The first step to successful stock investing: from the basics every beginner must know to portfolio construction

Stock Investment: Understand It Properly Before You Start

Representing the mainstay of personal finance strategies, how to invest in stocks may seem simple, but in reality, it requires in-depth learning and strategic planning. Many people think of stock investing as gambling, but this is a misconception. With systematic analysis and thorough preparation, stocks can become a powerful financial tool to effectively grow your assets.

This article will explain in detail from basic concepts to choosing a securities firm, opening an account, analysis methods, and practical investment strategies, so that beginner investors can learn how to invest in stocks step by step.

The Essence of Stocks: Buying a Part of Corporate Ownership

The first step in stock investing is to understand exactly what stocks are. Stocks represent ownership in a company in the form of securities; buying stocks means acquiring a stake in that company.

For example, owning one share of Samsung Electronics stock means owning about 0.0000018% of the entire company( as of February 21, 2025). Through this, you can gain two types of returns:

• Receiving dividends from a portion of the company’s profits
• Realizing capital gains when stock prices rise

Unlike real estate investment, stocks are highly liquid, allowing you to sell at any time when needed and convert to cash, which is a significant advantage.

Is Stock Investing Suitable for Me? Questions to Ask Yourself

Stock investing is not suitable for everyone. Before starting, it’s necessary to objectively evaluate your own situation.

The Attractive Aspects of Stock Investing

Long-term investment in quality stocks can yield substantial returns. For example, the S&P 500 index has recorded an average annual return of about 10% since 1957, significantly outperforming inflation. Over time, the power of compound interest can cause assets to grow exponentially.

Risks You Must Consider

However, reality is not so simple. Stock prices can fluctuate sharply in a short period. During the COVID-19 pandemic in March 2020, the S&P 500 index dropped about 34% in just one month. Maintaining psychological composure during such rapid declines and avoiding panic selling is very challenging.

Therefore, before starting stock investing:

• Accurately assess your risk tolerance
• Confirm that you have funds that you do not need for at least three years
• Be willing to invest time in market analysis and learning about investing

Only when all these conditions are met can you succeed in stock investing.

Various Ways to Trade Stocks: Find Your Style

How to invest in stocks is not limited to one method. Different approaches exist depending on your investment personality and capital size.

Direct Investment in Individual Stocks

Buying and selling stocks of specific companies like Samsung Electronics, Hyundai Motor, or Naver directly. Deep analysis of these companies can lead to high returns, but losses can also occur due to company failures or adverse market conditions.

Diversified Investment via ETFs and Funds

Investing in products that spread across multiple stocks, significantly reducing risk. While the expected returns are lower than individual stock investments, this is a much safer choice for beginners.

Small-Amount Trading and Dollar-Cost Averaging

A popular method nowadays, allowing investment in high-priced stocks with small amounts. Especially, dollar-cost averaging involves automatically investing a fixed amount every month, which is effective for long-term asset growth. It helps maintain an average entry price in the market and reduces psychological stress.

CFD and Leverage Products

CFD( (Contract for Difference) is an attractive way to expect large profits with small capital. For example, if you anticipate Nvidia’s stock price will rise, you can buy a CFD contract to gain the difference, or if a decline is expected, take a short position to profit. However, due to high risk, only attempt after sufficient learning.

Opening a Stock Account: Prepare Systematically

To actually start stock investing, you need to open an account through a securities firm. Nowadays, this process has become very simple.

) Necessary Preparations

ID### Resident registration card, driver’s license, passport, etc.( is enough to open an account within minutes via a mobile app.

) Understanding the Types of Accounts

Custodial Account
A standard account for stock trading, enabling buying and selling domestic and international stocks, as well as various financial products.

**ISA### (Individual Savings Account)(
A long-term investment account with tax benefits. It allows for income tax deductions, making it very advantageous for long-term asset management.

**CMA) (Cash Management Account)(
An account that pays interest on deposits and allows for both stock trading and short-term fund management simultaneously.

) Account Opening Procedure

1. Choose a securities firm considering fees, service quality, and mobile app convenience.
2. Download the dedicated app of the selected securities firm.
3. Scan your ID within the app and verify your identity via your mobile phone.
4. Enter personal information and source of income accurately.
5. Agree to the account opening application, submit proof of trading purpose, and accept online trading terms with digital signature.
6. After completing all steps, receive a notification that your account has been successfully opened.

Tips to Minimize Fees

Stock trading fees are highest when ordering directly from staff### about 0.5%(. Recently, online orders via PC’s HTS or smartphone’s MTS have become mainstream. Since many tend to keep the same securities firm long-term, starting with a low-fee broker can save significant costs over time.

Note: If you have a record of opening deposit or withdrawal accounts at a financial institution, you must wait 20 business days before opening an account at another financial company. This is a regulation to prevent financial crimes by authorities. However, securities firms partnered with banks like Kakao, K-Bank, or Toss Bank are exempt from this restriction.

Stock Analysis: Make Investment Decisions from Two Perspectives

Effective stock investing requires thorough analysis. Generally, two methods are used: technical analysis and fundamental analysis.

) Technical Analysis: Reading the Future Through Charts and Patterns

Technical analysis predicts future stock prices based on past price movements and trading volume patterns. It uses charts and various indicators to determine entry and exit points.

Indicators like Moving Average### or MACD( help identify trends and trading signals. This approach is mainly used by short-term traders, offering quick decision-making advantages.

) Fundamental Analysis: Assessing a Company’s Intrinsic Value

Fundamental analysis involves in-depth evaluation of financial statements, management performance, and industry trends to determine a stock’s true value.

Metrics such as PER( (Price-to-Earnings Ratio)), PBR### (Price-to-Book Ratio)(, and ROE) (Return on Equity)( are used to assess a company’s worth. This method is preferred by long-term investors, taking time but enabling more fundamental investment decisions.

) Combining Both Analyses

Wise investors blend technical and fundamental analysis according to the situation. Typically, they select quality companies based on fundamental analysis(, then identify appropriate entry points through technical analysis.

Investment Strategies: Choose a Method That Fits Your Style

The success of stock investing depends on your investment horizon and strategy.

) Short-Term Trading: Aim for Quick Profits

Day trading, representing short-term trading, involves buying and selling stocks multiple times within a short period to seek quick gains. It can yield high returns but also entails significant risks.

Short-term traders often use technical analysis, real-time news monitoring, and momentum trading strategies. However, frequent trading increases transaction fees and taxes, which can severely impact profitability. It also causes considerable psychological fatigue.

Long-Term Investment: Believe in the Power of Compound Interest

This strategy involves holding investments for over five years, exemplified by Warren Buffett’s value investing philosophy. It focuses on steady growth of quality companies without being swayed by short-term market fluctuations.

The main advantage is the effect of compound interest, where returns grow exponentially over time. Many countries also offer tax benefits for long-term investments.

( Which Approach Suits You?

Your investment period should be determined based on your financial situation, psychological disposition, and market analysis skills. Beginners are recommended to start with long-term investing.

Portfolio Construction and Risk Management

To minimize losses and pursue stable returns in stock investing, systematic portfolio management and risk strategies are essential.

) Diversification: ‘Don’t Put All Eggs in One Basket’

Diversification involves investing across multiple companies and sectors. Holding stocks like Samsung Electronics, Hyundai Motor, and Naver from different industries can significantly reduce risks associated with individual stocks or sectors.

Practical Risk Management Strategies

Stop-Loss Orders
Set automatic sell orders if stock prices fall below a certain level to limit losses. This helps manage losses systematically without emotional interference.

Periodic Portfolio Rebalancing
Regularly review and adjust your portfolio to match your target allocations. This allows you to respond to market changes and maintain balance.

Dollar-Cost Averaging
Invest a fixed amount, e.g., 2 million KRW, every month over five months instead of a lump sum. This helps maintain an average entry price and mitigates the impact of temporary market peaks.

Long-Term Holding Principle
Hold promising stocks over the long term without being swayed by short-term market volatility. This provides psychological stability and reduces transaction costs.

Practical Investment Tips: What Beginners Must Remember

Concrete advice for successful stock investing.

Start Small and Gradually Increase

Don’t invest large sums from the beginning. Start with small amounts, gain experience, then expand your investment scale.

Avoid Being Swept Up by Market Fads

Following themes like ‘theme stocks’ or ‘double-up stocks’ blindly during hype is very risky. Make objective, rational decisions based on analysis.

Continuous Learning and Monitoring

Spend 30 minutes daily reading economic news, and weekly check earnings reports and key economic indicators of your interest stocks. These habits form the foundation of successful investing.

Keep an Investment Journal

Record reasons for each trade, entry points, and outcomes. Over time, analyze your patterns and reflect on decisions to improve. This is the most effective way to reduce repeated mistakes.

Conclusion: Mastering Stock Investing from a Long-Term Perspective

Stock investing is not a skill to be mastered overnight. Success depends on thorough analysis, systematic risk management, and choosing appropriate strategies.

For beginners, it’s best to start with small successes and build gradually. Approach how to invest in stocks with patience and caution, as if running a marathon, aiming for long-term asset growth.