Investing in stocks is a great way to build wealth, although getting started can feel daunting for many beginners looking to get into the market. But with this quick-start guide you can begin  buying stock in minutes, even with just a little bit of money to invest.

So how exactly do you invest in stock? It’s actually simple and there are several ways to do it. One of the easiest ways is to open an online brokerage account and buy stocks or stock funds. If you’re not comfortable with that, you can work with a professional to manage your portfolio, often for a reasonable fee. Either way, you can invest in stock online at little cost.

Here’s how to invest in stocks and the basics on how to get started in the market.

Investing in stock: 4 quick steps to get started

So you want to begin investing in stocks? Here’s a four-step guide to get you going:

  1. Choose how you want to invest
  2. Open an investment account
  3. Decide what to invest in
  4. Determine how much you can invest – then buy

1. Choose how you want to invest

You have several options when it comes to investing, so you can really match your investing style to your knowledge and how much time and energy you want to spend investing. You can spend as much or as little time as you want on investing.

Here’s your first big decision point: How do you want your money to be managed?

  • A human investment professional: An investment manager is a great “do-it-for-me” option for those who want to spend just a few minutes a year worrying about investing. It’s also a good choice for those with limited knowledge of investing.
  • A robo-advisor: A robo-advisor is another solid “do-it-for-me” solution that has an automated program manage your money using the same decision process a human advisor might – but at a much lower cost. You can set up an investment plan quickly and then all you’ll need to do is deposit money, and the robo-advisor does the rest.
  • Self-managed: This “do-it-yourself” option is a great choice for those with greater knowledge or those who can devote time to making investing decisions. If you want to select your own stocks or funds, you’ll need a brokerage account.

Your choice here will shape which kind of account you open in the next step.

2. Open an investment account

So which kind of account do you want to open? Here are your options:

If you want a pro to manage your money

  • A human financial advisor can design a stock portfolio and help with other wealth-planning moves such as saving for college. A human advisor typically charges a per-hour fee or around 1 percent of your assets annually, with a high investment minimum. One big advantage: a good human advisor can help you stick to your financial plan. Here are six tips for finding the best advisor – and what you need to watch out for.
  • A robo-advisor can design a stock portfolio that matches your time horizon and risk tolerance. They’re typically cheaper than a human advisor, often a quarter of the price or less. Plus, many offer planning services that can help you maximize your wealth. The best robo-advisors can handle most of your investing needs.

Bankrate’s in-depth reviews of robo-advisors can help you find the advisor who meets your requirements.

If you want to manage your own money

  • An online broker allows you to buy stock and many other kinds of investments, including bonds, exchange-traded funds (ETFs), mutual funds, options and more. The best brokers offer no-fee commissions on stocks as well as a ton of education and research at no additional cost, so you can power up your game quickly.

Bankrate’s detailed reviews of the best brokers for beginners can help you find a broker that meets your needs.

If you go with a robo-advisor or an online brokerage, you can have your account open in literally minutes and start investing. If you opt for a human financial advisor, you’ll need to interview some candidates to find which one will work best for your needs and keep you on track. Use Bankrate’s free financial advisor matching tool to help you find a financial advisor in your area.

3. Decide what to invest in

The next major step is figuring out what you want to invest in. This step can be daunting for many beginners, but if you’ve opted for a robo-advisor or human advisor, it’s going to be easy.

Using an advisor

If you’re using an advisor – either human or robo – you won’t need to decide what to invest in. That’s part of the value offered by these services. For example, when you open a robo-advisor account, you’ll typically answer questions about your risk tolerance and when you need your money. Then the robo-advisor will create your portfolio and pick the funds to invest in. All you’ll need to do is add money to the account, and the robo-advisor will create your portfolio.

Using a brokerage

If you’re using a brokerage, you’ll have to select every investment and make trading decisions. You can invest in individual stocks or stock funds, which typically own hundreds of stocks. The best brokers offer free research and a ton of resources on how to buy stocks to aid beginners.

If you’re managing your own portfolio, you can also decide to invest actively or passively. Passive investors generally take a long-term perspective, while active investors often trade more frequently. Research shows that passive investors tend to do much better than active investors.

4. Determine how much you can invest – then buy

The key to building wealth is to add money to your account over time and let the power of compounding work its magic. That means you need to budget money for investing regularly into your monthly or weekly plans. The good news is that it’s simple to get started.

How much should you invest?

How much you invest depends entirely on your budget and time frame. While you may invest whatever you can comfortably afford, experts recommend that you leave your money invested for at least three years, and ideally five or more, so that you can ride out bumps in the market.

If you can’t commit to keeping your money invested for at least three years without touching it, consider building an emergency fund first. An emergency fund can keep you from having to get out of an investment early, allowing you to ride out any fluctuations in the value of your stocks.

How much do you need to start?

Most major investment accounts don’t have a minimum (or the account minimums are extremely low), so you can get started with little money. Plus, many brokers allow you to buy fractional shares of stocks and ETFs. If you can’t buy a full share, you can still buy a portion of one, so you really can get started with virtually any amount.

It’s just as easy with robo-advisors, too. Few have an account minimum and all you’ll need to do is deposit the money — the robo-advisor handles everything else. Set up an auto-deposit to your robo-advisor account and you’ll only have to think about investing once a year (at tax time). Once you’ve opened your account, deposit money and get started investing.

If you’ve opted for a human advisor, the minimum amount can vary substantially. Many advisors demand a minimum of $100,000 or more to get started, and that figure can go up quickly from there.

How to manage your investments

You’ve established a brokerage or advisor account, so now’s the time to watch your portfolio. That’s easy if you’re using a human advisor or robo-advisor. Your advisor will do all the heavy work, managing your portfolio for the long term and keeping you on track.

If you’re managing your own portfolio, you’ll have to make trading decisions. Is it time to sell a stock or fund? Is your investment’s performance a signal to sell or buy more? If the market dips, are you buying more or selling? These are tough decisions for investors, both new and old.

If you’re investing actively, you’ll need to stay on top of the news to make the best decisions.

More passive investors will have fewer decisions to make, however. With their long-term focus, they’re often buying on a fixed regular schedule and not worrying much about short-term moves.

Tips for beginning investors

Whether you’ve opened a brokerage account or an advisor-led account, your own behavior is one of the biggest factors in your success, probably as important as what stock or fund you buy.

Here are three important tips on how to invest in stocks for beginners:

  • While Hollywood portrays investors as active traders, you can succeed – and even beat most professional investors – by using a passive buy-and-hold approach. One strategy: Regularly buy an S&P 500 index fund containing America’s largest companies and hold on.
  • It can be valuable to track your portfolio, but be careful when the market dips. You’ll be tempted to sell your stocks and stray from your long-term plan, hurting your long-term gains in order to feel safe today. Think long-term.
  • To keep from spooking yourself, it can be useful to look at your portfolio only at specific times (say, the first of the month) or only at tax time.

As you begin investing, the financial world can seem daunting. There’s a lot to learn. The good news is that you can go at your own speed, develop your skills and knowledge and then proceed when you feel comfortable and ready.

Best stocks for beginning investors

As a new investor, it can be a wise decision to keep things simple and then expand as your skills develop. Fortunately, investors have a great option that allows them to purchase shares in hundreds of America’s top companies in one easy-to-buy fund: an S&P 500 index fund. This kind of fund lets you own a tiny share in some of the world’s best companies at a low cost.

An S&P 500 fund is a great option because it provides diversification and reduces your risk from owning individual stocks. And it’s a solid pick for investors – beginners to advanced – who don’t want to spend time thinking about investments and prefer to do something else with their time.

If you’re looking to expand beyond index funds and into individual stocks, then it can be worth investing in “large-cap” stocks, the biggest and most financially stable companies. Look for companies that have a solid long-term track record of growing sales and profit, that don’t have a lot of debt and that are trading at reasonable valuations (as measured by the price-earnings ratio or another valuation yardstick) so that you don’t buy stocks that are overvalued.

Stock investing FAQs

  • No, non-U.S. investors are able to open brokerage accounts and invest in U.S. companies, but they might face a few additional hurdles in getting started. Investors residing outside the U.S. may need to show additional forms of identification to prove their identity when opening an account and there can be even more forms on top of that to ensure proper tax reporting. Be sure to check with the broker for guidance on investing when living outside the country.
  • Not much. Most online brokers have no minimum investment requirements and many offer fractional share investing for those starting with small amounts. You’ll want to make sure that the money you’re investing won’t be needed for regular expenses and can stay invested for at least three years. Building up some savings in an emergency fund is a good idea before getting started with investing.
  • If you hold those stocks in a taxable brokerage account, dividends and realized stock gains are taxable. The rate you pay on capital gains will depend on how long you’ve held the investment and your income level. If you hold stocks in tax-advantaged accounts such as a Roth IRA, you won’t pay taxes on gains or dividends, making these vehicles ideal for retirement savings.
  • At any point in time, any stock may be the best to buy, because stocks can fluctuate a lot over the short term. But the stocks that increase in value over time grow their sales and profits year after year. It’s vital to research the stocks you’re investing in and understand them thoroughly. This approach requires a lot of work and it takes years to build enough expertise to succeed.

    For many investors – beginner and advanced alike – it’s easier to find stock funds with strong long-term returns, and then buy the top funds.
  • Stock funds are an excellent choice for new investors because they can deliver strong returns  without having to do much legwork. You can buy stock funds as either an exchange-traded fund or mutual fund. A stock fund invests in dozens or even hundreds of stocks, and by buying the fund you effectively own a stake in everything owned by the fund.

    For example, funds based on the S&P 500 Index have a strong track record of growth, averaging about 10 percent annually over long periods. These funds hold hundreds of stocks in the index, which includes America’s most successful large companies. You can buy a share of an S&P 500 ETF just like you would buy a share of stock at any brokerage.
  • Stock investing can deliver strong returns over time, but returns can fluctuate tremendously in the short term. Those who buy individual stocks must have undertaken significant research or they risk losing significant money. Buying individual stocks is much riskier than buying a broadly diversified index fund, which may own hundreds of stocks and tends to go up over time.

    When buying an individual stock, your success relies on only that company. If the firm does not perform well, the stock may decline in value permanently. In the worst case, the company could go bankrupt, and you could lose your entire investment. However, when you buy a fund, you’ve reduced your risk by relying on many companies.

    Investors can also reduce their risk by taking a long-term perspective, especially with stock funds. Experts routinely recommend that investors plan to hold an investment for at least three years, though longer is better, so that they can ride out the market’s volatility.

Bottom line

The great thing about investing is that you have so many ways to do it on your own terms, even if you don’t know much at the start. You have the option to do it yourself or have an expert do it for you. You can invest in stocks or stock funds, trade actively or invest passively. Whichever way you choose, pick the investing style that works for you and start building your wealth.