Investment Journey for Stock Beginners: The Perfect Roadmap to Your First Profit

Is Stock Investment Truly Worth It?

Many people look for a Stock Beginner’s Guide for a simple reason. Real estate takes a long time, and savings account interest can’t keep up with inflation. On the other hand, stock investing has recorded an average annual return of about 10% since 1957 based on the S&P 500 index. This suggests the potential to significantly grow assets over the long term.

But here’s an important point. During the COVID-19 pandemic in March 2020, the S&P 500 index dropped about 34% in just one month. Stocks exhibit tremendous volatility in the short term, so you shouldn’t just focus on “high returns.” Accurately understanding your investment style, financial situation, and emotional control ability is the first hurdle in stock investing.

What Does It Mean to Own Part of a Company

Stocks are securities representing ownership in a company. For example, buying 1 share of Samsung Electronics means owning about 0.0000018% of the entire company( as of February 21, 2025). It’s a tiny percentage, but when accumulated, it becomes a tangible asset.

Holding stocks offers two types of returns. First, dividends. Companies regularly pay cash to shareholders when they make profits. Second, capital gains. When the company grows and stock prices rise, selling at a higher price yields profit. Additionally, unlike real estate, stocks can be instantly liquidated at any desired time, offering liquidity advantages.

Investment Methods: Direct vs Indirect, Which One Are You?

There are mainly two ways to buy stocks.

Direct investment involves buying and selling shares of specific companies directly. Choosing individual stocks like Samsung Electronics, Hyundai Motor, or Naver. While it can yield high returns, the risks are also higher. If a problem occurs with one company, significant losses can happen.

Indirect investment involves investing in multiple stocks simultaneously through products like ETFs(Exchange-Traded Funds), mutual funds, or CFDs. This method offers risk diversification.

Recently, a popular method is fractional trading, which removes the restriction of buying at least one full share. For stocks that require 1 million KRW, you can buy 0.1 shares for 100,000 KRW. Although the fees are slightly higher, it’s much more accessible for beginners. Dollar-cost averaging is also popular. Automatically investing a fixed amount each month can lower the average purchase price over time and benefit from compound interest.

Leverage products like CFD(Contract for Difference) can aim for large profits with small capital, but they carry very high risks. If you think Nvidia’s stock will rise, you can buy CFDs to profit from it, or go short if you expect a decline. However, misjudging the market can lead to losses exceeding your initial investment, so only use these products after thorough understanding.

Investing Without Analysis Is Gambling: Technical and Fundamental Analysis

Before buying stocks, analysis is essential. There are two main methods.

Technical analysis predicts future price movements based on past price and volume patterns. Using charts and indicators like moving averages or MACD, traders determine whether it’s the right time to buy or sell. This method is often used by short-term traders.

Fundamental analysis involves in-depth examination of a company’s financial statements, management performance, and industry trends. Indicators like PER(Price-to-Earnings Ratio), PBR(Price-to-Book Ratio), and ROE(Return on Equity) help assess whether a company is undervalued. Long-term investors mainly use this approach.

Both are important, but beginners are recommended to start with fundamental analysis, as understanding the essence of a company is the foundation of investing.

Opening an Account: Easier Than You Think

Stock accounts are now easier to open than bank accounts. Just download a securities firm’s mobile app and have your ID(Resident Registration Card, Driver’s License, Passport, etc.) ready.

The process is as follows:

1. Choose a securities firm (Compare fees, services, app usability)
2. Install the mobile app
3. Scan your ID and verify your identity via phone
4. Enter personal information and source of income
5. Agree to contracts and terms, then sign digitally
6. Receive account opening confirmation

It’s also helpful to know the types of accounts. Discretionary accounts are standard trading accounts. ISA(Individual Savings Account) offers tax benefits and is advantageous for long-term investors. CMA(Cash Management Account) pays interest on deposits and allows stock trading.

Recently, to prevent financial crimes, accounts must wait 20 business days after opening before opening accounts at other financial institutions. However, online bank-affiliated securities accounts like Kakao, K-Bank, or Toss Bank are exempt from this restriction.

Investment Strategies: Short-term Speculation vs Long-term Investment

Choosing an investment strategy determines your returns.

Short-term speculation(Day Trading) involves frequent buying and selling over days or weeks. It can yield high profits but accumulates transaction fees and exerts psychological pressure. Real-time news monitoring and technical analysis are essential. Also, being tied to the market for about 8 hours daily is a downside.

Long-term investing(Over 5 years) follows Warren Buffett’s value investing philosophy. Finding good companies and holding them long-term. It’s less affected by short-term volatility, and compound interest causes profits to grow exponentially over time. Transaction fees are lower, and mental stress is less. Many countries also offer tax benefits for long-term investors.

For beginners, starting with long-term investing is a wise choice.

Risk Management: The True Skill of Investing

Many beginners only think about “how to make money.” Successful investors, however, prioritize “how to minimize losses.”

Diversification is the first rule. Don’t put all your funds into one stock. Holding shares of multiple companies like Samsung Electronics, Hyundai Motor, Naver, SK Hynix reduces the risk of a decline in any particular stock or sector.

Stop-loss orders(Stop Loss) are also crucial. When a stock falls below a set level, it automatically sells. This prevents emotional holding on, hoping it will rebound, which can lead to large losses.

Dollar-cost averaging is effective. Instead of investing 10 million KRW all at once, invest 2 million KRW each month over five months. This lowers the average purchase price and mitigates losses from poor market timing.

Regular portfolio rebalancing is also essential. Review your portfolio quarterly and adjust to your target allocation(e.g., 70% stocks, 30% bonds).

Practical Tips for Beginners

Start small. Investing large amounts from the beginning can cause psychological shocks if losses occur. Start with around 1 million KRW, gain experience, then gradually increase.

Don’t get caught up in theme stock hype. Following trends like “AI is booming” or “Metaverse is the future” blindly can lead to losses. Objective analysis comes first.

Develop a habit of reading economic news. Spend 30 minutes daily on economic news, and weekly check earnings reports and key economic indicators of your interest stocks. Information gaps lead to profit gaps.

Keep an investment journal. Record why you bought a stock and the outcome of each trade. Over time, this helps objectively analyze your investment patterns and avoid repeating mistakes.

Conclusion: From Stock Beginner to Investor

Stock investing isn’t easy. But following strict rules and continuous learning makes it entirely possible.

The key is thorough analysis, systematic risk management, and emotion-free decision-making. If you stick to these, you can steadily grow your assets like a marathon.

Refer to this Stock Beginner’s Guide now, open an account, and start with a small amount. A long-term wealth-building journey awaits you.