows that money left invested for 10+ years has almost always grown, even when the investor bought right before a major crash. Money moved in and out of the market based on trying to predict price movements has underperformed. The reason is simple: you cannot reliably predict when prices will rise or fall. Professional investors with teams of analysts cannot do it consistently. You should not expect to either.
A better approach is to invest money you will not need for at least five to ten years, then leave it alone. If you need the money in two years, stocks are too risky — use a savings account instead. If you have a 20-year timeline, short-term price swings do not matter because you have time to recover from them.
How much risk you should take on
Risk and potential return are linked. Stocks have higher potential returns than savings accounts, but they can also lose value. Bonds are less risky than stocks but have lower returns. A mix of both is called a diversified portfolio.
A common rule for beginners is the "100 minus your age" formula. If you are 30, invest 70% in stocks and 30% in bonds. If you are 50, invest 50% in stocks and 50% in bonds. The idea is that younger people have time to recover from crashes, so they can take more risk. Older people need their money sooner, so they should take less risk.
This is a starting point, not a rule. Your actual risk tolerance depends on your job stability, how much money you have saved, whether you have dependents, and how you feel watching your account value drop 20% in a month. If a big drop would panic you into selling at a loss, you are taking too much risk.
Common mistakes beginners make
Trying to pick individual stocks without research is the most common mistake. Most people who try to beat the market by picking stocks underperform index funds over time. If you want to pick individual stocks, spend months learning how to read financial statements and understand what makes a company valuable. If you do not want to do that work, buy index funds or ETFs instead.
Investing money you will need soon is another major mistake. Stock prices can drop 30% or 40% in a bad year. If you need that money in 18 months, you might be forced to sell at a loss. Only invest money you can afford to leave untouched for at least five years.
Panic selling during crashes is the third mistake. When the market drops 20%, many new investors sell everything to "stop the bleeding." They lock in losses and miss the recovery. If you cannot handle watching your account drop without selling, you are taking too much risk or you are investing money with the wrong timeline.
Frequently Asked Questions
Do I need a lot of money to start investing in stocks?
No. Many brokerages have no minimum deposit, so you can start with $50 or $100. What matters more is that you can afford to leave the money invested for several years without needing it back. Starting small and adding money over time is a solid approach.
Can I lose all my money investing in stocks?
You can lose a significant portion of your money, especially if you pick individual stocks or invest in risky sectors. However, if you spread your money across many stocks through an index fund or ETF, and you hold for 10+ years, the historical record shows you are unlikely to lose everything. Past performance does not may provide future results.
What is the difference between a brokerage account and a retirement account like an IRA?
A regular brokerage account has no contribution limits and no tax advantages — you pay taxes on gains when you sell. A retirement account like an IRA or 401(k) has contribution limits but offers tax breaks. Money in a retirement account is meant to stay there until you are 59½. For most people, both make sense: retirement accounts for long-term retirement savings, brokerage accounts for other goals.
How often should I check my account?
If you are investing for the long term, checking once a month or once a quarter is plenty. Checking daily can tempt you to trade too often or panic during normal price swings. Set it and forget it is a better strategy than constant monitoring.
Should I invest in individual stocks or index funds?
Index funds are lower risk and require less research. Individual stocks offer higher potential returns but require more knowledge and carry higher risk. Most beginners should start with index funds or ETFs, then move to individual stocks only after they understand how to research companies and manage risk.