Getting Started with Stocks: Account Opening and Investment Strategies for Beginner Investors

Reasons Why You Should Start Stock Investing Properly

Many people think of stock investing as gambling. However, with systematic knowledge and clear strategies, stocks can become a powerful means of wealth accumulation over the long term. Especially if you’re considering starting stock investing, it’s better to build a solid foundation rather than blindly investing money—this is the starting point for success.

The appeal of stock investing is simple. You can earn profits through dividends and capital gains as companies grow, and you can sell your stocks at any time to cash out. Unlike real estate, stocks offer quick liquidity, which is a significant advantage. Historical data shows that the S&P 500 index has achieved an average annual return of about 10% since 1957, outperforming inflation over the long term.

However, it’s important not to overlook that stock prices can exhibit sharp volatility in the short term. For example, during the pandemic in March 2020, the S&P 500 index dropped about 34% in just one month. To avoid being psychologically shaken by such short-term fluctuations, it’s essential to clearly understand your investment personality and risk tolerance.

What Are Stocks?

To start investing in stocks, you need to understand the basic concepts first. Stocks are securities representing ownership in a company. When you buy stocks, you acquire a partial stake in that company. For example, owning one share of Samsung Electronics is equivalent to owning about 0.0000018% of the entire company as of February 21, 2025. It’s a tiny piece of a large corporation, but it’s meaningful because it allows you to participate in the company’s growth process.

Comparing Different Investment Methods: Direct vs Indirect Investment

One of the most important choices when starting stock investing is the method of investment. There are mainly two ways to trade stocks.

Direct investment in individual stocks involves buying and selling shares of specific companies directly. It can yield high returns but also carries significant risks. It requires thorough company analysis and investment experience.

Indirect investment through ETFs(Exchange-Traded Funds) and mutual funds involves diversified products invested across multiple stocks. They are effective for risk reduction and are recommended for beginners.

Recently, fractional trading has gained popularity. Although it involves somewhat higher fees, it allows investing in expensive stocks with small amounts of money. Regular savings plans automatically invest a fixed amount each month, which is effective for long-term asset growth.

Leverage products like CFD(Contract for Difference) can generate large profits with small capital but come with very high risks. It’s wise to invest in such products only after gaining sufficient understanding and experience.

Choosing a Brokerage and Opening an Account

To start stock investing, you first need to select a brokerage firm. Consider factors like fees, service quality, and mobile app convenience.

The account opening process is as follows:

1. Choose a brokerage – compare trading fees and services
2. Install the mobile app – download the app of your selected broker
3. Verify your identity – proceed with ID scanning and mobile authentication
4. Enter personal information – accurately input personal details and income sources
5. Agree to terms – review and digitally sign the terms of use and trading application
6. Complete account opening – start trading after approval

Account types include:

• General Custodial Account: Basic account for trading domestic and international stocks and financial products
• ISA(Individual Savings Account): A tax-advantaged account for medium- to long-term investments, offering income tax benefits
• CMA(Cash Management Account): Pays interest on deposits and allows stock trading and short-term fund management

Note: If you already have a record of opening deposit/withdrawal accounts, you must wait 20 business days before opening new accounts with other financial institutions. This regulation aims to prevent financial crimes. However, brokerage firms partnered with Kakao, K-Bank, Toss Bank, etc., may not be subject to this restriction.

Understanding Trading Fees

A common oversight when starting stock investing is trading fees. If you place orders directly with staff, fees can be around 0.5%, which is quite high. In contrast, online orders via HTS(Home Trading System) or MTS(Mobile Trading System) are much cheaper.

Since you tend to stick with the same brokerage for a long time, it’s wise to start with a provider offering low fees. The Korea Financial Investment Association provides a service that compares trading fees across brokerages at a glance, so check it out.

Corporate Analysis: Two Main Methods

Before making investment decisions, you need to analyze companies and stocks thoroughly. Understanding the two most widely used analysis methods is crucial.

Technical analysis predicts future stock prices based on past price movements and trading volume patterns. Indicators like Moving Averages(Moving Average) and MACD(Moving Average Convergence Divergence) are used to determine buy and sell points. It is mainly favored by short-term traders.

Fundamental analysis involves closely examining financial statements, management performance, and industry trends to evaluate a stock’s intrinsic value. Metrics like PER(Price-to-Earnings Ratio), PBR(Price-to-Book Ratio), and ROE(Return on Equity) help assess the true worth of a company. Long-term investors primarily use this method.

Investment Strategies: Short-term vs Long-term

Short-term speculation aims for quick profits over a brief period. Day trading is a typical example. While it offers high potential returns, it also involves significant risks. Frequent trading incurs high transaction costs.

Long-term investing involves holding quality stocks for over five years. Warren Buffett’s value investing philosophy exemplifies this approach. The main advantage is that, over time, compound interest can significantly increase investment returns. Many countries also offer tax benefits for long-term investments.

Risk Management and Diversification Strategies

Diversification and risk management are key to minimizing losses and achieving stable returns in stock investing.

The core of diversification is “not putting all eggs in one basket.” Holding stocks of multiple companies like Samsung Electronics, Hyundai Motor, and Naver can greatly reduce the risk of a decline in any single stock or sector.

Specific risk management methods include:

• Stop Loss(Stop Loss): Automatically sell when stock prices fall below a set level to limit losses.
• Periodic portfolio rebalancing: Regularly review and adjust your portfolio to match target allocations, responding to market changes.
• Dollar-cost averaging: Instead of investing all at once, invest a fixed amount (e.g., 2 million won) each month over several months to stabilize the average purchase price.
• Long-term holding: Hold promising stocks for the long term to reduce the impact of short-term market fluctuations.

Practical Advice for Starting Stock Investing

Start small: It’s important to begin with a modest amount to gain experience. This way, you can learn from mistakes while limiting potential losses.

Avoid overheated markets: Don’t get caught up in trends like “theme stocks” or “limit-up stocks.” Make investment decisions based on objective analysis rather than rumors.

Continuous learning: Develop a habit of reading economic news for 30 minutes daily and checking quarterly earnings reports or key economic indicators of your interest stocks.

Keep an investment journal: Record reasons for each trade and its outcome. Analyzing your investment patterns helps improve decision-making over time.

Properly Starting Stock Investing Step by Step

Stock investing cannot be mastered in a short time. For beginners, thorough analysis and risk management are most important, along with choosing an investment strategy suited to your situation. Starting stock investing is like running a marathon—approach it steadily and cautiously to achieve your long-term goal of asset growth.