Stock Investment Study Order: A Practical Investment Guide from the Beginning

Things You Need to Know Before Starting Stock Investment

Many people make the mistake of ignoring the order of studying stocks and jumping into the market recklessly. However, without systematic learning, it can become a ‘game of losing money.’ The first step in studying stocks is to clearly understand the basic concepts. Stocks are financial products representing ownership in a company, and by purchasing them, investors acquire a partial stake in the company. For example, owning one share of Samsung Electronics means holding approximately 0.0000018% of the entire company(as of February 21, 2025).

There are two sources of profit in stock investment. First, capital gains generated when stock prices rise as the company grows. Second, regular cash flow from dividends paid by the company. Compared to other financial products, stocks boast excellent liquidity. This means you can sell them at any time when needed and convert to cash, which is a key feature that distinguishes them from assets like real estate.

Looking at the long-term returns of investing in quality stocks, the S&P 500 index has recorded an average annual return of about 10% since 1957. This allows for sufficient inflation offset and real asset growth over time.

Understanding Your Investment Style Is the First Task

The most important step in the stock study order is to accurately identify your investment style. Not everyone is suitable for stock investing. You need to objectively evaluate your current financial situation, the capital you can invest, and your psychological capacity to handle losses.

Stock prices can unexpectedly plummet. During the COVID-19 pandemic in March 2020, the S&P 500 index dropped about 34% in just one month. Facing such volatility, it is essential to maintain a psychological state that prevents panic selling. Therefore, it is crucial to objectively assess your risk tolerance before making investment decisions.

Understanding the Diversity of Stock Investment Methods

There are various ways to invest in stocks. As you progress in stock study, you should understand the characteristics of each method.

Direct investment in individual stocks involves buying and selling shares of specific companies directly. It offers the potential for high returns but also carries significant risk of loss. This method requires thorough analysis and experience.

Indirect investment through ETFs and funds involves trading products that are diversified across multiple stocks. The advantage is reducing the risk associated with individual stocks. It can be a more suitable choice for beginners.

Fractional trading has recently gained popularity. You can buy expensive stocks with a small amount of money, though transaction fees may be somewhat higher.

Dollar-cost averaging involves automatically investing a fixed amount every month, which is effective for long-term asset growth. It also reduces the burden of timing the market entry.

Choosing a Securities Firm and Account Opening Procedures

To move into the practical phase of the stock study order, you need to select a securities firm and open an account. Consider transaction fees, services offered, and the usability of mobile apps when choosing a broker. Many investors keep their initial securities account for a long time, so it’s best to choose carefully from the start.

Recently, account opening can be completed in just a few minutes via smartphone apps. All you need are identification documents such as a resident registration card, driver’s license, or passport(.

Account opening steps:

Step 1: Decide on a securities firm and download the official app
Step 2: Scan your ID and verify your identity via your mobile phone
Step 3: Enter personal information and source of income accurately
Step 4: Review the account opening application and terms, then sign digitally
Step 5: Receive confirmation that the account has been successfully opened

Note: If you have recently opened a deposit or withdrawal account, opening an account at another financial institution may take up to 20 business days due to anti-money laundering regulations. However, securities firms partnered with KakaoBank, Toss Bank, and others are exempt from this restriction.

Tips to reduce trading fees: In the past, placing orders through staff could incur fees of around 0.5%. Now, with online trading platforms)HTS, MTS( becoming standard, fees have significantly decreased. Starting with a securities firm that offers low fees can save you considerable costs in the long run.

Two Approaches to Stock Analysis

During stock study, you should learn two key analysis techniques.

Technical analysis predicts future stock prices based on past price movements and trading volume patterns. It uses charts, moving averages)Moving Average(, MACD)Moving Average Convergence Divergence(, and other indicators. This method is mainly used by short-term traders.

Fundamental analysis involves comprehensively examining a company’s financial health, management performance, and industry trends to evaluate its intrinsic value. Indicators like PER)Price-to-Earnings Ratio(, PBR)Price-to-Book Ratio(, ROE)Return on Equity( are referenced. This approach is preferred by long-term investors.

Understanding and applying both methods appropriately can lead to more balanced investment decisions.

Developing Investment Strategies: Short-term vs Long-term

Stock investment strategies are broadly divided into two types.

Short-term speculation strategies aim for quick profits within a short period. Day trading is a typical example. While it offers high returns, it also involves high risk of loss. Techniques include real-time news monitoring, technical analysis, and momentum trading. Frequent trading can lead to high transaction costs.

Long-term investment strategies span over five years or more. Value investing is a common approach, famously associated with Warren Buffett’s philosophy. Through long-term holding and compound interest, profits can grow exponentially over time. Many countries offer tax benefits for long-term investments.

Beginners are recommended to start with a long-term strategy.

Strategies to Minimize Risks

The final core of the stock study order is risk management. To pursue stable profits, minimizing losses is essential.

Diversification follows the investment principle of “don’t put all your eggs in one basket.” Holding stocks from different companies and industries, such as Samsung Electronics, Hyundai Motor, and Naver, can mitigate the impact of a decline in any single stock or sector.

Stop-loss strategies involve automatically selling stocks when their prices fall below a certain level to limit losses.

Portfolio rebalancing entails periodically reviewing your holdings and adjusting them to match your target allocations. This allows active response to market changes and maintains portfolio balance.

Dollar-cost averaging involves investing multiple times over a period rather than all at once. For example, investing 10 million won over five months by investing 2 million won each month can significantly reduce entry timing risk.

Practical Tips for Beginners

When you finish stock study and start actual investing, keep these points in mind.

Start small. It’s wise to gain experience with a small amount of capital rather than investing a large sum from the beginning.

Don’t follow trends blindly. Chasing after ‘theme stocks’ or ‘double-up stocks’ can lead to significant losses. Make decisions based on rational analysis.

Continuously learn. 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. Record the rationale and results of each trade to analyze your patterns and improve decision-making.

Conclusion: From Stock Study to Practical Investing

By systematically following the stock study order, conducting thorough analysis, and managing risks, stock investing can become a powerful tool for long-term wealth accumulation. Like a marathon, proceed steadily and cautiously, aiming for gradual asset growth.