Recently, a friend asked me how to start investing in stocks. In fact, the most common mistake beginners make is wanting to make a lot of money right from the start. Instead of doing that, it’s better to first figure out which approach fits you and how much risk you can handle.

When it comes to buying stocks, there are actually more ways than you might think. The most straightforward option is to open a brokerage account and buy individual shares, making you a shareholder in a company. Nowadays, opening an account online is very convenient: prepare your ID, complete the verification, and link a settlement account to get started. The brokerage fee for Taiwan stocks is usually 0.1425% of the trade value, but if you use electronic order entry, you get a discount. Large brokers may offer 60% off, and smaller brokers sometimes cut it down to 2–3 tenths. The biggest advantage of buying stocks is that you truly hold the shares—when the company is profitable, you can receive dividends, and liquidity is also quite good. The downside is that trading hours are limited, the threshold for short selling is high, and in Taiwan buying a full board lot (1000 shares) isn’t cheap.

If you don’t want to put in effort picking stocks, ETFs are another option. One ETF is equivalent to buying dozens or even hundreds of companies at once, and it provides excellent risk diversification. You can buy ETFs with a stock account. The fees are similar to individual stocks, but the trading tax is only one-third of that for individual stocks. It’s best suited for people who don’t have time to research individual stocks and want to invest more easily. The downside is that performance tends to be more average; if you frequently trade in the short term, the fees and taxes can eat up a lot of your profits.

In recent years, CFD (Contracts for Difference) has also attracted a lot of attention. In simple terms, it’s a 1-to-1 contract that tracks the price of spot assets, with 0 commission, and the platform earns from the spread. How do you buy stocks using CFDs? For example, if you’re bullish on a particular US stock, you choose to buy, set the quantity and leverage, and place the order. The key is that you can choose not to use leverage (1x), so the logic of price movement is closer to the actual underlying asset—except you don’t hold the stock and you don’t receive dividends. The advantages of CFDs are low trading costs, the ability to short, and flexible leverage. With one account, you can trade various underlying assets such as stocks, foreign exchange, indices, and cryptocurrencies. The disadvantages are that the leverage risk is high, there is no dividend distribution, and you must choose platforms with mainstream regulation such as FCA and ASIC.

There are also stock index futures, which track broad market index levels rather than a single company’s stock. You need to open a futures account. The leverage effect is similar to CFDs, but leverage is usually fixed and the margin requirements are higher. For retail investors, the barrier is relatively high.

After you decide which tool to use, you also need to think through your trading strategy. The logic of long-term investing is based on dividends and stock price appreciation. You don’t need to watch the market every day. The focus is to find companies with solid fundamentals and growth potential, then buy at a reasonable price and hold long term. To determine whether a company is worth it, you can look at fundamentals: what the company does, whether revenue and earnings have been stable and growing in recent years, whether there are any major problems, whether the gross margin and earnings per share have growth, and what the industry outlook looks like. Technical indicators such as moving averages and KD can also help.

Short-term investing is completely different. It aims to see results quickly—profits come from price differences, not dividends. You might hold for days, hours, or even minutes. This requires a sharper sense for the market: you need to follow news, earnings reports, economic data, and industry developments, and quickly judge how they will affect stock prices. Technical analysis is an essential tool, including golden cross, death cross, MACD, trading volume, and order/position analysis. The benefit of short-term trading is that you can see results quickly and you can use leverage tools to amplify returns, but the risks are higher, the pressure is greater, and it takes a lot of time. If you need to work during the day and can’t monitor the market, short-term trading may not be suitable for you.

Beginners should pay attention to a few things. First is choosing a platform. This is the handler for each of your trades—you should look at stability, customer service speed, and whether withdrawals are smooth. For CFD platforms, you must confirm their regulatory credentials. Second, do your homework before buying stocks. Don’t rush in just because friends say it will go up or because you’ve been seeing it rise continuously. At minimum, find out what the company does, how its revenues and profits have changed over the past few years, and whether there are any major issues. Third, strictly follow stop-loss and take-profit rules. Many people lose money because they take profits too early or, after losing, stubbornly hold on. Before entering a trade, decide in advance how much you are willing to lose and what profit level will make you exit, then use the platform’s stop-loss orders to execute automatically—don’t let emotions interfere. Finally, find your own rhythm. Everyone’s capital, time, and risk tolerance are different. What full-time traders do isn’t suitable for office workers, and the methods of short-term experts aren’t ideal for people who want to invest more easily.

If you want to hold stocks long term to collect dividends, buying individual stocks through a brokerage is the most suitable. If you want to diversify risk but don’t want to research, ETFs are a good choice. If you can accept higher risk and want to trade the broader market, you can consider stock index futures, though the barriers are higher. If you prefer short-term trading and want more flexibility, CFDs are worth considering.

As for the first step, my recommendation is to open a demo account and practice for one to two months first. After you’ve become familiar with the order placement process, margin calculations, and stop-loss settings, then enter using real funds. You can start with real funds of within NT$10,000, and even less can work. The key isn’t how much you can profit—it’s learning how to control losses first. After two or three months of stable small gains or small losses within a controllable range, you can consider adding more capital.

Someone asked whether buying US stocks through overseas brokers would involve tax issues. Dividends are subject to a 30% withholding tax—this is a regulation of the US Internal Revenue Service (IRS), and it applies the same whether it’s through a custodian or an overseas broker. But if you sell the stock and profit from the price difference, Taiwan’s offshore income exemption is 7,500,000 Taiwanese dollars per year; if you exceed that amount, you would need to pay the basic tax, which most people won’t run into.

Regarding CFD platform safety, compliant platforms will be regulated by major financial authorities in major countries, such as the UK’s FCA, Australia’s ASIC, and Cyprus’ CySEC. You can check on the official websites of these regulatory agencies whether a platform holds a license. Legitimate platforms won’t guarantee you steady profits, and they also won’t require you to transfer money to a personal account.

How to buy stocks ultimately comes back to you. Stock investing isn’t limited to just one way. For beginners, the most important thing isn’t finding the most profitable tool right away—it’s finding the approach that suits you best. If you want a steady, solid start, ETFs and traditional stocks are usually the better first stop, while CFDs and stock index futures are more advanced tools. Today’s most practical first step is to pick a platform that feels right to you, open a demo account, and start practicing. After using a demo account for two to three weeks, you’ll find that your responses to the market become much more composed. Once you’re operating smoothly, start gradually entering the real market with small amounts of funds you can accept.