To properly learn how to invest in stocks, it’s important to first understand the basics. You need to know what stocks are, how they’re traded, and what strategies fit you best.

Stocks are securities that represent ownership in a company. When you buy stocks, you gain a stake in that company. You may be able to earn regular income through dividends, or you can aim for capital gains by selling when the stock price rises. For example, owning 1 share of a large company means you own a very small portion of the entire company.

However, how to invest in stocks isn’t suitable for everyone. You must clearly understand your investment temperament, your financial situation, and how much risk you can take. Stock prices can experience significant volatility in the short term. For example, during the 2020 pandemic, major indices fell by more than 30% within a single month. You need to be able to psychologically endure such fluctuations.

There are also various ways to trade. You can buy and sell individual stocks directly, or invest in diversified products such as ETFs or funds. Recently, fractional trading and recurring (systematic) investing have become popular among beginners. With small amounts, you can invest in expensive stocks, and by automatically investing a fixed amount each month, you can work toward long-term asset growth.

To open an account, you need to choose a securities firm. Compare things like fees, services, and app convenience, then select the one that fits you. These days, you can create an account in just a few minutes using a smartphone app. If you have an ID, you can open the account after completing identity verification. Since there are multiple account types—such as a standard brokerage account, ISA, and CMA—you should choose the one that matches your investment goals. One tip is that you tend to keep using the securities firm where you start trading, so it’s generally best to begin with one that charges low fees.

When learning how to invest in stocks, analysis methods are also important. Technical analysis is a method that predicts future stock prices by looking at past price movements and trading volume patterns. It uses indicators such as charts, moving averages, and MACD. In contrast, fundamental analysis evaluates a stock’s real intrinsic value by analyzing a company’s financial statements, management performance, and industry trends. It makes use of metrics like PER, PBR, and ROE.

Investment strategies also differ. Short-term speculation is a strategy that seeks quick profits by trading over a short period. It may offer high returns, but it also comes with substantial risk and frequent transaction costs. On the other hand, long-term investing is a strategy of holding stocks for 5 years or more. One advantage is that, due to the effects of compounding, returns can grow significantly over time. Historically, long-term investors tend to achieve more stable returns.

Risk management is essential, too. Instead of putting all your funds into a single stock, diversification—holding stocks from multiple companies at the same time—is the basic approach. Set stop-loss orders to limit losses, and periodically rebalance your portfolio. It can also be effective to invest in multiple installments rather than all at once.

If you’re a beginner, it’s best to start with a small amount to build experience. Avoid market-following behaviors like the theme-stock frenzy, and make decisions based on objective analysis. Developing the habit of reading daily economic news and checking the earnings announcements of the stocks you’re interested in can also help. If you record the reasons and results of each trade, you can analyze your patterns and improve them.

Ultimately, how to invest in stocks requires knowledge, strategy, and patience. Thorough analysis and risk management are the keys to success, and like a marathon, making steady and careful progress over time can help you achieve your goal of long-term asset growth.