How to Pick Stocks: A Beginner's Guide

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Last Updated:Nov 02, 2024

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So, you have decided to buy stocks. We know you're probably feeling overwhelmed, but trust us, you're not alone! Many people find the stock trading market very confusing and intimidating.

That’s why we compiled this article — to help you understand the basics of stock trading. It isn't as complicated as it seems, you'll see; it's all about making the best choices in alignment with your goals. Even with so many brokers out there, it all boils down to understanding your financial objectives, your desired level of involvement, and your willingness to spend.

In this article

Understanding stocks

Stocks are securities that represent the ownership of a percentage of an issuing corporation. The main reason companies sell their stocks is to get additional funds to grow further. Now comes the best part — as the company grows, you'll profit as a partial owner of the company.

Let's imagine a scenario where you buy stocks of your favorite brand. After making the purchase, you would automatically own a tiny bit of that company. How cool is that?

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Setting your investment goals

Think about your goals, as they will be your starting point. Ask yourself, “What am I saving for? Is it for rent, a house, or maybe a vacation?” It is very important to know why you want to invest. Your goals help shape your strategy.

For example, if you want to secure retirement, you're looking at long-term goals in life, so you're likely to consider different stocks than if you're hoping to make quick cash.

Stock research

Let’s take a closer look at how to do your research. You've probably heard someone say, "Buy low, sell high." That really sounds like a catchy phrase, but it's actually the basic principle of investing! To be informed enough to make such decisions and recognize big opportunities, you must understand the stocks you're interested in.

Begin by researching and analyzing companies you're familiar with, maybe your favorite coffee shop or a tech giant you admire. Also, make a little daily habit of glancing at articles and financial news sites. Investopedia is excellent for beginners, and Yahoo Finance is a great starting point for tracking your favorite stocks.

To broaden your research, consider reading investment newsletters. There, you’ll find real recommendations and insights that’ll help you simplify your stock selection process. For easier selection, see our article on Best Stock-Picking Newsletters.

Choosing a brokerage

To trade with stocks, you must have a personal account on the brokerage firm's platform. You can buy and sell stocks and manage your account on it. There are many available options — some platforms are beginner-friendly with easy interfaces, while others offer advanced tools for experienced investors.

When choosing a brokerage, ask yourself questions like, “Do I want an app that allows me to trade on the go, or do I prefer a desktop experience? What kind of account am I looking to open?”

The most popular accounts you can open in brokerage firms are:

Standard taxable brokerage accounts (for buying and selling stocks, with taxation of profits).
Roth IRA (a retirement account where withdrawals are tax-free in retirement).
Traditional IRA (a retirement account with pre-tax contributions, offering tax deductions but with taxed withdrawals).
Solo 401(k) (a retirement plan designed for self-employed individuals or business owners with no employees, allowing for high contribution limits).

Keep in mind that not all brokerage firms offer all types of accounts, so consider what your plans are to make sure you find a broker that will support your financial needs.

Think about all your preferences and goals before choosing. Websites like Robinhood and E*TRADE are great starting points for beginners because they offer tools that simplify stock trading.

Start your investment journey today

Commission free stock trading.
No account minimum.
Trade stocks, options, ETFs, and more.
First stock free.

Open an account

What should you consider when choosing a brokerage?

When looking for a perfect brokerage, here are some things to look for:

Fees and commissions. Different brokerages may charge commissions differently. There are brokerages that charge a commission on each trade, while some others don’t. So consider how often you plan to trade and whether you are willing to pay additional service fees.
Account minimums. If you are unfamiliar with it, many stock trading platforms require a minimum deposit to open an account.
Investment options. Look for a brokerage that offers a variety of investment options, such as stocks, ETFs, mutual funds, and more. This way, you can easily diversify your portfolio without the need for multiple accounts.
Educational resources. If you are a beginner, the most important thing is to master the material well. If you have access to learning tools provided by the brokerage firm, such as webinars or detailed guides, your chances of understanding the stock market better will be higher.
User experience. Try different platforms to see how easy it is for you to navigate. Having a clean and intuitive platform interface can make your investment journey much easier, especially if you're just starting out.
Customer service. What is important for you as a customer and what the brokerage house should provide to you is good customer support. You want to know, in any case, that there is someone who can quickly clear up any confusion.

Buying stocks

You are getting close to buying stocks. After you've chosen a brokerage and funded your account, it's time to buy some stocks! Start by searching for stocks you want by their symbols.

For example, Apple Inc. trades under the symbol AAPL. But it’s not just big tech names — say you’re into cars, you might look up Tesla under TSLA. Once you find the symbol of the stock you’re interested in, check out its current price and decide how many stocks you want to buy. Simple as that!

Start your investment journey today

Commission free stock trading.
No account minimum.
Trade stocks, options, ETFs, and more.
First stock free.

Open an account

Managing your portfolio

You must review your portfolio regularly to stay on track with your investment goals. But how often should you check? Although daily tracking can be tempting, consider a monthly or quarterly review, mainly when large fluctuations occur. When they occur, emotional decisions may lead to buying or selling stocks.

When reviewing your portfolio, consider factors such as market conditions and company performance. Also, keep an eye on news that may affect your investments. But if you understand the basics of stock investing before everything, your investments will pay off.

As we have already established, what you need to do is to set clear goals, do research, choose the right broker, manage your account, and watch out for brokerage fees and other trading costs. Little by little, your interest will grow, time will take its toll, and you will gain enough knowledge to become an experienced stock trader. Good luck with your investing!

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