Beginner's Practical Investment Start Guide for Stock Beginners

Many people hesitate at the stock beginner stage and miss investment opportunities. While the stock market can be a powerful means of wealth accumulation, it also requires careful approach. This guide will practically cover all steps of how to invest in stocks, from choosing a securities firm to building a portfolio, so that beginner investors can proceed systematically.

Should I start investing in stocks?

The first advantage of stock investing is its high potential return. Historical data shows that the S&P 500 index has achieved an average annual return of about 10% since 1957, which comfortably offsets inflation. Holding shares of quality companies long-term can provide regular cash flow through dividends while also aiming for capital gains.

The second advantage is liquidity. Unlike real estate, stocks can be sold at any time during trading hours to cash out, enabling quick access to funds when needed.

However, stocks are not suitable for all investors. In early March 2020, at the start of the pandemic, the S&P 500 plummeted about 34% in just one month. Investors must be psychologically prepared for such volatility and have sufficient spare funds. Most importantly, understanding the market and maintaining a consistent learning attitude are essential.

What exactly are stocks?

Stocks are securities that prove ownership in a company. Owning one share of stock means owning a tiny part of that company. For example, one share of Samsung Electronics stock as of February 21, 2025, corresponds to approximately 0.0000018% of the total equity(.

When you buy stocks, you can earn profits in two ways. First, dividends—regular income received as the company shares its profits. Second, capital gains—profits from selling stocks at a higher price than purchase price.

Understanding various stock investment methods

Investment methods are broadly divided into direct and indirect investments.

Individual stock direct investment involves buying and selling shares of specific companies directly. It offers higher returns but also involves greater risks.

Indirect investment)ETF, funds, CFD( involves investing in products that diversify across multiple stocks or assets. It is effective in reducing individual risks.

Fractional trading has recently gained popularity, allowing investors to hold parts of expensive stocks. Although fees may be somewhat higher, it is a good way for beginners to start without much burden.

Dollar-cost averaging involves automatically investing a fixed amount every month, reducing concerns about market timing and promoting long-term asset growth.

CFD) (Contract for Difference)( is a leveraged product. It offers the potential for large profits with a small amount of capital but also carries significant risk of loss. For example, if you expect Nvidia’s stock price to rise, you can buy CFDs to profit from the increase, or take a short position to profit from a decline. This product should only be approached after thorough understanding.

Choosing a securities firm and account opening procedures

)Criteria for selecting a securities firm

Compare the following when choosing a securities firm:

• Trading fee levels ###Approximately 0.5% for staff-initiated orders, much cheaper for online orders(
• Usability of mobile app and chart analysis tools
• Quality of customer service
• Fee discount events and benefits

Since investors tend to continue using the same firm once opened, choosing carefully at the start can significantly reduce costs in the long run.

)Account opening step-by-step process

1. Download the securities app - Install the dedicated app for the chosen securities firm.

2. Identity verification - Scan your ID###resident registration card, driver’s license, passport, etc.( and verify your identity via your mobile phone.

3. Enter personal and income information - Fill in accurate details.

4. Agree to terms - Review and digitally sign the account opening application, financial transaction proof documents, and online trading terms.

5. Wait for approval - Most accounts are opened within a day.

)Choosing account type

• Custodial account: Basic account for general stock trading, allowing investment in domestic and international stocks and various financial products.

• ISA###(Individual Savings Account)(: A tax-advantaged account for medium- to long-term investments, offering income tax benefits and suitable for long-term asset management.

• CMA)(Cash Management Account)(: Pays interest on deposits and enables both stock trading and short-term fund management simultaneously.

Note: Financial institutions with deposit and withdrawal transaction records must wait 20 business days before opening accounts at other financial firms. However, affiliated institutions like KakaoBank, K-Bank, and Toss Bank are exempt from this restriction.

Stock analysis: two approaches

)Technical analysis

Predicts future stock prices based on past price movements and trading volume patterns. Uses charts and indicators such as moving averages###MA(, MACD, Relative Strength Index)RSI(. Mainly used by short-term traders.

)Fundamental analysis

Analyzes financial statements, management performance, and industry environment to assess the true value of a company. Uses indicators like PER###Price-to-Earnings Ratio(, PBR)Price-to-Book Ratio(, ROE)Return on Equity(. Preferred by long-term investors.

Investment strategies: choosing based on time perspective

)Short-term trading/speculation

Day trading is a typical example, seeking quick profits in a short period. Offers high profit opportunities but also involves high risks and potential losses from accumulated trading fees.

###Long-term investing

Holding stocks of quality companies for over five years. Warren Buffett’s value investing philosophy exemplifies this. The power of compound interest maximizes returns over time, and many countries offer tax benefits for long-term holdings.

Stabilizing your portfolio and risk management

###Diversification

“Don’t put all your eggs in one basket.” Investing in companies across different sectors like Samsung Electronics, Hyundai Motor, and Naver can reduce the impact of declines in specific stocks or industries.

###Risk management techniques

• Stop Loss###: Automatically sell when losses reach a certain level to limit damage.

• Periodic portfolio rebalancing: Adjust the portfolio back to its original target ratios over time.

• Dollar-cost averaging: Instead of investing 10 million won all at once, invest 2 million won monthly over five months. This stabilizes the average purchase price.

• Long-term holding: Hold stocks of promising companies for the long term to reduce the impact of short-term volatility.

Practical tips for beginner investors

• Start small: It’s key to gain experience with a modest amount initially. Minimize costs from mistakes.

• Avoid market hype: Don’t get swept up in theme stocks or rapid surges. Maintain objective, data-driven investment decisions.

• Continuous learning: Read economic news at least three times a week, monitor quarterly earnings reports of interest stocks, and key economic indicators.

• Manage your investment records: Record why you bought each stock and the results. Over time, this helps objectively review your investment patterns and improve decision-making.

Conclusion

Growing from a stock beginner to a skilled investor requires time and effort. Thorough analysis, strict risk management, and appropriate strategy selection are key to success. Keep progressing steadily and cautiously like a marathon, aiming for long-term asset growth.