Stocks for Dummies Guide to getting started

What is stock?

Stock is all of the shares that ownership of a company is divided amongst. A share is a single piece of ownership of that company. Anybody can buy shares in a company as long as that company is publicly traded.

When you buy these shares, you are investing in the company. Most of the money you paid for your shares goes to the company for their use. The more a stock is traded, the more the price fluctuates. The point of investing is to sell your shares above the price you bought them, that way you turn a profit.

Some companies even pay dividends. Most who do pay them quarterly (4 times a year). A dividend is a percentage of profit made by the company that is paid to its shareholders. The more shares you own, the bigger the dividends payments will be.

How to Buy and Sell

Most buy and sell stock through a brokerage. Recently, people have begun using brokerage apps, such as Robinhood, to buy and sell. These apps don't take as large a commission and you can send the buy and sell orders yourself, giving the user a lot more control over when to buy or sell.

A brokerage is a firm made up of brokers who arrange the transactions between buyers and sellers of stock and get paid a commission when the deal is done. Many will advise clients on what stocks to buy or sell, and some will even completely manage accounts for you.

There are many online brokerages, all with different features and issues. Where you invest is just as important as what you invest in, so research which you want to use. Fidelity is often called the best all-around, but for someone who trades more options, E*TRADE may be better suited. If you need to do more research, try out Merrill Edge.

These online brokerages all have different terms. Some will require you to pay commissions, others may make money through selling your data. Now is a better time than ever to read the Terms and Conditions. Do your research.

What to Invest With

The first step in finding what to invest in is to decide how you are going to invest. If you are going to a brokerage (not an online one), then you can ask your stockbroker to make choices for you. They will suggest companies to invest in, and you'll make the call on whether you will and how many shares you'll buy.

If you have the money for it, you can pay someone to do this for you. Someone can not only set up the transactions, like a broker, but also decide how much money to put in. They're known as financial planners or financial advisors. They not only control your investments, but all your assets and purchases. Of course, you could veto any decision they make.

You could also do the second most common thing, which is find what to invest in by yourself. This is going to require time, lots of it. You're going to have to use software designed for research. No, not the "Stocks" app that comes with your phone.

TD Ameritrade offers a software named "Thinkorswim" which is great for research and is completely free (pictured). There are many others. When you first download it, play around a bit to get used to it. Watch some videos on how to use it. Learn as much as you can so you can use it easily.

What to Invest In

There are specific things to look for in an investment. Let's say you're shopping online. If you want a black shirt, you go to the filters and you check "shirt" and "black" and your size. When using your application, you'll want to use the filters. Things such as percentage increases since the market opened and RSI levels are good things to filter by.

RSI stands for "Relative Strength Index". It is a number from 0 to 100 that rates the strength of a stock. A rating over 30 means that the stock is "oversold", suggesting a rise in price. A rating over 80 means that the stock is "overbought", suggesting a fall in price.

Another important thing is knowing when to sell your shares. The market has a naturally upward trend, meaning if you diversify your portfolio enough, you will make more money the longer you hold. If you don't plan on holding for a long time, usually after a long time of a stock going up, it will start to drop.

You want to sell as high as possible, that way you make the most money. But if you wait too long, then it'll fall and you'll lose some. You also want to buy as low as possible, that way it has the biggest potential, but if you wait too long, it'll start to rise again. You have to learn the trends.

Stocks are a huge topic, it couldn't all be explained. You'll learn more and more with experience. This video will help to learn more. There is a list of stock terms that will come in handy down the road.


  • Bear Market - a market that is falling. Individual stocks can also be "bearish", and people can have "bearish" mindsets
  • Blue Chip Stock - a stock of a company with a national reputation, like Apple or VISA
  • Bull market - a market that is rising. Like it's counterpart, individual stocks can be "bullish", and people can have "bullish" mindsets
  • Close - the end of the trading day, usually 4pm on weekdays
  • Day Trade - buying and selling one investment within the same day. It has a success rate of about 10% and is considered a full-time job
  • Diversification - the process of investing in a variety of types of investments to reduce the risk of loss
  • ETF - aka exchange-traded fund, a group of stocks traded as one. Unlike a mutual fund, it is sold at a variety of prices throughout the trading day
  • High - the highest price the stock reaches within a given period of time
  • Index Fund - a portfolio created to track the growth of that given group of stocks
  • IPO - aka Initial Public Offering, the first price a stock is offered at when it goes public
  • Low - the lowest price the stock reaches within a given period of time
  • Mutual Fund - a group of stocks traded as one. Unlike an ETF, it is sold at it's price at the end of the trading day
  • Open - the beginning of the trading day, usually 9:30am on weekdays
  • Option - a contract between a buyer and a seller to purchase a certain stock at a certain price up until a defined expiration date
  • Portfolio - a collection of investments, the core being stocks, bonds, and cash
  • Privately Held Company - a company owned by a relatively small amount of shareholders and is not listed on any stock exchange
  • Short - borrowing stock to sell and rebuy at a lower price, giving it back to who you borrowed from and pocketing the difference
  • Spread - the difference between a stock's high and low
  • Strike Price - a fixed price that the owner of an option contract can buy or sell at
  • YTD - aka year-to-date, referring to the period from January 1st of the current year to the present day