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Before you start investing, you'll want to have a few basics down. Knowing which investments to choose, what your budget and timeline are and how to manage your portfolio are key fundamentals.
This article covers DIY investing, but you can also invest in stocks through a financial advisor or a robo-advisor (more on that later).
If you want to learn more about the actual mechanics of investing, like executing a trade, you'll find that information in our article about how to buy stocks.
Step 1. Choose individual stocks or a stock fund
Investing in the stock market doesn't have to be complicated. For most people, it means choosing between these two investment types:
Individual stocks
If you’re after a specific company, you can buy a single share or a few shares as a way to dip your toe into the water. Building a diversified portfolio from many individual stocks is possible, but it requires significant investment and research.
If you go this route, remember that individual stocks will have ups and downs. If you research a company and choose to invest in it, think about why you picked that company in the first place if jitters start to set in on a down day.
Stock mutual funds
Mutual funds let you purchase small pieces of many different stocks in a single transaction. Index funds and exchange-traded funds (ETFs) are two kinds of mutual funds that track an index; for example, an S&P 500 fund replicates that index by buying the stock of the companies in it.
When you invest in a fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio. Note that stock mutual funds are also sometimes called equity mutual funds.
What makes sense for most investors?
The upside of stock mutual funds is that they are inherently diversified, which reduces risk. For the vast majority of investors — particularly those investing their retirement savings — a portfolio composed mostly of mutual funds is the clear choice.
But mutual funds are unlikely to rise in meteoric fashion as some individual stocks might. The upside of individual stocks is that a wise pick can pay off handsomely, but the odds that any individual stock will make you rich are exceedingly slim.
However, it doesn't have to be all or nothing
If you decide you want a good portion of your portfolio to be invested in mutual funds, that doesn't mean you have to avoid individual stocks altogether. If you want to test your luck at being an early investor in the next Google, a good compromise could be dedicating a small portion of your portfolio — say, 5% — to individual stock investing.
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Step 2. Set a budget
New investors will want to think about two things in this step of the process:
How much money do I need to start investing in stocks?
The amount of money you need to buy a single stock depends on the share price. Share prices can range from just a few dollars to a few thousand dollars. Some brokerages allow you to invest in fractional shares. Simply put, that means you can choose a dollar amount to invest and own part of a share.
If you want mutual funds and have a small budget, investing in ETFs may be your best bet. Mutual funds often have minimums of $1,000 or more, but ETFs trade like a stock, which means you purchase them for a share price — in some cases, less than $100.
How much money should I invest in stocks?
If you’re investing through funds, you can allocate a fairly large portion of your portfolio toward stock funds, especially if you have a long time horizon. A 30-year-old investing for retirement might have 80% of their portfolio in stock funds, with the rest in bond funds (and perhaps a small portion in individual stocks).
Step 3. Focus on investing for the long term
Stock market investments have proven to be one of the best ways to grow long-term wealth. Over several decades, the average stock market return has been about 10% per year. However, that’s just an average across the entire market. Some years will be up, some will be down, and individual stocks will vary in their returns.
For long-term investors, the stock market is a good investment no matter what’s happening day-to-day or year-to-year; they’re looking for that long-term average.
The best thing to do after you start investing in stocks or mutual funds may be the hardest: Don’t look at them. Unless you’re trying to beat the odds and succeed at day trading, it’s good to avoid the habit of checking how your stocks are doing every day.
Tip: When we say "long-term investing," we generally mean at least five years. That usually gives your portfolio time to ride out any market downturns. If you have a goal that's closer, check out our list of the best short-term investments.
Step 4. Manage your stock portfolio
While fretting over daily fluctuations won’t do much for your portfolio’s health — or your own — there will, of course, be times when you’ll need to check in on your investments.
If you follow the steps above to buy mutual funds and individual stocks over time, you’ll want to revisit your portfolio a few times a year to make sure it’s still in line with your investment goals.
A few things to consider: If you’re approaching retirement, you may want to move some of your stock investments over to more conservative fixed-income investments. If your portfolio is heavily weighted in one sector or industry, consider buying stocks or funds in another sector to diversify.
Pay attention to geographic diversification, too. Vanguard recommends that international stocks make up as much as 40% of the stocks in your portfolio. You can purchase international stock mutual funds to get this exposure.
If DIY investing feels like too much work ...
You may be a good candidate for a robo-advisor, a service that invests your money for you for a small fee. Many of the major brokerage firms and some independent companies offer these services.
Similar to shopping for a broker, there are pros and cons to each. Some robo-advisors have very low fees, while others let you talk with a financial advisor if you need extra support or more personalized guidance. It's a good idea to compare robo-advisors to see which ones offer the services you need. Most robo-advisors charge about 0.25% of your account balance.
Frequently Asked Questions
Which stocks are the best investments for beginners?
The process of picking stocks can be overwhelming, especially for beginners. After all, there are thousands of stocks listed on the major U.S. exchanges. Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with stock market basics.
That generally means using funds for the bulk of your portfolio — Warren Buffett has famously said a low-cost S&P 500 ETF is the best investment most Americans can make — and choosing individual stocks only if you believe in the company’s potential for long-term growth.
The S&P 500 is an index consisting of about 500 of the largest publicly traded companies in the U.S. Over the last 50 years, its average annual return has been more or less the same as that of the market as a whole — about 10%.
» Learn more: How to invest in the S&P 500
How many stocks should I invest in?
That really depends on your goals and your risk tolerance. It can be risky to invest a large portion of your wealth in just a few stocks. Diversification — investing in a large number of companies across many industries — is important. If you don't have the time or money to buy dozens of individual stocks, look into low-cost index funds, which invest in hundreds of individual stocks for you.
Is now a good time to invest in stocks?
The truth is, you’ll never know if it’s exactly the right time to invest in stocks. However, if you’re investing for the long term (say, more than five years), then the time to buy stocks may be as soon as you have the money available. Even if the market falls soon after investing, you’ll have plenty of time to make up those losses. And the only way to guarantee you’ll be a part of any stock market recovery and expansion from the beginning is to be invested before the recovery starts.
Are investing apps safe?
Generally, yes, investing apps are safe to use. Some newer apps have had reliability issues in recent years, in which the app goes down and users are left without access to their funds or the app’s functionality is restricted for a limited period.
Even in these instances, your money is typically still safe, but losing temporary access to it is still a legitimate concern.
So, if you’re hoping to avoid these issues, you can choose an investing app from a large and established brokerage. Our list of the best stock apps is a good place to start.
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- 1. Vanguard. International Investments: Stocks, Bonds, & ETFs. Accessed Mar 24, 2026.
