How to Invest in Stocks: 5 Steps to Get Started

By Matthew Frankel, CFP – Updated Oct 11, 2025 at 3:13 PM | Fact-checked by Robin Hartill, CFP

Key Points

Invest in stocks to potentially build wealth, focusing on companies you understand.
Choose a suitable investment method based on your willingness to research stocks.
Because of the potential for market volatility, avoid investing money you expect to need soon.

Stock investing means putting your money to work in publicly traded companies. Stock investing can allow you to own a piece of your favorite retailers, software providers, and much more. A share of stock represents a slice of ownership in a company and entitles the owner to benefit from its future profits.

When done the right way, investing in stocks is one of the most effective ways to build long-term wealth. But like most financial decisions, there are right ways and wrong ways to invest in the stock market. With that in mind, here's a step-by-step guide to investing money in the stock market correctly.

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An infographic showing five steps to investing in stocks. — Image source: The Motley Fool.

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Robo Advisor

Robo-advisors are programs designed to act as a sort of financial advisor. They can work by themselves, performing specific tasks when specific thresholds are met or in tandem with a human advisor.

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Bonds

Bonds are debt securities that entitle the holder to receive interest payments.

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For example, some brokers offer customers a variety of educational tools. Some offer access to investment research and other features that are especially useful for newer investors. And some have physical branch networks, which can be nice if you want face-to-face investment guidance.

There's also the user-friendliness and functionality of the broker's trading platform to consider. Many will let you try a demo version before committing any money; if that's the case, it can be well worth the time.

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Want to compare brokerages?

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8 Best Investments for 2025

Explore smart investment options for every goal and risk level. Learn what to invest in to grow your wealth.

Investing in Safe Stocks and Low-Volatility Stocks

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What Is a Good Return on Investment?

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How to Calculate Total Stock Returns

Total returns can help compare the performance of investments that pay different dividend yields.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

Charles Schwab is an advertising partner of Motley Fool Money. Matt Frankel has positions in SoFi Technologies. The Motley Fool recommends Charles Schwab and recommends the following options: short December 2025 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.

5. Continue investing

Here's one of the biggest secrets of investing, courtesy of the Oracle of Omaha himself, Warren Buffett: You do not need to do extraordinary things to get extraordinary results.

The most surefire way to make money in the stock market is to buy shares of great businesses at reasonable prices and hold on to the shares for as long as the businesses remain great (or until you need the money). If you do this, you'll experience some volatility along the way. But over time, you'll most likely enjoy excellent investment returns.

Types of stocks

There are literally hundreds of categories and subcategories of stocks. Here are some of the common categories investors should be familiar with:

Common stocks: Stocks that allow you to own equity in a business

Preferred stocks: Stocks that have a guaranteed rate of return and work like debt instruments, not equity investments

Growth stocks: Companies that are growing sales faster than the overall stock market average

Value stocks: Companies whose stocks are (theoretically) trading for a discount to the intrinsic value of the business

Dividend stocks: Stocks that pay regular distributions of cash to investors

Large-cap stocks: Generally used to refer to companies with a $10 billion market cap or higher

Mid-cap stocks: A company with a market cap of between $2 billion and $10 billion

Small-cap stocks: Companies with less than $2 billion in market cap

Potential benefits and risks of investing in stocks

As mentioned, stocks can be a great way to create wealth over time. Over periods of several decades, major stock market averages have produced returns of between 9% and 10% annually.

The main risks are related to how volatile stocks can be over short periods of time. Swings of 10% in the stock market are rather common, happening about once a year, and declines of 20% or greater (which define a bear market) happen occasionally.

How to Invest in Stocks: 5 Steps to Get Started

Key Points

Robo Advisor

Bonds

8 Best Investments for 2025

Investing in Safe Stocks and Low-Volatility Stocks

What Is a Good Return on Investment?

How to Calculate Total Stock Returns

About the Author

Our Guides

Premium Investing Services

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1. Determine your investing approach

The different ways to invest in the stock market

2. Decide how much money you will invest in stocks

Asset allocation

4. Choose your stocks

5. Continue investing

Types of stocks

Potential benefits and risks of investing in stocks

Related investing topics

Stock investing mistakes to avoid

FAQ

3. Open an investment account

Type of account

Costs and features