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Investing

How To Start Investing In Stocks (For Beginners)

Calvin Lo

Are you interested to start investing but don’t know where to start?

Are you afraid to lose large amounts of money in the stock market or feeling overwhelmed by the financial jargon and news headlines bombarding us everyday?

What I can tell you from my experience investing so far is that investing is actually pretty simple and definitely not as complex as the finance professionals make it to be.

You don’t need to have a degree in finance or be an investment banker to understand investing principles and concepts.

When I started investing, I had almost ZERO financial knowledge. I don’t work in the finance industry and I didn’t study anything remotely related to finance.

I’m an engineer by profession. The closest I had to financial knowledge was from the Accounting Principles subject I took in secondary school.

I’d like to share 4 simple steps to get you started in investing:

  1. Formulate your core investing principles
  2. Open an account with a discount broker
  3. Start buying index funds regularly
  4. Keep learning while staying invested

Before you get started though, check out my previous post on the 5 basic things things you need to consider before investing in the stock market.

1. FORMULATE YOUR CORE INVESTING PRINCIPLES

Before you dive head in, you do need to have a set of core investing principles to hold onto.

These principles will be what you anchor your investment decisions and actions on.

They will be absolutely crucial especially when you inevitably face difficult market situations.

Once you have your investing principles, write them down somewhere safe and refer to them anytime you feel fear, uncertainty or doubt about your investments.

The core investing principles you hold onto will be deeply personal to you, and I encourage you to take the time to reflect and formulate yours.

Here are my core investing principles, for inspiration:

  1. Only invest what you can afford to lose
  2. Keep it simple – buy and hold, let compounding do its thing
  3. Don’t try to time the market, leave that to the experts
  4. Use short-selling, leverage, and derivatives with caution, or not at all
  5. Only invest in what you can understand, otherwise indexing is your friend
  6. Business fundamentals come first, valuations or technical analysis come later
  7. Review and rebalance, but not too often
  8. If you’re losing sleep over investments, you’re taking too much risk
  9. Let the stock market do its thing, get a life!

2. OPEN AN ACCOUNT WITH A DISCOUNT BROKER

Before you can even buy any shares, you first need a trading account with a broker.

The good news is that there are so many discount brokers out in the market now. Some are aggressively trying to gain market share, offering free shares and limited commission-free trades for new sign-ups.

In Singapore, brokers like Tiger, MooMoo, Saxo, and Interactive Brokers offer very competitive fees.

Do note though that most of these brokers will act as custodian for your shares. That means that if you trade with these brokers, your shares will be held with the broker on your behalf. So if the broker goes bust, there’s a risk that might lose your shares.

But with that said, all the brokers I mentioned above are licensed and regulated by MAS in Singapore. Although that doesn’t guarantee that you won’t lose your shares, I do at least get some comfort knowing that big brother is watching them and making sure they behave.

If you’re still paying a minimum of $20 or more for trades, do consider one of the newer discount brokers. If you’re a small retail investor like, every little bit saved on fees goes a long way in improving your overall returns.

I’ve been trading with Tiger Brokers, and they charge only US$1.99 min per trade on US stocks. That’s a far cry from when I was paying $10 min per trade with Standard Chartered and even $25 min per trade with DBS Vickers!

If you want to sign up for an account with Tiger Brokers, you can use my referral link.

Although fees are the prime consideration when choosing a broker, you need to also consider other things like user interface, ease of use, and performance tracking. Some of the newer brokers even provide really cool stock analysis tools and help you keep up with the latest news and developments.

3. START BUYING INDEX FUNDS REGULARLY

Once you have your brokerage account up and running, it’s time to put your money to work.

But hold on! If you don’t have a portfolio or trading plan yet, don’t buy any stocks just yet. You don’t want to end up with a haphazard portfolio of random stocks.

However, you could consider buying index funds as a start.

Index funds that track market benchmarks like the S&P 500 or NASDAQ are great core holdings for all investors. Because these funds hold so many stocks from many different sectors, they are extremely well-diversified and thus offer a less risky way to get into the markets.

Here are some index funds you could consider:

  • Vanguard Total World Stock Index Fund ETF (ticker: VT) – tracks the FTSE Global All Cap index, which includes US and International stocks
  • SPDR S&P 500 Trust ETF (ticker: SPY) – tracks the S&P 500 index, the most widely followed benchmark for the US stock market
  • Invesco QQQ ETF (ticker: QQQ) – tracks the NASDAQ-100 index, which are more heavily weighted towards tech stocks

I’ve previously written about VT here. Personally, I’ve chosen to invest in VT and QQQ as my core holdings.

After you’ve picked one, set aside funds for investments every month to buy your chosen index fund. Investing is long-term commitment and requires regular and consistent contributions to build wealth.

4. KEEP LEARNING WHILE STAYING INVESTED

While you’re invested in core index funds so that your money isn’t getting eroded by inflation, take your time to research and build up your financial knowledge.

Investing is definitely NOT a get-rich-quick scheme. Anyone who tells you that it is and that you can earn high returns in a short time without much work is probably trying to cheat you or get you to buy something.

Either you take the passive hands-off approach by fully investing into index funds, or you put in the hard work and due diligence required for individual stock analysis. There are NO shortcuts.

Investing in individual stocks requires an order of magnitude more time and effort to analyse and follow.

If you’re looking at fundamentals, you will need to learn how to read financial statements, understand financial ratios, qualitative factors, etc. of a given company you’re intending to invest in.

If you’re looking at technicals, you will need to learn about charting tools, patterns, trading signals, etc.

There’s always something new to learn in the stock market. That’s what makes it so exciting. But keep in mind that when you’re trading in individual stocks, you’re going up against the experts. Unless you’re willing to put in the work to even have a chance, don’t buy individual stocks and stick to index funds.

CONCLUSION

If you’ve been thinking of investing in the stock market, the best time is now. Don’t wait for the next market crash or pullback. Remember, inflation doesn’t wait for you and retirement isn’t getting any further away (unless you delay it).

Don’t make excuses for yourself that it’s not a good time to invest. Take control of your financial future, today.

Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

For more investing resources, see my Referrals page.

Disclosure: This post may contain affiliate links and I may get a commission when you click on the links or open an account through the links, at no additional cost to you. I only recommend products or services that I have personally tried and have found useful.