First Steps to Investing in the Stock Market

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Investing in the stock market can be overwhelming for many. It doesn't have to be. I share simple tips to get in the stock market and grow your wealth now.

I remember my first exposure to investing in the stock market like it was yesterday. I was ten years old. My grandfather had given me ten shares of AT&T stock. The shares were in physical certificate form and all I knew was that the piece of paper was supposed to be worth money – or so I was told.

Fast forward several decades (too many if you ask me) and my curiosity with investing in the stock market has grown into a passion.

Over those years, I’ve made many mistakes, but thankfully those have been few and far between. You don’t have to be an expert at stock market analysis in order to be successful, but you do have to be willing and ready to take on risk, not to mention a desire to grow your wealth.

While the potential of loss can cause many to avoid investing in the stock market, it is a necessary part to increasing your net worth. Investing in the stock market really only takes a few simple steps that nearly anyone can follow and have a relative level of success. If being in the stock market is something you want to do but aren’t certain where to start, this post is for you.

Determine How Much You Want to Put in the Stock Market


Unless you come from money, you’ll probably be starting from scratch and that’s ok. Many of us have to start small – myself included. Begin by determining how much you want to invest.

If you’re going the route of investing in mutual funds many will have some initial minimums you need in order to buy in. There are numerous ones available that have no minimum balance requirement, such as through Betterment.

If you’d rather invest in individual stocks, you need to choose an online broker. Many of these will also have minimums to get started, though some of them don’t. If you don’t have $1,000 to invest right now, set a goal for yourself to save up the money as you can start investing with $500 or less at a number of online brokers.

When you reach your goal, your investment account will mean all the more to you because you had to work harder for it.

Just remember that, if you are contributing to your employer’s 401(k), you are technically already investing in the stock market. An individual portfolio will simply offer you more control than the pre-selected mutual funds of your 401(k) plan. This is, of course, depends on the amount of funds you have to invest, but can be a great way to add further diversification and greater growth potential.

For example, you may way to diversify into real estate or guarantee your family’s future financial security with life insurance. For the latter, like any other financial product or service, I’d recommend researching the best companies before purchasing a policy. If tragedy strikes, a term life insurance policy will provide significantly more funds for your family to live off of than a stock portfolio that has been growing for a few years.

Where Will You Invest the Money?


If you want to start investing in the stock market, there are many places that can help you do just that. You can choose from one of the various online discount brokerages, or you can go more local and find a commissioned broker in your area. The downside to a commissioned broker is they have considerably higher fees and may have higher minimum requirements. The benefits of an online brokerage are lower fees and more control.

This begs the question of which online broker to choose as there are dozens of them. Don’t let that overwhelm you or hold you back from investing in the stock market. If you’re new to investing, then feel free to check out my learn to invest page as I have a selection of different posts I’ve written on how to get started investing.

You can also check out my best online brokerages page to find some of the best options to consider. Assuming you’re going to invest with little money, here are some of the top ones to consider, along with their minimum balance requirement:

As you can see, there are many available options to invest your money in the stock market. Just pick the one that fits your needs best and start!

What Will Your Portfolio Look Like?


I like the Warren Buffett approach of investing in what you know.

This may be oversimplifying it, but given his solid wisdom I tend to listen when he talks about investing in stocks. The basic idea is to look around your house and your day-to-day life to see what products you use on a regular basis. Many of the companies that make those items have been around for decades and are solid companies.

The other idea to follow when it comes to what your portfolio should look like is that you want to invest with the stock market and not against it. In simple terms this means you have a long-term view not caring what happens from day to day. That approach tends to do far better than reacting to short-term blips.

Given that, a great approach to take is to invest with the stock market by investing in solid index funds. Put plainly, an index fund is a basket of stocks that follows a certain index like the Dow Jones or S&P 500.

This approach will help you stay with the market as opposed to trying to time the market and end up losing more in the process. If this sounds overwhelming to manage, there are options to help.

Automated retirement programs, such as Betterment, manage a portfolio of such index funds at minimal cost and nothing required to start.

Regardless of which approach you take, you need to determine what level of risk you are most comfortable with. You can invest in individual stocks, some mutual funds, all bonds or a combination of all the above.

When you’re just starting out investing in the stock market, or many times for that matter, a good mix of those various vehicles is probably your best option available. The problem can be knowing how to determine that mix.

Many online brokers have calculators to help you determine the best mix, so make sure to use them. If you choose a robo-advisor like Betterment they do the same and rebalance your portfolio as the year goes on to ensure your portfolio is at your comfort level.

The other thing to consider is that you want to be careful not to have too many brokerage accounts as it can lead to not having a good grasp of everything you’re invested in or the fees you might be paying.

While I do have multiple brokerage accounts at different places, I manage the entire portfolio through Personal Capital which allows you to watch all your investment and banking accounts in one place. This not only provides one location to go to, they also analyze if there are cheaper investment and banking alternatives for you.

What I love even more about Personal Capital is that it’s completely free to use and provides a great way to stay on top of all your finances – not just your investments.

Investing in the Stock Market is Vital to Building Wealth


Fear is a common reason given for why people don’t invest in the stock market. I can certainly understand that feeling. Don’t allow that fear or the feeling that you don’t have enough to invest hold you back from investing in the stock market. These are common investing lies that only rob you from growing your wealth.

Time, in terms of growing your assets as well as putting you on an improved path for your financial future is best served by investing your money. If you plan to retire someday, then it’s vital that you begin going down that path sooner rather than later. By having a long term vision of your assets you’ll best set yourself up for overall financial success.


Investing in the stock market can be overwhelming for many. What was your first investing experience?

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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.

Latest posts by John Schmoll (see all)


  • Justin@TheFrugalPath says:

    I’m a big fan of value investing. Warren Buffett is my financial idol. It’s just very difficult to emulate the way he invests because it’s very difficult to jump in when everyone says get out. And to get out when everyone says to get in.

    • John says:

      I tend to be as well Justin. It can be difficult to follow Buffett’s strategy, but he’s able to separate his emotions which is vital to have.

    • Dustin Small says:

      When I first started investing I was totally enamored with the idea of technical analysis, and the ability to make buy/sell decisions based on the numbers and charts alone. I quickly learned that this was not as easy as it looks however, and since then have been focused on Value Investing techniques as well. Yes, it can be difficult to get in when everyone else is getting out, but not so much if you know what you’re buying is worth more than you’re paying for it.

  • DC @ Young Adult Money says:

    My first investing experience was investing in a green energy ETF that my uncle recommended. I invested $500. Let’s just say I bought at the peak :/

  • Jordann @ My Alternate Life says:

    I must admit I have $0 in the stock market. I’m focused on paying off debt right now, and since I’m only 23, I’m ok with not having any retirement savings just yet. That, and investing in the stock market scares me because I don’t really know much about it. Thanks for the beginner tips!

    • John says:

      I can understand that feeling Jordann as I was there once too. Do you have access to a 401k? If so, I would take advantage of any free matching and go from there.

      • Catherine says:

        We don’t have 401k’s in Canada- I assume they’re similar to out RRSP’s though (registered retirement savings)? I also don’t have any stock involvement, something I plan on educating myself on asap so can participate. We just found out we’re eligible to now contribute to hubby’s pension which is great- 2% salary matched 100% we just need to determine what type of investment plan we want to go with.

        • Dustin Small says:

          Hi Catherine,

          Yes – an RRSP is essentially the Canadian version of an American 401K. 23 years old is the perfect age to start contributing to one if you haven’t already, even if you only put a small amount of money each month into it. The advantage with an RRSP is that you don’t pay tax on that money when you put it in. That extra money you’re saving on tax really adds up over the long term.

  • Matt says:

    My first investment was in a company that my mate worked for. He’d been given stock options as part of his employment and told me about them. This piqued my interest so I looked into how to buy shares and promptly bought some myself. I was lucky, they did very well and in the end paid for my wedding πŸ™‚

  • Lauren @ L Bee and the Money Tree says:

    I JUST bought individual stocks out of my fidelity account the other day-my balance from my old job had just been hanging out there. I’m REALLY starting to get into it, it’s exciting to check every day and see what is going on. I only invested in brands I use/enjoy, but hopefully I will have the opportunity to branch out soon.

    • John says:

      That’s awesome! It can be exciting to watch what your stocks are doing, as long as you don’t let the emotion dictate your decisions. Starting out with some brands you know is a great way to start out.

  • Kim@Eyesonthedollar says:

    I have put most of what I’ve invested in index funds with very little in individual stocks. Maybe when I have more time to research them,? I think you bring up a good point with determining how much to start with and work toward that goal. You’d never get started without a goal, even if it’s $25 at first.

    • John says:

      That’s a great route to take Kim, especially if you don’t have the time to research. I totally agree, you do need a goal to help you be successful as you get started.

  • WorkSaveLive says:

    The best place to start is just by throwing money into your 401k. Then, take some time to learn about/review your investment options with the 401k and pick one. See how it does and start trying to pick up more (learn more) each week.

    • John says:

      Great point Jason! Most plans will generally offer a few solid options and is a great way to get your feet wet. The possible free money isn’t too bad either. πŸ™‚

  • Mandy @MoneyMasterMom says:

    I totally agree that stock investing is vital to building wealth. You’re not going to get results investing in CD’s, and a lot Mutual Funds have some crazy fees that really cut into profits.

    • John says:

      Great point Mandy! CD’s serve a purpose, but these days they don’t even serve much of one. I hate paying high fees, so I avoid them all I can.

  • Derek @ Freeat33 says:

    Investing in what you know is really important. My first stock was a oil and gas start up. I saw the value considering I work for a major player in the industry. My next purchase was a local brewery that was gaining popularity fast. I made a great profit on both. Don’t get me wrong, I picked some real LOSERS too.

    • John says:

      I agree Derek, it can be a great foundation to build from. I hear you, I’ve had some awesome winners and some awful dogs as well.

  • Grayson @ Debt Roundup says:

    I just started investing a few months ago because I was working on paying off my debt. I will say that it is overwhelming, but once you take some time to learn it, it is not as bad. Thanks for the great steps John!

    • John says:

      Great for you Grayson! It can be overwhelming in the beginning, but there’s so much free info & education out there that you can really get a good, basic understanding of what to do.

  • Pauline says:

    I have read a book on investment provided by a broker company and decided it was too complicated. I like the invest in what you know and have stuck to real estate and index funds for now. I have had a good eye for companies I liked before they were really famous and have seen their stocks really appreciate so maybe on the next call I will invest.

    • John says:

      You have to invest in what you know, otherwise you’re opening yourself to much more risk. From what you’ve said in the past I can tell that you have some good diversification working for you.

  • Ornella @ Moneylicious says:

    My portfolio is pretty aggressive. I don’t have the time to day trade. Therefore, I stick with a long-term approach to my investment stratedgy and invest in low-cost index fund & ETFs in different sectors.

    • John says:

      We’re fairly aggressive as well Ornella. I don’t have the time or stomach to day trade, so I leave it to those that do. Having a long term view really is important when it comes to investing.

  • Midlife Finance says:

    I think when you start investing, you should just go with index funds. This is easy and many people can get started right away. Investing in what you know usually mean investing in your employer’s company and that’s not a good thing for most people in the long run.

    • John says:

      That’s a great point about index funds. What I was referring to with investing in what you know was however about investing in brands you know. It’s a strategy espoused by Buffett and can be a pretty solid one in my opinion. Investing in your company is a whole different can of worms for a different day.

  • MakintheBacon says:

    My mom told me to invest early on in my mid-twenties. Initially I ignored and said it was boring and that I didn’t have enough money because I just graduated. Eventually I came to my senses and started to invest in guaranteed investment certificates, which were low risk. Then I moved on to mutual funds in which the minimum contribution was $500.

    • John says:

      Sounds like I’d get a long well with your Mom. She’s totally right because time is a great thing when it comes to investing. Great to hear that you’ve started with some funds.

  • Mackenzie says:

    Investing is definitely something I need to learn more about! It seems overwhelming, but I am going to figure it out. That’s one of my goals for next year.

    • John says:

      It can be overwhelming Mackenzie, but I would encourage you to not let that hold you back. There’s a lot of free education available to get people started and that education can really breed confidence. Perhaps a post for me to do in the future. πŸ˜‰

  • K.K. @ Living Debt Free Rocks! says:

    I had held a few index funds but recently sold them to hold the cash in my RRSP. When one is looking to permanently move to another country from Canada it presents a whole host of taxation consequences. So my job right now is to learn the rules so that when the time comes that I know exactly how I need to act with my investments to minimize the amount of taxes I’ll need to pay. Once I transfer my assets to the US I’ll be looking forward to getting back into the stock market!

    • John says:

      I would imagine that it presents some unique taxable consequences. Our tax code is messed up enough as it is without throwing another country into the mix as well. πŸ™‚

  • Joanna @ Our Freaking Budget says:

    Yes, please keep covering this topic! One of our goals for 2013 is to meet with a financial advisor so we can start investing in stocks beyond just what our companies offer.

    • John says:

      Thanks for the feedback Joanna, I plan on it! I love investing and the Market so it’ll be a regular feature. That’s a great goal to have, I would be careful though to be cognizant of what they might charge.

  • Kyle James says:

    Great topic. My first experience in investing was setting up a SEP IRA when my online business started doing fairly well back in 2004. A little scary dropping a huge chunk of change into it, but the tax savings quickly erased that fear πŸ˜‰

    • John says:

      Thanks Kyle! We just expanded our business this year and need to get a SEP set up. I love that the contribution limits are so much higher, it can provide a nice little tax savings.

  • AverageJoe says:

    While it feels safer to stay in cash, I think what many investors forget is inflation. Money sitting in a bank account earning nothing is actually losing purchasing power. You might as well spend it now! Over long periods only stocks and real estate have reliably beaten the pants off of inflation.

    • John says:

      Great point Joe! I think a lot of people justify keeping cash in a bank account by saying they’re fearful or can’t lose money. However, with rates the way they are they really are losing that purchasing power thanks to inflation.

  • Canadianbudgetbinder says:

    I think all it takes is to make money once investing and then look out , but it can also backfire in someone’s face so I want to make sure I know what I’m doing before I jump in. Nothing is for certain though but once I learn more I’ll start dabbling with stocks. Thanks for this post John. MR.CBB

    • John says:

      That’s a good stance to take Mr. CBB. I often find that education is a great equalizer and can really breed confidence for many investors.

  • Brian Fourman says:

    For me, the biggest challenge to being in the stock market is not paying attention to it every day. When I first started investing, I would check my stocks every hour (with streaming quote services on my desktop). I would get too upset with the ticks down on my stocks and too excited with the ticks up. And when you are emotional, you make REALLY BAD investment decisions. I learned through the years to better manage the emotions and might only check my mutual fund positions about once a month.

    The market is driven up and down each day by fear or greed or other various reasons that we, as small time investors, have no control over. This shouldn’t detract people from getting in it. As other’s have said, it is an incredible way to generate big time wealth.

    • John says:

      Great points Brian! I could not agree more in terms of emotions and investing. The key is learning to be able to separate the two so you can make measured and rational decisions. That’s easier said than done though and when the market is 95% fear driven you’ll end up ahead of the game if you can keep a cool head.

  • FI Fighter says:

    Great advice on investing in what you know. It’s the simplest way to invest, and chances are high that you will pick a solid blue chip as a result. People can stop buying ipads at any moment, but they’ll still need the basics like toothpaste, electricity, and gas for their cars. How about some PG, SO, and XOM? You could probably do a lot worse than that.

    My first stock purchase was RIMM back in late 2008. I followed a “tip” from my brother who was working as an engineer on the Storm II product. He thought for sure it was the next big thing that couldn’t fail. It’s fun to laugh about it (why didn’t I at least buy 50% AAPL!), but luckily I was able to break even and not lose any money. After holding for a year, I think I profited enough to buy a cheap steak dinner πŸ˜‰

    I think that exposure was all I needed to learn that investing in growth stocks was not in the cards for me.

    • John says:

      Great points on buying the staples! Many people don’t realize that but a lot of what you use around the home or in your day to day life are made by numerous major companies that have solid stocks.

  • GoodTrader says:

    My style of trading in the markets is momentum trading but I completely agree that start small and learn to invest is a must and good advice.

  • Buy & Hold Blog says:

    First time visiting your blog. Loved this blog post. I totally agree that fear is a common reason given for why people don’t invest in the stock market. Fear also keeps a lot of people from getting out of bad investments. This is one reason why I follow the Buy & Hold approach to investing where I buy low cost, high quality index funds and keep buying them using the dollar-cost-averaging method to even out ups and downs.

    • John says:

      Thanks! Fear can be a powerful thing, but it should not be anywhere near your investments as it can negatively impact your investments leading you to make unwise decisions. Thanks for stopping by!

  • Johnny Moneyseed says:

    I love investing. It’s easily one of the best things to become passionate about. I started by buying about $600 worth of common stocks. Fast forward a few years and I’ve learned a lot about how the market works, and have just a little bit more than $600 now ;).

    • John says:

      As do I. It has taken some time to get to where I am at, but love learning more and being in the market. Must be the nerd in me. πŸ˜‰

  • Jose says:

    Value investing has been my biggest success strategy, especially over the long term. I follow some of the strategy (with some minor deviations) in Joel Greenblatt’s book, “The little book that beats the market”. I also use technical analysis, more to help identify good points to get in or out of a position. I’ve been following that strategy for almost four years now and I’m happy with the result so far.

  • Rich Uncle EL says:

    I welcome the fear and take baby steps with investing. I like the security of ETF’s and mutual funds, but nothing in the investing world is as exciting as striking on an individual stock. I tend to favor brands I use and respect. But I have chased a few high yielding stocks for the fun of it. Thanks fo the post.

    • John says:

      I do as well. I think the key is to not let that fear hold you back in regards to investing. I like being able to buy a stock/option and getting a hefty return on it, but I think ETFs and Mutual Funds are good for many…especially those that lack time/investing knowledge. Buying the brands you know is a great angle to take…heck Buffett preaches it. Thanks for stopping by!

  • Adam says:

    I remember the first time I invested in stocks too. I had a friend who referred me to a broker. I took $500 and wanted to invest in this high risk stock. He encouraged me to diversify or buy a fund or even buy a more conservative stock. Of course I didn’t and bought it anyway. It actually worked out well for me and I made a little money. It wasn’t long after that though that I learned my lesson, investing in a penny stock based on a recommendation of a relative who heard from a friend that….. I’m sure you’ve heard the story before. I lost a bunch before I finally sold out.

  • A Frugal Familys Journey says:

    Investing in individual stocks isn’t for everyone…some prefer to give their money to a financial expert to invest. No matter what type of investor you are, the goal is to simply invest and grow your money. The sooner the better because your money will have more time to compound and grow. Many great bloggers out there to help you get your feet wet no matter which style you prefer. πŸ™‚

  • Nate Matherson says:

    The stock market is really volatile right now. Novice investors should really look away from their portfolios over the summer. I have a Betterment account… they’ve been emailing me everyday telling me not to worry.

    Any tips for keeping calm during market volatility?

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