Stock Basics to Practical Skills: The Perfect Investment Roadmap for Beginners

Am I Truly Cut Out for Stock Investing?

Before starting stock investing, there is a question you must ask yourself. Have you accurately assessed your investment style, financial situation, and risk tolerance?

Stocks are undoubtedly an attractive means of wealth management. They offer higher returns compared to other financial products, with the S&P 500 index recording an average annual return of about 10% since 1957, outperforming inflation over the long term. You can profit from capital gains through stock price increases alongside company growth, and also secure regular cash flow through dividends. Most importantly, high liquidity allows you to cash out anytime if needed.

However, the misconception that stocks are ‘gambling’ also exists. Stock prices can show intense volatility over short periods. For example, during the COVID-19 pandemic in March 2020, the S&P 500 index dropped about 34% in just one month. The psychological burden caused by rapid market fluctuations is as significant as actual losses. Additionally, continuous learning and market analysis are essential. Relying solely on vague expectations is not sufficient.

Therefore, stock investing can become a powerful tool to significantly grow your assets if approached with proper knowledge and strategy.

What Exactly Are Stocks?

Stocks are securities representing ownership in a company. Buying stocks means owning a part of that company. You can earn profits through dividends and capital gains depending on the company’s performance.

For example, owning one share of Samsung Electronics as of February 21, 2025, grants you approximately 0.0000018% of the company’s total shares(. Although a tiny fraction, it makes you a partial owner of a giant corporation, and as the company grows, so does your investment. This is the fundamental principle of stock investing.

What Are the Ways to Trade Stocks?

Stock trading methods are broadly divided into two categories: direct investment in individual stocks and indirect investment through ETFs, funds, etc.

Direct investment involves buying and selling specific company stocks, which can yield high returns but also carries significant risk. On the other hand, ETFs and funds are diversified products containing multiple stocks, effectively reducing risk.

Let’s look at two popular trading methods nowadays.

Fractional Trading allows investing in high-priced stocks with relatively low fees, making it accessible for beginners by lowering entry barriers.

Dollar-Cost Averaging involves automatically investing a fixed amount every month, which is good for long-term asset growth. It reduces emotional decision-making and allows systematic accumulation.

Basic Guide to Opening a Stock Account

Opening a stock account is similar to opening a bank account but is done through a securities company. Fortunately, nowadays, it can be completed in just a few minutes via smartphone apps.

) Required Documents ID card###Resident registration card, driver’s license, passport(are sufficient.

) Choosing the Account Type

Before opening an account, check which type suits you best.

General Custodial Account is the most basic account for stock trading, allowing trading of domestic and international stocks and financial products.

ISA###Personal Comprehensive Asset Management Account( offers tax benefits for mid- to long-term investments. It provides income deductions, making it advantageous for long-term asset management.

CMA)Comprehensive Asset Management Account( pays interest on deposits and allows for both stock investment and short-term fund management simultaneously.

) Opening Procedure

Step 1: Choose a Securities Firm Consider fees, service quality, and mobile app convenience comprehensively.

Step 2: Install App and Verify Identity Download the account opening app of the chosen securities firm, scan your ID, and complete phone verification.

Step 3: Enter Information Accurately input personal details, income sources, and other required information.

Step 4: Agree to Terms Consent to trading terms and online HTS usage agreements, then sign digitally.

Step 5: Completion Once all steps are completed, you’ll receive a notification that your account is ready.

Note: If you have recent deposit or withdrawal records, you may need to wait 20 business days before opening a new account with another financial institution due to anti-money laundering regulations. However, affiliated securities firms like Kakao, K-Bank, and Toss Bank are exempt from this restriction.

Tips to Reduce Fees

Stock trading fees are highest (~0.5%) when placing orders directly through staff###. However, online HTS or mobile MTS orders are now the norm, with much lower fees.

Since investors tend to stick with their initial securities firm, choosing one with low fees from the start is a wise decision.

Two Main Approaches to Stock Analysis

To succeed in investing, thorough analysis of stocks is essential. There are mainly two methods.

( Technical Analysis to Read the Market

Technical analysis predicts future stock prices based on past price movements and trading volume patterns, utilizing charts and various indicators.

Indicators like the Moving Average)Moving Average### or MACD(Moving Average Convergence Divergence) are used to determine trading timing. This approach is favored by short-term investors and traders.

( Fundamental Analysis to Assess Company Value

Fundamental analysis evaluates a company’s true worth by analyzing financial statements, management performance, and industry trends.

Indicators such as PER)Price-to-Earnings Ratio###, PBR(Price-to-Book Ratio), and ROE(Return on Equity) help determine whether a stock is overvalued or undervalued at its current price level.

Investment Strategies: Short-term vs Long-term

Investment strategies vary depending on the investment horizon.

( Characteristics of Short-term Trading Strategies

Day trading and other short-term strategies involve buying and selling stocks over brief periods to seek quick profits. They can yield high returns but also entail high risks.

Short-term traders mainly use technical analysis, real-time news monitoring, and momentum trading. However, frequent trading increases transaction costs.

) Strengths of Long-term Investment Strategies

Long-term investing involves holding stocks for over five years. Value investing, exemplified by Warren Buffett’s philosophy, is a typical approach.

The biggest advantage of this method is the power of compound interest. Over time, investment returns grow exponentially. Many countries also offer tax benefits for long-term investments.

No Success Without Risk Management

Minimizing losses and achieving stable returns in stock investing requires risk management.

Importance of Diversification

The core of diversification is ‘not putting all eggs in one basket.’ Holding stocks of multiple companies like Samsung Electronics, Hyundai Motor, and Naver can significantly reduce the risk of a decline in any single stock or sector.

Practical Risk Management Techniques

Stop Loss### is an automatic sell order triggered when stock prices fall below a certain level, limiting losses.

Periodic Portfolio Rebalancing involves regularly reviewing and adjusting your portfolio to match your target allocations, responding to market changes.

Dollar-Cost Averaging involves investing multiple times rather than all at once, such as investing 10 million KRW over five months at 2 million KRW each month.

Long-term Holding involves keeping promising stocks for extended periods to reduce the impact of short-term market fluctuations.

Essential Investment Tips for Beginners

How to Start Investing Properly

Start Small by beginning with a modest amount to gain experience. This allows you to directly observe market movements and learn.

Avoid Blindly Following the Market is crucial. Be cautious of hype around ‘theme stocks’ or ‘limit-up stocks.’ Instead of chasing overheated markets, base your decisions on objective analysis.

( The Need for Continuous Learning

Ongoing Learning and Market Monitoring are not optional but essential. Dedicate 30 minutes daily to reading economic news, and weekly review of earnings reports and key economic indicators of your interest stocks.

Keep an Investment Journal as well. Recording reasons for each trade and its outcome helps analyze your investment patterns, reflect on decisions, and improve over time.

Final Advice Based on Stock Fundamentals

Stock investing is not just about making money but understanding companies and markets. For beginners, thorough analysis and risk management form the foundation of success, and choosing the right investment strategy is key.

Persist steadily and cautiously like a marathon runner, aiming for long-term asset growth. Learn the basics step by step, and as you invest your time, your returns will follow.