How to Invest in Stocks: Guide for Beginner Investors (2021)

Wondering how to invest in ETFs, mutual funds, index funds, or individual stocks? 

This guide will show you how to invest in stocks as a beginner investor.

Inside, you’ll find…

  • Information you need to help you take your first steps
  • A step-by-step guide for getting your trading accounts opened
  • Information to help you choose how and where you’ll invest
  • How to monitor your investments in the long-term

We’ve got a lot to cover, so let’s get started. 


6 Steps to Stock Investing for Beginners


Step #1: Decide What Kind of Financial Instruments You Want to Invest in

Step #2: Set a Budget for Your Investment

Step #3: Open an Investment Account

Step #4: Decide How You’ll Invest

Step #5: Buy Your First Stocks

Step #6: Manage Your Investment Portfolio

Step #1: Decide What Kind of Financial Instruments You Want to Invest in

Before you do anything else, to get started investing in stocks, you need to decide how you’ll do it. 

There are a few different ways that you can invest your funds into the stock market, each with its own requirements, risks, and ways of being managed. 

Here are five of the most common ways of buying stocks for you to consider. 

Instrument #1: ETFs

An exchange-traded fund, or ETF, is a type of security that allows you to access lots of different stocks without investing in one directly. 

Put simply, EFT trades a basket of assets and you can buy the fund to benefit from the price increase – or suffer potential losses – that it produces. 

There are lots of different types of securities that will part of an ETF, such as:

  • Stocks
  • Bonds
  • Commodities
  • Currencies

Meaning that you’re investing in a more diverse portfolio. 

The biggest ETFs tend to track stock price movements of an index, such as the S&P 500 ETF Trust, which trades as the SPY, with $363 million assets under management (AUM).

Image Source: Yahoo Finance

These funds can be traded and their prices change throughout the day in the same way an individual stock can.

That’s in contrast to mutual funds, which settle once, at the end of the day, and we’re looking at them next.


Instrument #2: Mutual funds

A mutual fund is similar to an ETF in that it is made up of a range of assets including stocks. 

However, rather than just tracking a range of securities, a mutual fund is managed by an expert who makes trades with the capital in the fund, matching the stated objectives of the fund. 

There are lots of different mutual funds to choose from, some of which will focus more on stocks whilst others can have real estate, currency, and commodities holdings. 

The largest mutual fund in the USA is the Vanguard Financials Index Fund Admiral Shares, traded as VFAIX, which invests in stocks of banks and other financial services providers

Image Source: Yahoo Finance

Mutual funds offer you a more diversified portfolio which can be appealing for people with a risk averse. 


There is a vast range of different mutual funds where you can invest your money, such as:

  • Equity funds
  • Fixed-income funds
  • Index funds
  • Balanced funds
  • And many more. 

Time to move on to look at an instrument that can be either a mutual or an exchange-traded fund.


Instrument #3: Index funds

An index fund is a portfolio of assets that are designed to mimic a market index. 

In many ways, index funds are similar to ETFs in that they will broadly reflect the profits or losses across an index. 

However, index funds aren’t traded throughout the day like EFTs are – they can be traded once, at the end of the day, just like mutual funds can. 

Index funds can be a common place to invest funds for individual retirement accounts (IRAs) and can form part of a retirement plan because of their diversification of assets. 

One of the biggest index funds is the Fidelity Zero Large Cap Index Fund, which invests in most of the large-capitalization stocks in the USA and has over $4.236 billion in net assets as of 26th July 2021. 

Image Source: Yahoo Finance

Time to look at how you can directly invest in the stock market.


Instrument #4: Individual stocks

The first thing that you think about when you hear “stock trading” is the buying and selling of shares in a company

You can usually buy stocks in any company listed on an exchange and either trade them or keep hold of them for the long term. 

There are thousands of stocks available, but there are some which are more popular than others, such as:

  • Tesla (TSLA)
  • Apple (AAPL)
  • AMD (AMD)
  • Microsoft (MSFT)
  • American Airlines (AAL)


Which currently have characteristics that make them an interesting choice for day trading.

There can be a lot of volatility in the prices of individual stocks which can be off-putting to new investors. 

There’s one last trading instrument that you should be aware of. 


Instrument #5: Robo-advisors

Rather than being run by humans like most mutual, index, or exchange-traded funds, robo-advisors complete trades based on a computer algorithm. 

Robo-advisors have been around since 2008 for retail investors and are fully automated to complete trades based on rules they have been given. 

There are a lot of technical calculations that the robo-advisor completes to decide where to invest funds, taking into account risk appetite and lots of other data. 

Those are the five most common investment products to consider when starting to invest in stocks, let’s now look at the money aspect of investing.


Step #2: Set a Budget for Your Investment

As you prepare to invest in stocks for the first time, it’s important to really get to grips with your finances. 

Get to know your financial goals and limitations, investment objectives, and the funds you have to achieve them – you shouldn’t make investments before you’ve covered your bills and other financial commitments, for example. 

Another rule of thumb is that you should never use borrowed capital to invest in stocks.

This can be troublesome because there is a chance that your investment will lose value but you’ll still owe the principal debt plus interest. 

Before you invest cash in the U.S. stock market, or any other market, you need to make some considerations, which we’re outlining below. 

Consideration #1: Your age

Your age will be a big factor in things like your investment goals and how much risk you’re prepared to expose yourself to. 

This is because some investment choices can be volatile in the short run but may still rise over the longer economic cycle. 

Take the Dow Jones Industrial Average (DJIA), a well-known stock market index that tracks 30 blue-chip stocks; in the screenshot below, you can see that there has been an upward trend in the last 20 years but there have been some big falls too. 

Image Source: Macrotrends

Author’s note: We’re showing this to illustrate historical trends; past performance of a stock or index is no guarantee of future performance. 

As you get older you may want to diversify your assets, potentially changing the balance between stocks and bonds or investing in mutual funds rather than individual stocks – this is a judgment for you to make when assessing your risk appetite and goals. 

On to the next consideration.


Consideration #2: Your disposable income

You need to make sure that all of your financial commitments are covered before you can start to consider investing money. 

You need to assess your finances – your income and all of your outgoings – and be realistic. 

Whilst you may think you can survive on budget home-cooked meals for the next decade so you can squeeze more into your stock investments, is this a sensible plan for a comfortable life? 

Look at what you reasonably have left after covering all your monthly expenses and savings you’ll need to cover annual expenses, then have an emergency fund as a contingency that’s liquid, i.e. easy to access when you need it. 

What’s left after that is likely to be your disposable income, which you can then consider using to invest.

To get a better understanding of your financial commitments and how to plan your finances, you can seek advice from a financial adviser.  

Let’s look at the idea of having some liquid assets with our next consideration.


Consideration #3: Liquidity

Although it’s possible to make quick moves on the stock market with strategies like day trading, it’s common to make long-term investments into Wall Street stock. 

The world-famous financier Warren Buffett is quoted as saying, “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”

Put simply, he says that you should be planning to invest in the long run when you put your money into stock and it shouldn’t be a short-term plan. 

This means that you need to have access to other money in the case of something unexpected like a medical bill or losing your job.

Having cash in a quick access savings account may yield less return, especially with record low interest rates as shown in the chart below, but it’s sensible so that you have the liquidity to cover the worst. 

Image Source: Macrotrends

Let’s look at the next thing you need to understand about your budget.


Consideration #4: Risk appetite

Investing in stocks is risky – there is potential to make a profit, but the value of your investment can also go down due to market volatility. 

There is potential to lose a lot of money;  due to the COVID-19 pandemic, in March 2020 the DJIA lost 26% of its value in less than four trading days, for example.  

That type of loss in value will make a big dent in the value of your investments and you need to be prepared for this type of event. 

Stock market fluctuations are a fact of investing and you can try to mitigate your risk by changing your asset allocation mix across different instruments like mutual funds or ETFs, called diversification of your portfolio. 

On to the final factor you need to think about when looking at what you can afford to invest.


Consideration #5: Investment minimums

Whilst we’ve looked at factors about you and your circumstances so far, there are external factors to be aware of when considering your investment options.

As well as brokerage firms having minimum amounts that you need before you can open an account, there are other minimums to consider. 

To buy just one share of Amazon on July 1st, 2021, the price was $3,449 – a big sum of money to have ready for one share. 

Of course, there are companies with a much lower share price, but it’s worth looking at the price for any stock you’re interested in owning. 

There are also minimum investment amounts needed to invest in a mutual fund and you’ll need enough for one share in an EFT, too. 

Take this into account when preparing to start your first equity investment. 

Budget understood; time to get an account opened and look at the many investment options on ZuluTrade.


Step #3: Open an Investment Account

Once you know how you’re going to invest, and how much of your money you’ll be working with, it’s time to get an account opened.

To start investing, you need to have an account with a stockbroker, and using an online brokerage, such as AAAFx tends to be the easiest way to buy and sell shares. 

Photo by Glenn Carstens-Peters on Unsplash

Online stock selling and buying can make your investment management accessible and smooth – you can monitor your open positions and check on your bottom line when you’re at the gym or when you wake up in the morning. 

Here’s our quick guide to getting your investment account open and ready to trade.


Step #1: Choose your platform

A trading platform is a website you go to and place your trades, such as ZuluTrade. 

ZuluTrade doesn’t actually hold your cash, instead, you buy and sell stocks – or currency, cryptocurrency, commodities – and the platform sends this information through to your broker account. 

When choosing the right trading platform for you, you need to consider:

  • Whether you will need to pay management fees
  • Is it commission-free or low-cost to run your account
  • What information the platform offers, such as historical data
  • How easy the platform is to access and use
  • If the platform works with the online brokers you choose


Other tools, such as being able to do Copy Trading rather than having to execute your own trades can also be a deciding factor when choosing your platform – more details about Copy Trading coming up shortly. 

Once you’ve got an open account on a trading platform, it’s time to get your brokerage account set up. 


Step #2: Select your brokerage account

There are many, many brokerage firms for you to choose from. 

This is the company that will hold your money, complete your trades, and send payouts to your bank account when you request. 

Be sure that your broker is regulated in the country in which they’re based and check online reviews to ensure that other people haven’t had difficulties in the past. 

At ZuluTrade, we only work with regulated brokers, such as AAAFx

Image Source: AAAFx

Whilst your account opening process will be different across brokers, you can expect a similar experience. 

You’ll need to provide:

  • Your personal information like your name and address
  • Identification documents, e.g.  your passport
  • Documentation to prove where you live


So you can start using the company’s brokerage services. 

A small amount of money will need to be deposited in your brokerage account, with minimum deposits typically a few hundred dollars – at AAAFx, you need to add at least $300.

Now you have both accounts, what next?


Step #3: Link your accounts

You need your brokerage account and your trading platform to be able to communicate with each other. 

To do this, you need to link your accounts, which should be a reasonably simple and smooth process

All you have to do is register via ZuluTrade’s website and link the Broker account to ZuluTrade. Once you have authorized the broker to link your account to our copy trading service, simply fund your account and you are all set to enjoy the ZuluTrade copy trading experience!

Now, it’s time to start working towards your investing goals and open some positions.


Step #4: Decide How You’ll Invest

It’s important that you have an investment strategy in place before you start trading. 

Broadly speaking, you have two main options, making manual trades or Copy Trading. 

How you’ll trade is completely up to you, the time you have to learn the skills you need, and how hands-on you want to be in the process. 

Photo by Chris Liverani on Unsplash


Let’s check out the two main trading options.


Option #1: Manual trading

Manual trading means that you will trade stocks by opening and closing your own positions. 

This option gives you a lot of control – you will be the one making every decision and completing every trade. 

Interesting as that sounds, there will be quite a lot of work to do, such as understanding and testing a strategy – more on this in the next section. 

You’ll be trading stocks and indices based on your own knowledge and making your own decisions, which can be time-consuming, especially when a stock exchange like the Nasdaq is only open 9.30 am to 4 pm, which is likely when you’ll be working at your day job. 

It’s also useful to know that 74 – 89% of people who do manual trading lose money, according to the European Securities and Markets Authority.

If that doesn’t sound like what you’re looking for, what’s the other option?


Option #2: Copy Trading

Copy Trading is a trading system that allows your capital to follow the trading signals of a professional Trader. 

This allows you to benefit from the knowledge and experience of a Trader, although this still doesn’t guarantee you’ll always make a profit. 

For example, you can see the trader in the screenshot below has made a return on investment of 146.34% in the last 20 weeks. 


You need less knowledge upfront when you start Copy Trading and some people find it a positive way to start to learn about how to make trades for themselves. 

Using ZuluTrade, 76% of people who choose Copy Trading are in a winning position after 12 months, although this isn’t investment advice and you need to make the choice that’s right for you. 

If you decide you want to do all manual trading or mix manual trading and Copy Trading, you need to know how to buy stocks, which is our next step.


Step #5: Buy Your First Stocks

It’s time to actually start buying the stocks you’ve been planning, so how do you go about doing that?

There are many companies that you can buy stocks in that are household names – you’re likely using an Apple-made phone or a Google-made operating system to read this article and you can buy shares in either. 

It’s not quite as simple as picking the companies you know, you need to understand what makes a stock a potentially good investment

We’re going to look at what you need to consider if you choose the option of manual trading rather than Copy Trading.


Tip #1: Have a strategy

As a trader, it’s important that you have a strategy that you understand and can stick to. 

There are many different investment strategies you can use to trade stocks that will take some time for you to study and understand. 

Trading and investing strategies that you can look at, depending on your goals, are:

  • Value investing
  • Growth investing
  • Active trading
  • Buy and hold
  • Dollar-cost averaging


With plenty more out there. 

Which strategy you choose will depend on similar factors to the ones we looked at when discussing how much to invest, such as your age, risk appetite, and financial goals. 

Once you’ve got a strategy, what’s next?


Tip #2: Test your strategy

Before you put your money into any strategy, you need to test it. 

There are two types of testing that you can do on your strategy that will tell you how your strategy would have performed during a period in the past, which are:

  • Backtesting 
  • Forward testing


Both will show you the past performance of your strategy, which isn’t a perfect indicator of how your strategy will work in the future, but it can help you understand your chances of making a profit or a loss

What else do you need to be when starting to invest your money?


Tip #3: Learn you stocks

It’s important that you choose the right stocks to match the strategy you’ve chosen and tested. 

You’re going to need to learn to read reports from businesses such as their financial statements and learn how to assess their past performance. 

There are technical indicators that you’ll also need to figure out, such as how volatile a stock is.

It’ll pay off to get to grips with your stocks before you start investing into them; the more knowledge you have the better you should be able to react to the market and make positive investment decisions. 

A lack of knowledge about your stocks and overall market conditions can be a major reason why many traders don’t make the returns they expect, or even lose money. 

Now, we’re going to look at how you actually buy a stock.


Tip #4: Place an order

Once you feel confident in your strategy and your stocks, it’s time to place an order. 

On the ZuluTrade platform, it’s a simple process; first, you need to log into your account…

… and click on Trade to see the securities you can invest in:

Simply click on the stock you want to buy, in this case, we’re going to use Tesla (TSLA) as an example.

Here you can set a stop-loss, which means your stock will automatically be sold if the price drops below a value you choose, as a way to help prevent heavy losses:

Click OK and a signal will be sent to your brokerage account to buy that stock on your behalf. 

Onto the sixth step to becoming a stock investor.


Step #6: Manage Your Investment Portfolio

With your investments made or Copy Trading set up, you now need to manage your portfolio. 

Whichever method of investment you’ve chosen, you need to keep yourself up to date with your positions to ensure you’re getting the capital gains you’d intended. 

It’s important that you follow data regarding your stocks, such as when financial statements are announced, so that you can evaluate your position. 

Keeping up with both fundamental and technical analysis of the stocks, indices, and funds you’ve invested in will help you manage your portfolio and make adjustments where necessary.

It’ll be worth setting up a watchlist of the stocks/indices you’re invested in so you can see the value of each stock or ETF you work with. 

However, if you’ve chosen to do Copy Trading, you probably won’t need to be as involved with the day-to-day management of your investments. 

You can check on your positions whenever you want and pose questions to the Trader on the ZuluTrade platform, but you don’t need to take any action to continue what you’re doing. 

It’s possible for you to increase how much money you have allocated to following each Trader and you can withdraw your money at any time, as well. 

See your portfolio management as a long-term, regular activity; you should stay informed about your positions in case the markets change or the risk profile of an asset changes. 


That’s all you should need to know about taking your first steps into the world of stock trading, so let’s wrap this up.


Now Over to You

That’s it for our beginner’s guide to investing in the stock market. 

We’ve covered everything you need to get started, helping you know what to invest in and how much is a sensible amount of cash to invest. 

If you’re looking to invest in the stock market but don’t have the time or skills to get going, Copy Trading could be the solution for you. 

You’ll be able to monitor your investments and control how much money you have actively invested, without the need to place orders or know the ins and outs of a company or fund. 

Ready to get started with your stock investing journey? 

Create an account with ZuluTrade today and get the wheels in motion. 

Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.