Stock Study Essential Guide: Practical Investment Tips from Profit Generation to Risk Management

How to Increase Assets with Stocks: Let’s Learn Properly

Stock investing is more than just a simple financial technique; it is a financial tool to efficiently grow capital. However, blindly following tips can lead to losses, so systematic knowledge and clear strategies are essential. From the basics that beginner investors must know to practical techniques, this article will detail every step of how to invest in stocks, from choosing securities firms to analyzing stocks.

Understanding the Nature of Stocks: Small Pieces of Corporate Ownership

Stocks are securities that represent a divided ownership of a company. Buying stocks means holding a partial stake in the company, and profits can be earned through dividends and capital gains depending on the company’s performance. Specifically, owning one share of Samsung Electronics grants rights to approximately 0.0000018% of the total shares of Samsung Electronics as of February 21, 2025(.

Who Should Invest in Stocks? Self-Assessment of Investment Tendency

Stock investing offers higher expected returns compared to traditional financial products. You can profit from stock price increases driven by company growth and secure cash flow through regular dividends. Unlike real estate, stocks can also be quickly liquidated, which is a big advantage. Historically, the S&P 500 index has achieved an average annual return of about 10% since 1957, surpassing inflation.

However, not everyone is suitable for stock investing. You must accurately assess your risk tolerance, financial situation, and investment horizon because stock prices can fluctuate sharply in the short term. For example, in March 2020, during the early days of the pandemic, the S&P 500 dropped about 34% in just one month. The psychological readiness to withstand such volatility is also a key condition for investment success.

Various Methods of Stock Trading: From Direct to Indirect Investment

Stock trading mainly falls into two categories: direct purchase of individual company stocks and indirect investment through ETFs), mutual funds, CFDs, etc. Investing in individual stocks offers high potential returns but also concentrates risk. Conversely, ETFs and mutual funds are diversified products that help mitigate risk.

Recently, fractional trading and automatic savings investments have become practical options for beginners. Fractional trading involves slightly higher fees but allows access to high-priced stocks with small capital, while savings investments enable automatic monthly contributions for long-term asset growth.

Leverage products like CFD( contracts for difference) can yield significant profits with small amounts of capital, but they also carry high risk of losses. For example, if NVIDIA’s stock price is expected to rise, you can buy a CFD contract to profit from the increase; if a decline is anticipated, you can take a short position to profit from the fall.

Opening a Securities Account: The First Step to Investing

A stock account is opened through a securities firm, similar to a bank account. Nowadays, it can be done within minutes via a mobile app. Just prepare identification documents(such as a resident registration card, driver’s license, or passport).

Account types can be chosen based on purpose:

• Custodial Account: The basic trading account for buying and selling domestic and international stocks and various financial products
• ISA(Individual Savings Account): A tax-advantaged account for mid- to long-term investments, offering income tax benefits for long-term asset management
• CMA(Cash Management Account): An account that pays interest on deposits and allows short-term fund management alongside stock investments

The opening process is as follows:

1. Choose a securities firm - compare fees, services, and app usability
2. Install the mobile app - download the dedicated app for account opening
3. Verify identity - scan ID and authenticate via mobile phone
4. Enter personal information - provide accurate details and source of income
5. Agree to terms - digitally sign the account application and terms
6. Complete opening - receive confirmation of account setup

Important Tip: If you have recently opened a deposit or withdrawal account, you can open accounts with other financial institutions after 20 business days( due to regulations by financial authorities to prevent financial crimes). However, partnerships with Kakao, K-Bank, Toss Bank, and similar platforms exempt from this restriction.

Transaction fees vary by securities firm. While in-person orders may cost around 0.5%, online orders via PC( or mobile) platforms like HTS( and MTS) are much cheaper. This is why initial securities firm selection is important.

Stock Analysis: Technical vs Fundamental Analysis

Thorough analysis is essential before making investment decisions. Let’s explore the two main analysis methods used in stock investing.

Technical analysis predicts future stock prices based on past price movements and trading volume patterns. It uses charts and indicators such as moving averages(Moving Average) and MACD(Moving Average Convergence Divergence). These help determine optimal buy and sell timing.

Fundamental analysis evaluates a stock’s intrinsic value by analyzing financial statements, management performance, and industry trends. Key indicators include PER(Price Earnings Ratio), PBR(Price Book Ratio), and ROE(Return on Equity).

Investment Timing Strategies: Short-term vs Long-term

Short-term trading(Day Trading) aims for quick profits within a brief period. Strategies include technical analysis, real-time news monitoring, and momentum trading. While offering high potential returns, it also involves higher risks and increased trading fees.

Long-term investing(Over 5 Years) follows value investing principles, exemplified by Warren Buffett. Its advantages include maximizing compound interest over the long term, and many countries offer tax benefits to long-term investors.

Diversification and Risk Management: Minimizing Losses

To achieve stable returns, diversification and risk management are crucial.

Principle of diversification: Do not concentrate all funds in a single stock. Holding stocks of multiple companies like Samsung Electronics, Hyundai Motor, and Naver reduces the risk associated with any one stock or sector.

Practical risk management techniques:

• Stop Loss(Stop-Loss): Automatically sell if stock price falls below a set level to limit losses
• Periodic portfolio rebalancing: Regularly review and adjust holdings to target ratios and respond to market changes
• Dollar-cost averaging: Invest a fixed amount, e.g., 2 million KRW monthly over 5 months, instead of a lump sum
• Long-term holding: Keep high-quality stocks for the long term to reduce impact from short-term market fluctuations

Practical Tips and Precautions for Stock Study

Beginner investors should keep these points in mind:

• Start small: Gain experience with modest amounts before investing large sums
• Avoid herd mentality: Don’t get caught up in themes like “hot stocks” or “double-100% gains”; base decisions on objective analysis
• Daily learning habit: Spend 30 minutes daily reading economic news, quarterly earnings reports, and economic indicators
• Keep an investment journal: Record reasons for each trade and its outcome to analyze patterns and improve strategies

Conclusion: Stock Investing is a Game of Consistency

Stock study and stock investing are not simple endeavors. Success requires systematic analysis, thorough risk management, and choosing the right investment strategies. Like a marathon, slow but steady and cautious progress can lead to achieving long-term asset growth.