10 Ways to Start Investing in the Stock Market, for Beginners

Learning to invest is kind of like learning to ride a bike. You can prepare and practice, but nothing replaces the experience of taking off those training wheels and going for it. You'll find your rhythm after a few skinned knees -- and then you can focus on moving faster and taking on more varied terrain.

You know that's the process, but it's still tough to get started. Here are 10 tips that can help. They cover where and how to start investing, and may even spare you some figurative skinned knees along the way.

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A 401(k) is a nice place to start investing for a few different reasons. For one, your 401(k) offers you a limited set of investment options. Selecting the best funds from 20 options is vastly easier than selecting the best securities from thousands of options.

Plus, your 401(k) has withdrawal restrictions that naturally encourage you to focus on long-term results. There are some exceptions, but you normally can't withdraw funds from a 401(k) without penalties until you are 59 and a half.

When the market's going sideways, that restriction is comforting for anyone under the age of 55. You can't withdraw your funds anyway, so you might as well ride out the short-term volatility. That long-term focus can keep your stress level low and minimize rash decision making that can lessen your returns.

ALSO READ: Got $1,000? Here's How to Start Investing

Robo-advisors provide automated, algorithm-based investing advice. They are low-cost and easy to use, making them a good choice for beginners with routine investing goals.

To get started with a robo-advisor, you'd answer a few questions about your investing goals and timeline. The robo-advisor platform uses those responses to recommend a suitable portfolio.

After that, much of the investing work is automated. You can normally set up recurring deposits and have your funds invested automatically. The platform will also rebalance your portfolio periodically, to keep your risk level aligned with your goals.

Robo-advisors typically charge a low management fee of 0.25% to 0.35%, applied to your account balance annually. A human advisor would charge several times more than that, in the range of 1% to 2%.

Dollar-cost averaging (DCA) is investing set amounts on a regular schedule. An example would be investing $100 each month, as opposed to $1,200 once every year.

DCA is ideal for beginning investors, because it puts you in the habit of investing regularly, no matter what's happening in the market. That habit can dramatically improve your results over time, relative to investing only when you feel confident.

Plus, DCA helps keep your cost basis low, which pushes your gains higher. This is because your set monthly investing amount buys more shares when prices are lower and fewer shares when prices rise.

If you don't want to buy a whole share of stock, you can buy a fraction of a share. The practice is called, you guessed it, fractional investing. Fractional investing is a great starting point for beginners because it lowers your starting costs substantially.

These fractions of shares can be very small. Investing app Robinhood, for example, allows for $1 purchases that buy as little as one millionth of a share. In practice, that means you could build a nicely diversified stock portfolio for $20. If you only purchased whole shares, you could spend thousands creating a new stock portfolio.

Your fractional shares will have many of the same rights as full shares. If you own half a share of Procter & Gamble, for example, you will earn half the dividend. Depending on your broker, you may also have half of a shareholder vote.

ALSO READ: Even Tesla Can Be a Penny Stock With Fractional Shares

A mutual fund is a diversified portfolio that gives you exposure to a range of securities in a single share. The fund's portfolio might hold 500 different stocks, for example. Buy one share and you own a slice of a 500-stock portfolio. You get the benefits of diversification without having to buy each of those stocks individually.

Passive mutual funds are automated to track an index or to follow predefined investing rules. Active mutual funds are managed by professional investors. This distinction is important because it affects the fund's operating costs, also known as the fund expense ratio.

Passive funds have lower expense ratios, which allows a larger portion of the fund's investment returns to flow through to you, the shareholder. For that reason, it's smart to lean toward funds with lower expense ratios when you can.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

S&P 500 index funds are one of the most popular type of passive funds, and for good reason. The S&P 500 index includes 500 of the largest, most successful public companies in the U.S. It's also considered a benchmark for the entire stock market. So when you invest in an S&P 500 index fund, you get access to a high-quality group of stocks, along with near-market-level performance.

The difference in performance between your S&P 500 fund and the index itself is largely a function of the fund's expense ratio. Thankfully, you can find S&P 500 funds with very low expense ratios -- 0.04% or less. Options include Fidelity 500 Index Fund and Schwab S&P 500 Index Fund.

Mutual funds are repriced once at the end of each day, based on the value of the fund's portfolio. Exchange-traded funds (ETFs), on the other hand, trade like stocks. They are bought and sold throughout the day at whatever prices buyers and sellers agree on.

An ETF isn't inherently better than a low-cost mutual fund -- but there is one advantage that may be significant. You can buy a single share of an ETF. Many mutual funds, on the other hand, have minimum investment thresholds. As an example, Vanguard Admiral Shares funds carry a minimum investment of $3,000.

If you don't want to spend $3,000 right now, you can buy just one share of an ETF with a similar portfolio. Low-cost options in that category include SPDR Portfolio S&P 500 ETF, Vanguard S&P 500 ETF, and iShares Core S&P 500 ETF.

ALSO READ: 3 Reddit Stocks I'd Buy Right Now Without Any Hesitation

Target date funds (TDFs) are retirement funds that gradually adjust their portfolios from a growth focus to a capital preservation focus over time. This follows the best practice of investing more aggressively when you have a long timeline and more conservatively when you don't. What's nice is you don't have to redo your portfolio manually to make that adjustment happen. Your TDF does it for you, automatically.

You'd align the fund's timeline with your own by selecting a TDF with the same vintage as your planned retirement year.

When shopping for TDFs, look in the fund documentation for the fund's glide path. This will show you how the fund moves from aggressive to conservative over time, and when it reaches its most conservation mix of securities.

Dividend Kings are stocks that have increased their dividends every year for 50 consecutive years. Only companies with great leadership, reliable cash flow, and manageable debt can reach that milestone. While there's no guarantee Dividend Kings will continue raising their dividends, these companies are among the most established and reliable dividend payers out there.

As a novice investor, you will appreciate the dividend income especially when the market gets dicey. When share prices are falling across the board, that regular income could temporarily be the only positive in your portfolio.

When choosing dividend stocks, look for a payout ratio below 75%. That's a quick gauge of the company's ability to continue paying that dividend. Low debt levels and a history of stable and increasing cash flow are also important.

Experienced investors buy companies they understand because it gives them an edge when evaluating business models and predicting future earnings potential.

The same concept applies to you as a beginner, even if you don't view yourself as an analyst. For example, if you shop at Walmart, you know what you like and don't like about the mass retailer. If Walmart announces a strategy change, you can evaluate that from the perspective of a Walmart customer. Guaranteed, if you don't like the new strategy, other customers won't, either.

Now think about software company Autodesk, maker of AutoCAD and other design titles. Unless you're an architect or engineer, you probably find it tough to form any opinions about Autodesk. And that puts you at a disadvantage as a shareholder.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

You don't have to be a financial guru or technical expert to start investing. But you do need the courage to pull the training wheels off and put your money out there.

You will make mistakes and skin your knees -- all investors do. What's important is that you learn, adjust, and press on. Soon enough, you'll be taking on bigger investing challenges and reaping larger financial rewards.

Catherine Brock owns shares of Procter & Gamble and Vanguard S&P 500 ETF. The Motley Fool owns shares of and recommends Autodesk and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.