Get in the Investing Game: 6 Tips for Beginners Investing in the Stock Market

Positions. Shares. Stocks. Mutual Funds. Is investing in the stock market something you want to do but haven’t because you are scared or feel that you don’t know where to start? I’ve been there.  I grew up reading the money section of the newspaper off the kitchen counter where my mother would put it when she got home from work.  

I had no clue what most of the columns meant. I would ask my older sister who told me that I should read the articles and look at the daily changes in the stock prices of companies that I like so that one day I could invest money in the market and be rich one day.  I read the pages everyday throughout middle/high school. I was sold! I wanted to be rich someday. I wanted to buy my own stocks but I didn’t know how. Here’s some advice from my own experience going from no stock to chasing my 1.3 Million FIRE number.

1. Start Where You Are

If you want to start buying stocks, it doesn’t have to be complicated or difficult.  My own start into stocks was very simple. I got my first job at Toys R Us working part time while I was going to college. Before my first day my sister told me during orientation to ask them if they had a profit sharing plan or a stock purchase plan. I asked and they did have a stock purchase plan. So I signed up and had money coming out of my little paycheck per week.

That was my first stock and I was able to buy 6 shares over a time. (Remember I was part time). I sold the shares before I left and made my first capital gains profit. Since my income was low I barely paid any taxes on them.

2. Don’t Listen to Negative Nancy

After I graduated college and got my first career job I was super excited to start putting real money to work. They did not have a stock plan but I started contributing 10% to the 401k they offered. I wanted to invest in stocks but they only had a group of mutual funds, my first time buying those, from the same family of funds as their 401k.

It really bothered me that when I talked to 401k representatives who would attend our open enrollments they would tell me “not to think about the stock market because it really wasn’t for someone like myself. I just needed to focus on contributing at least 10% to my 401k and I would retire at 65 and be okay.” Really ANNOYING.

I would talk to other co-workers and friends and they would all laugh it off and tell me to stop worrying about tomorrow and focus on today. I knew this was something I wanted to do and if I was going to make it happen I needed to not listen to them. You will also need to block out the negative Nancies some of whom are intimidated because they aren’t investing.

3. Educate and Empower Yourself

I continued to read about investing and I started to pay for subscriptions to magazines such as Money, Smart Money, Kiplinger and Fortune. I figured they were cheaper than hiring my own financial planner to tell me the same thing as the 401k advisors. After a few years of 401k contribution and putting away more money into my savings account I decided I was ready to take the plunge into stocks on my own but didn’t know which brokerage firm to use.

Bank of America must have been profiling me because I started getting notices to sign up for Merrill Lynch brokerage account offering 30 free trades and no monthly maintenance fee.  I called the 800 number and they walked me through the steps and I funded my account with $2k from my savings. I was excited and nervous but I did it and I read the instructions and talked with the online reps. I made my first 3 buy trades. I bought Coca Cola, McDonalds and Walgreens.

There are more free resources available today. Make use of them. Also consider paying for the subscription magazines mentioned above or see if your local library has subscriptions. Take the time to educate yourself before jumping in.

4. Decide: Investor or Day Trader?

I didn’t have an investing strategy I just wanted to buy companies that I had heard of. I got my feet wet. I watched the market all day online while at work. I would watch it in the evenings since I set my DVR to recorded CNBC morning finance shows. I would watch Suze Orman every Saturday at 5:00pm. I couldn’t get enough. I want to say I was a huge success but I wasn’t. I got greedy.

The trades were free so I went wild and I started moving more money. I even moved my $10K emergency money over as well.  I started buying stocks that I had never heard of just because the analysts, (talking heads) were calling them a buy. I was trading and selling within the same week. I was all over the place. I would buy/sell on same day and I maxed out my 30 trades per month within the first two weeks of the month. I was losing money not making it.

I didn’t want to hear I told you so and I hated seeing my account shrink. I settled down and decided to learn more.  I finally got few books from authors like Suze Orman, Jean Chatzky, and Ric Edelman. I realized I was day trading on a smaller scale. I did not want to do that. I wanted to be an investor. This took a few months and it took seeing most of my stocks in the RED that woke me up.

Decide for yourself your investing strategy is going to be. How much time per week do you have to devote to watching the market, doing the research and making trades? Do you understand the difference between a day trader and an investor?

5. Define your Buy/Sell Criteria

I decided I was going to sell all the stocks I had that I didn’t know anything about (16 positions) at the time and only keep what I know. I would focus on them and research them to make sure they were good buys. As I started to research, I came across an article about a thing called “Aristocrat Dividends”. This was my foundation for stocks.

If they were on this list, then I knew at least I was buying a long term winner. I also wrote down other things that I needed to do to make sure that if one stock got hit hard, I could still be winning-DIVERSIFICATION. I learned all about the Sectors and how you should have stocks in multiple sectors so that you don’t duplicate your holdings.

At the time I had VZ (Verizon) and T (AT&T) so no wonder both were down at the same time. I also had 2 shipping tanker companies. (Don’t ask). I chose VZ over T since I use them as my cell carrier. I figured I’d pay myself first. So my last criteria, was that I wanted to have a good position (100 shares) in each stock and build from there.

To recap my criteria:

1. I wanted to own stocks in companies that I had heard of myself.

2. I wanted to own dividend stocks – (this would be my foundation). I would own non-dividend stocks but my “anchors” would be my dividend stocks. This group would rarely be SOLD. They would stay in the portfolio and be BUYS if they were hit hard.

3. I wanted to own stocks in each sector of the market – This one has been challenging for me. Some sectors I just don’t like or haven’t done well for me like Healthcare and Materials.

4. I wanted to own a position of 100 shares in each stock and hold that position until I was able to purchase more once my other positons reached 100. I didn’t do this in any particular order.

5. I would only buy on down days. I didn’t want to be chasing the market.  

6. I would buy in blocks of 5-10 shares at a time. This was as close as I could get to dollar cost averaging because I don’t like fraction shares. To do this I keep my dividend payouts in my account until I am ready to buy shares and I don’t necessary use them on the same stock that I received the dividend from. WHY? It’s the house money. So why not buy in shares that are down more and better buys.

Before you begin in stocks define your own buy/sell criteria. What mix of stocks would best suit your investment approach? Deciding your criteria now will help you down the road from making impulse buy/sell decisions instead of making objective decisions.

6. Trust your Gut

I knew that I wanted my stock portfolio to consist of 10 to 15 positions. I could manage this number while working fulltime. I also decided that I would still watch the shows and keep my magazine subscriptions although I have cut back to only 3. More importantly, I would not just act on the hot stock tip of the day. I would buy it when I was ready. When was I ready?  My gut would tell me, as well as my available cash balance.

I have continued to do this method since 2012. Yes, it took me a few more years to get it right. I admit in 2007-2011 after I moved cross-country to California I was not in a financial position to keep investing more into the market. But I never got out of the market. I just curbed my buys while the recession happened. I started hoarding cash again in my savings account. I still beat the market and saw my brokerage account grow and grow just from the dividends and capital gains. I knew I finally got it right. BUY and HOLD. I started to read about the FIRE (Financial Independence Retire Early) movement and I said that’s it. I’m in. My FIRE number is 1.3 Million which I hope to reach in the next year.  

Let your gut be your guiding force. I had to learn the hard way by losing money in the beginning so that I wouldn’t panic now. Especially in the last few months.  It wasn’t easy at first to see the down days. It’s easier now because I just don’t look at it every day.  I have a solid portfolio and I let it do the work since I already did the hard part. I started investing. I got in the game.

Are you a newbie investor? What tip did you find most helpful?

Michele resides in Los Angeles but is a transplant from the Windy City (Chicago). She works as a Senior Accountant for a nonprofit. She is a pretty private person but is on Instagram to interact with people who don’t want to settle for 65/bingo lifestyle.  She loves reading anything finance or home décor and can’t wait to travel more and return to her Midwestern roots.  Catch her on IG: 1226Chicago_investor

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This Post Has 4 Comments

  1. This was a really helpful post. I started investing when I was 21 because my dad encouraged me too. I only invested in stocks I knew or admired. At the time, it was AOL and XO Group – which was the company behind The Knot bridal magazine. Not really knowing much, I actually made a decent profit. Several years later, I needed the money and withdrew it all. I’d like to get back into investing but haven’t had the push yet. I really like your personal criteria. It will definitely help get me on track.

    1. Glad you found it helpful Terri. Def will be coming back to it when it is time to start buying stocks.
      ~Toni

  2. Really great information, thanks for the share and insights! I will recommend this to my friends for sure.

  3. Wonderful article with great takeaways for the beginner to get started or for an amateur investor to consider a new structure. Thanks for sharing. I plan to share your article with those asking, ‘How do I get started?’

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