How to start investing in stocks: a 7-step guide for beginners

• The stock market is judged over years. US stocks returned 10% a year on average from 1928 to 2025, dividends included, but they lost 36.55% in 2008 and 18% in 2022.
• An index fund beats most professionals. In 2025, 79% of active US large-cap equity funds did worse than the S&P 500, and 89% over five years.
• You do not need a large sum. Many brokers accept a few dollars, and fractional shares let you buy part of an expensive stock.
• Time matters more than the amount. 100 a month at 6% a year grows to 190,768 in forty years, about twice as much as in thirty.

Investing in stocks means buying a share of companies, directly or through a fund, to benefit from their profits and growth over time. It is not trading: a trader buys and sells over days or hours, an investor holds for years. The two have different rules and different risks.

This guide follows the order in which decisions are made: what to sort out before investing, your horizon and risk, the account, the broker, what to buy, the first order, then how to stay the course and the mistakes that cost the most. The figures quoted are dated and sourced.

Step 1: what to sort out before investing

Two things come before the stock market. The first is an emergency fund: three to six months of expenses in accessible, risk-free accounts, so that a breakdown or a spell without income never forces you to sell your stocks at the worst moment. The second is expensive debt: a credit card or personal loan at 15 to 20% a year costs more than the stock market returns on average. Paying it off is a guaranteed return at that rate.

For readers in France, the guide to where to put your money in France in 2026 explains how to split savings between savings accounts, the euro fund and shares depending on when you will need the money.

Step 2: set your horizon and the risk you accept

Over the long run, stocks have returned more than risk-free investments. According to the historical data of Professor Aswath Damodaran (NYU Stern), the S&P 500 returned 10.02% a year on a geometric average from 1928 to 2025, with dividends reinvested, against 3.37% for three-month Treasury bills. These figures are in dollars and before inflation.

The price of that return is the drops. The same index lost 36.55% in 2008 alone and 18.04% in 2022, before gaining 17.78% in 2025. A fall of 30 to 50% can happen within months, and it has sometimes taken years to recover. That is why you only invest in stocks money that can wait five to eight years at least, and why past performance never guarantees future results.

The real question is not the drop you think you can handle, but the one you will handle while watching your savings shrink for months. If a 30% fall would make you sell everything, your share in stocks should stay small, and the rest should go into guaranteed savings.

What about inflation?

The historical returns quoted here are nominal: they do not account for rising prices. With inflation at 3% a year, an investment returning 7% only adds a little under 4% of purchasing power a year. That is what makes stocks useful over the long run, and it is also why money left for years in an account paying 1 or 2% loses value, even though it never falls in dollar or euro terms.

Step 3: choose the right account

The account decides the tax on your gains, not their size before tax. Almost everywhere there is an ordinary taxable brokerage account, which accepts everything and whose gains are taxed, and one or more tax-advantaged accounts with limits and rules: the IRA and 401(k) in the US, the ISA in the UK, the PEA in France. The "where to hold ETFs by country" section of the ETF guide sums up the rules in five countries.

The general rule: use your country's tax-advantaged account first, up to its limit, and only move to a taxable account for what it does not allow. In the UK, for instance, up to £20,000 a year can go into a Stocks and Shares ISA, with gains and dividends tax-free.

Step 4: choose a licensed broker

Whether a bank or an online broker, the firm must be licensed to provide investment services in your country: check the regulator's official register (FINRA BrokerCheck in the US, the FCA register in the UK, the AMF and Regafi in France). A site that promises high returns with no risk, or that appears in no register, is not a broker.

The securities you buy remain your property, kept separate from the broker's own accounts. If it failed and securities were missing, a protection scheme steps in: in the US, SIPC covers up to $500,000 per customer, including $250,000 in cash; in France, the FGDR compensates up to €70,000 of securities per person and per firm, according to the AMF. None of these schemes covers market losses.

Then compare costs: commission on each order (some brokers no longer charge any on stocks or ETFs), custody fees, currency conversion fees if you buy securities in another currency, and whether you can buy fractional shares or set up recurring purchases.

Step 5: choose what to buy

You have two routes. The first is picking stocks one by one: it is fascinating, but you need at least ten holdings so as not to lose everything on a single company, and the time to follow them. The second is buying an index fund, often an ETF, which holds a whole market for annual fees often below 0.3% on the major indexes.

The numbers favor the second, at least to begin with. According to the SPIVA report by S&P Dow Jones Indices published in March 2026, 79% of active US large-cap equity funds underperformed the S&P 500 in 2025, and 89% over five years. If most professionals do not beat the index, buying the index itself is a sensible starting point.

A global index fund spreads your money across thousands of companies in some twenty countries; a fund on a single country or sector concentrates the risk. The guide to what an ETF is explains how to compare them, and the one on stocks covers the basics of individual shares.

Step 6: place your first order

A stock order says what you are buying, how many and at what price. A market order executes immediately at the available price, which can differ from the one displayed if the security is thinly traded. A limit order sets a maximum purchase price: it only executes if that price is reached. To start, a limit order placed during exchange hours avoids unpleasant surprises.

The guide to order types covers each order in detail. Before confirming, check three things: the right security (the same name can refer to several funds, so check the ticker or ISIN), the quantity, and the total price, fees included.

Step 7: invest regularly and stay the course

Nobody knows when the market has bottomed. Investing a fixed amount every month, whatever the price, spares you from guessing: you buy more units when prices are low and fewer when they are high. This method, dollar-cost averaging, guarantees no gain, but it removes the temptation to wait for the "right moment", which never comes when you expect it.

Time then does most of the work, because gains generate gains of their own. As an illustration, 100 a month for thirty years at 5% a year grows to 81,538 for 36,000 paid in. At 6% a year, forty years of contributions give 190,768 and thirty years 97,451: starting ten years earlier almost doubles the result. The compound interest calculator reruns the numbers with your own amounts, fees and inflation included.

Once a year, check whether the split between stocks and guaranteed savings has drifted from the one you chose, and rebalance if needed. The rest of the time, checking your investments every day mostly pushes you to act at the wrong moment.

A concrete example: an investor's first year

Take a 30-year-old employee. She has set aside four months of expenses in accessible accounts and has no consumer debt. She opens a tax-advantaged account with a licensed online broker, picks a global index ETF after comparing its fees, and schedules a 150 purchase on the 5th of every month, right after payday. Her first order is a limit order.

In the fourth month, the market falls 12% in a few weeks. The 600 she has paid in is now worth about 530. She does not sell and changes nothing: the next month's purchase happens at a lower price and buys her more units for the same 150. This is exactly the moment when many beginners give up, and the moment when regular investing shows its value.

By the twelfth month, she has paid in 1,800. She opens her statement once, checks that the fees charged match those in the key information document, notes her cost basis and raises her monthly amount to 200 after a pay rise. She has done nothing else all year.

This example is not a promise: the same year could have ended down. It shows the order of decisions and the behavior that protects you most: the emergency fund first, automatic purchases next, no reaction to drops, one check a year.

The costliest beginner mistakes

1. Selling during a downturn. A loss only becomes final when you sell, and those who sold at the bottom of major crises often missed the recovery.
2. Betting everything on a few fashionable stocks. A company can lose half its value in a single session; a whole index, far more rarely.
3. Confusing investing with trading. Buying and selling often multiplies fees and mistakes. Trading is a different job, with its own risk management rules.
4. Ignoring fees. One percentage point of fees a year weighs more over twenty years than most performance gaps between two investments.
5. Investing money you will need. Without an emergency fund, the first surprise forces you to sell, often at the bottom.
6. Not tracking your cost basis. Without it, you cannot tell whether a position is up or down, or report your gains correctly.

How much money do you need to start investing in stocks?

Much less than you might think. Many brokers have no minimum, or a few dollars, and fractional shares let you buy part of a stock or ETF whose full share costs several hundred. With small amounts, watch fixed fees above all: a $2 commission on a $50 order is 4% lost before you even start. Recurring purchases with low or no fees are then the best option.

Tradoshi's portfolio tracking keeps your cost basis line by line, measures your unrealized gains and compares the allocation you aim for with the one you actually have. And if you also trade, the trading journal keeps the two activities apart.

This guide is educational and is not personalized investment advice. Any investment in stocks carries a risk of capital loss; past performance does not predict future returns.

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