How to Invest in Stocks: From Opening a Real Account to Managing Your Portfolio

Is Stock Investing Truly ‘Gambling’?

Many people start with this question before learning how to invest in stocks. Stock investing is certainly an attractive means of wealth accumulation, but it also involves risks. The key is understanding the difference. Acting emotionally without knowledge can turn it into gambling, but approaching it with systematic analysis and strategy makes it a viable long-term asset growth method.

This article provides step-by-step essential information for beginner investors. Covering everything from choosing a securities firm, account opening procedures, stock analysis methods, to risk management strategies to avoid failures how to invest in stocks.

What is Stock? Starting with Basic Concepts

Stocks are securities that prove ownership in a company. Buying stocks is like owning a part of that company.

For example, holding 1 share of Samsung Electronics means owning approximately 0.0000018% of the entire company(as of February 21, 2025). Although a tiny fraction, if the company’s performance improves, you can profit through stock price increases and receive dividends when profits are distributed.

The profit structure of stock investment consists of two parts. First is capital gains, earning profit by buying low and selling high. Second is dividends, which are profits distributed to shareholders by the company.

Are You Suitable for Stock Investment?

Before answering this question, you should first assess your financial situation and psychological state.

Advantages of stock investing:

• Expectation of high returns: Long-term investment in quality companies can yield an average annual return of around 10%. In fact, the S&P 500 index has recorded about 10% average annual returns since 1957.
• Quick liquidity: Unlike real estate, selling does not take long, making stocks highly liquid.
• Compound interest effect: Long-term investing allows you to experience the ‘magic of compounding.’ Small profits grow exponentially over time.

Disadvantages and risks of stock investing:

• Volatility: Stock prices fluctuate greatly in short periods. For example, during the March 2020 pandemic, the S&P 500 index dropped about 34% in just one month.
• Psychological burden: The mental stress from experiencing losses can be more than expected.
• Continuous learning required: To beat the market, you must keep studying constantly.

Therefore, stock investing is suitable for those who have idle funds that won’t be used for at least 6 months and possess psychological stability to withstand market fluctuations.

Various Ways to Invest in Stocks

Direct Investment in Individual Stocks

Buying and selling specific company stocks directly. It can yield high returns, but if analysis fails, significant losses can occur. Usually chosen by experienced investors.

ETF and Fund Investment

Products diversified across multiple stocks, with lower risk than individual stocks. Recommended for beginners.

Fractional Trading and Dollar-Cost Averaging

Popular methods offered by securities firms nowadays. Fractional trading allows investing in expensive stocks with less than one share, and dollar-cost averaging involves investing a fixed amount monthly to promote long-term growth.

For example, even if Samsung Electronics stock is priced at 1 million won, with only 100,000 won, you can buy 0.1 share. Dollar-cost averaging by investing 500,000 won monthly over 12 months can reduce timing risk.

Starting with Account Opening

Criteria for Choosing a Securities Firm

Consider fees, mobile app convenience, customer service, and variety of investment products comprehensively. Using the Korea Financial Investment Association’s fee comparison service helps make an objective comparison.

Understanding Account Types

• Discretionary Account: For general stock trading, allows buying and selling domestic and international stocks and financial products.
• **ISA( Individual Savings Account): A tax-advantaged account for mid- to long-term investments.
• **CMA( Cash Management Account): Pays interest on deposits and supports stock trading and short-term fund management.

Five-Step Process to Open an Account

Step 1 - Choose a Securities Firm: Select a firm that matches your investment style.

Step 2 - Install App: Download the dedicated app for account opening of the chosen firm.

Step 3 - Identity Verification: Scan ID(such as resident registration card, driver’s license, passport) and complete phone authentication.

Step 4 - Enter Information: Accurately input personal details, income sources, and investment experience.

Step 5 - Agree to Documents & Complete: Agree to trading terms, sign digitally, and submit. Usually, the account is opened on the same day or next business day.

Tip: After opening a deposit/withdrawal account, you must wait 20 business days before opening accounts at other securities firms. This is a regulation to prevent financial crimes. Exceptions include bank-affiliated securities like Kakao, K-Bank, Toss Bank.

Stock Analysis: Two Main Methodologies

Technical Analysis (

Analyzing past stock price movements and volume patterns to predict future price changes.

Key indicators:

• Moving Average)Moving Average(: Connects average prices over a period to identify trends.
• MACD)Moving Average Convergence Divergence(: Uses convergence/divergence of two moving averages to determine buy/sell signals.
• RSI)Relative Strength Index(: Assesses whether a stock is overbought or oversold.

) Fundamental Analysis ###
Analyzing financial statements, management performance, and industry trends to evaluate intrinsic stock value.

Key indicators:

• PER(Price-to-Earnings Ratio): Stock price divided by annual net profit. A lower PER suggests undervaluation.
• PBR(Price-to-Book Ratio): Stock price divided by book value per share.
• ROE(Return on Equity): Shows how much profit a company generates with shareholders’ equity.

Beginner Tip: Using both analyses together yields more accurate judgments—use technical analysis to determine entry points and fundamental analysis to confirm long-term value.

Investment Strategies: Find the Approach That Fits You

( Short-term Trading )Day Trading / Swing Trading### Frequent buying and selling over short periods to seek quick profits.

Advantages:

• Potential for rapid gains
• Actively utilizes market volatility

Disadvantages:

• High failure rate
• Increased transaction fees and taxes
• Psychological stress

( Long-term Investing )Value Investing### Holding stocks of quality companies for over 5 years, exemplified by Warren Buffett’s philosophy.

Advantages:

• Profits grow over time through compound interest
• Reduced transaction costs
• Psychological stability
• Tax benefits(in some countries)

Disadvantages:

• Requires patience
• Maximizes importance of choosing the right companies

Conclusion: For beginners, long-term investing has a much higher success rate.

Risk Management Strategies: Minimize Losses

( Principles of Diversification The saying “Don’t put all your eggs in one basket.”

For example:

• ❌ Wrong approach: Invest 10 million won all in Samsung Electronics stock
• ✓ Correct approach: Distribute 2 million won each into Samsung Electronics, Hyundai Motor, Naver, LG Chem, SK Hynix

This way, negative news about one company limits overall portfolio loss.

) Practical Risk Management Methods

Stop Loss###: Set automatic sell orders if stock price drops more than 5-10% below purchase price to avoid emotional decisions.

Regular Portfolio Rebalancing: Review and adjust your portfolio periodically (quarterly or semi-annually) to maintain target ratios###e.g., 70% stocks, 30% bonds(.

Averaging Down): Invest 2 million won monthly over 5 months instead of all at once, lowering the average purchase price.

Long-term Holding: Hold promising stocks for over 3 years to avoid short-term volatility.

Tips Every Beginner Must Know to Invest in Stocks

( 1. Start Small Use spare funds, not living expenses. Losses should not impact daily life.

) 2. Avoid Fads like Themed Stocks Following trends on SNS(e.g., semiconductors, biotech, electric vehicles) blindly is risky. Decisions should be based on objective analysis.

3. Continuous Learning and Monitoring

• Daily: Read economic news for 30 minutes
• Weekly: Check earnings reports and key economic indicators of interest stocks
• Monthly: Review portfolio performance

4. Keep an Investment Journal

Record “Reason for buying,” “Judgment basis,” “Results,” “Improvements” for each trade. Over time, this helps objectively analyze your investment patterns.

( 5. Reduce Trading Fees

• ❌ Broker-assisted orders: About 0.5% fee
• ✓ HTS)PC online orders###: About 0.015%~0.03%
• ✓ MTS###Mobile app orders###: Similar to HTS

Since investors tend to stick with their initial securities firm, choosing a low-fee broker from the start is crucial.

Conclusion: How to Invest in Stocks Is a Marathon

Stock investing is not a sprint. It requires thorough study, meticulous risk management, and consistent execution—a marathon.

For beginners:

1. Start with accurate self-assessment.
2. Open an account and gain experience with small amounts.
3. Learn fundamental and technical analysis methods.
4. Prioritize risk management.
5. Invest steadily with a long-term perspective.

There are always people aiming for ‘big wins’ in the market. But remember, true wealth accumulation comes from a boring, repetitive process. Stay cautious and consistent until you achieve your financial goals.