What is Stock Trading?
When you buy a stock, you're buying a tiny piece of a company. If the company does well, your piece becomes more valuable. If it does poorly, it becomes less valuable.
For example, if you buy Apple stock, you own a small piece of Apple. When Apple sells more iPhones and makes more money, your stock typically becomes more valuable.
Investing vs. Trading
Investing means buying stocks and holding them for years, letting them grow over time. This is what most financial advisors recommend.
Trading means buying and selling frequently, trying to profit from short-term price changes. This is riskier and requires more knowledge.
This guide focuses on basic investing for beginners.
Important Terms to Know
Before we start, let's learn a few basic terms:
Choosing a Brokerage
A brokerage is where you'll open an account to buy stocks. Here are reliable options for beginners:
| Brokerage | Best For | Minimum to Start |
|---|---|---|
| Fidelity | Beginners, great customer service | $0 |
| Charles Schwab | All-around excellent, local branches | $0 |
| Vanguard | Long-term investors, low fees | $0 |
All three are reputable, established companies. We recommend Fidelity for beginners because of their excellent customer service and easy-to-use app.
Opening Your First Brokerage Account
1 Download the Fidelity app
Search "Fidelity Investments" in your app store and download it. (You can also go to fidelity.com on your computer.)
2 Create an account
Tap "Open an Account" and choose "Brokerage Account" (this is a regular investment account).
You'll need to provide:
- Your full legal name
- Social Security number (required by law)
- Date of birth
- Address
- Employment information
Why do they need my Social Security number?
By law, all brokerages must verify your identity and report investment gains to the IRS. Your information is protected and encrypted. Fidelity has been in business since 1946 and is one of the most trusted financial companies.
3 Link your bank account
Connect your checking account so you can transfer money to invest. You'll log into your bank through Fidelity's secure system, or you can enter your account and routing numbers manually.
4 Transfer money
Transfer some money from your bank to your new Fidelity account. Start with whatever amount you're comfortable with - even $100 is fine to start learning.
Note: Transfers typically take 1-3 business days to complete.
Making Your First Investment
Once your money has arrived, you're ready to invest!
Start simple with an ETF
Instead of picking individual stocks, we recommend starting with an index fund ETF. This automatically spreads your money across hundreds of companies, reducing your risk.
Recommended first investment: An S&P 500 index fund
The S&P 500 is a collection of the 500 largest American companies. When you buy an S&P 500 fund, you own a tiny piece of Apple, Microsoft, Amazon, Google, and 496 other major companies all at once.
Popular S&P 500 ETFs:
- VOO (Vanguard S&P 500 ETF)
- SPY (SPDR S&P 500 ETF)
- IVV (iShares Core S&P 500 ETF)
All three track the same companies. Any of them is a great choice.
5 Buy your first investment
- In the Fidelity app, tap "Trade"
- Search for "VOO" (or your chosen ETF)
- Tap "Buy"
- Enter how much you want to invest in dollars
- Review and confirm your order
Fidelity allows "fractional shares," meaning you can invest any dollar amount - you don't need to buy a whole share.
Congratulations!
You're now an investor! You own a piece of hundreds of American companies. Over time, as these companies grow, your investment typically grows too.
What Happens Next?
Check in occasionally, but don't obsess. Stock prices go up and down every day. This is normal. Looking at your account once a month is plenty.
Consider investing regularly. Many successful investors add money monthly, regardless of whether prices are up or down. This is called "dollar-cost averaging."
Think long-term. The stock market has historically gone up over long periods of time, even though there are bumps along the way. Investments held for 10+ years have historically done well.
Common Beginner Mistakes to Avoid
Don't do these things:
- Panic selling - Don't sell just because prices dropped. This locks in your losses.
- Trying to time the market - Nobody can consistently predict when prices will go up or down.
- Investing money you need soon - Only invest money you won't need for 5+ years.
- Following "hot tips" - Be skeptical of stock tips from friends or social media.
- Putting all your money in one stock - Spread your investments around (ETFs do this automatically).
Tax Considerations
When you sell investments for a profit, you may owe taxes. Here's the simple version:
- If you hold an investment for more than 1 year before selling, you pay lower "long-term capital gains" tax
- If you hold for less than 1 year, you pay higher "short-term capital gains" tax
- You only owe taxes when you sell - not just for owning investments
Fidelity will send you tax documents each year showing what you owe. Consider working with a tax professional.
Want help getting started?
We'll walk through opening your account, making your first investment, and understanding how it all works. Patient guidance, no pressure.
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