how can a person invest in the stock market

How can a person invest in the stock market

how can a person invest in the stock market is a common question for new savers and experienced savers moving into equities. This guide explains the main routes to own publicly traded companies (U.S. and global markets), account types and tax treatments, choosing a broker or robo-advisor, how to place trades, portfolio construction, risk management, costs and taxes, and a practical step-by-step plan to get started.

As of 2026-01-22, according to Yahoo Finance's Morning Brief and related market commentary, investors should remain alert: some market strategists judge portions of the market as fully priced and warn of possible pullbacks (some estimating a 10–15% correction range). This market context reinforces the importance of clear goals, diversification and risk controls when deciding how can a person invest in the stock market.

Disclaimer: This article is educational only. It is not personalized investment advice. Consult a licensed financial advisor or tax professional about your individual situation.

Overview of stock market investing

Stocks are shares of ownership in a company. When you buy a share you own a fractional claim on the company's assets and future earnings. Investors earn returns from two main sources: price appreciation (shares rising in value) and distributions (dividends). Stocks historically have offered higher long-term returns than cash or many bonds, but with higher volatility and the risk of losing principal.

Common participants include individual investors, mutual funds and ETFs, pension funds, hedge funds and market makers. The simplest ways to gain exposure are direct share ownership, pooled funds (ETFs and mutual funds) and managed accounts.

Reasons to invest and typical goals

People invest in the stock market to pursue goals such as retirement saving, long-term wealth accumulation, generating income (dividends), beating inflation, or preserving capital in real terms. Your time horizon and risk tolerance should shape the investments you choose: longer horizons usually favor higher equity allocation because short-term volatility is more tolerable when you have time to recover.

Common goal types:

• Retirement: decades-long horizon, focus on growth and tax-advantaged accounts.
• Wealth accumulation: flexible mixes of stocks and bonds based on risk appetite.
• Income: focus on dividend-paying stocks, REITs, or income-focused funds.
• Shorter-term needs: generally favor safer, more liquid assets than equities.

Investment vehicles and instruments

Individual stocks

Buying individual stocks means owning shares of a single company. Pros: potential for high returns if the company performs well, voting rights in some share classes, and direct dividend payments. Cons: concentrated company-specific risk, higher due diligence burden, and emotional management of volatility.

Exchange-Traded Funds (ETFs)

ETFs are pooled funds that trade on exchanges like stocks. They can track broad indexes, sectors, countries, or investment themes. ETFs provide instant diversification, intraday tradability, and generally low expense ratios. Fees (expense ratios and potential bid-ask spreads) vary by fund. Many beginners use broad-market ETFs to gain diversified exposure with low cost.

Mutual funds (including index funds)

Mutual funds pool investor money and are managed either actively or passively. Index mutual funds track an index and are priced at net asset value (NAV) once per trading day. Active mutual funds seek to outperform benchmarks but typically charge higher fees. Mutual funds suit investors preferring automatic investment plans or those in retirement accounts with a limited fund menu.

Stock mutual funds vs. index funds

Index funds (passive) aim to match market returns with minimal trading and low fees. Active mutual funds attempt to beat the market but must cover higher management expenses. Over long horizons, many index funds outperform the average active manager after fees. Cost and tax efficiency are key differences.

Other instruments (options, ADRs, preferred stock, REITs)

• Options: contracts giving the right (not obligation) to buy or sell a stock at a specified price; used for hedging or leverage and are advanced and risky.
• American Depositary Receipts (ADRs): U.S.-listed receipts representing shares of non-U.S. companies.
• Preferred stocks: hybrid equity with priority for dividends but less upside than common shares.
• REITs: Real Estate Investment Trusts provide access to real-estate income and capital appreciation; they may pay higher dividends but have sector-specific risks.

Accounts and access routes

Tax-advantaged retirement accounts (401(k), IRA, Roth IRA)

Retirement accounts offer tax benefits that can materially improve long-term results. Key features:

• Traditional 401(k)/IRA: Contributions may be tax-deductible; withdrawals in retirement taxed as ordinary income.
• Roth IRA: Contributions are after-tax; qualified withdrawals are tax-free.
• Contribution limits change annually—check current IRS limits—and some accounts have income eligibility rules.

Employer plans (401(k)) often offer matching contributions—prioritize capturing employer match before other investments. Investment choices in workplace plans can be limited to funds chosen by the plan sponsor.

Taxable brokerage accounts

Brokerage accounts let you buy and sell stocks, ETFs, mutual funds and other securities with no early-withdrawal restrictions. Gains are taxable when realized; dividends are taxed in the year received. Taxable accounts provide flexibility and are appropriate for non-retirement savings goals.

Custodial accounts and accounts for minors

Custodial accounts (UGMA/UTMA in the U.S.) allow adults to hold assets on behalf of minors. Control transfers to the child at legal age; tax rules and gift limits apply. These accounts are useful for saving for education or transferring wealth but consider the impact on financial aid eligibility.

Direct stock purchase plans (DSPPs) and dividend reinvestment plans (DRIPs)

Some companies and brokerages offer DSPPs that let investors buy company shares directly, sometimes with reduced fees. DRIPs automatically use cash dividends to purchase more shares, compounding returns over time. DSPPs/DRIPs can reduce friction for long-term investors but may offer limited trading flexibility.

How to get started — choosing a broker or platform

Types of brokers (full-service, discount, online/mobile apps)

• Full-service brokers provide personalized advice and planning but charge higher fees.
• Discount brokers allow self-directed trading with lower commissions.
• Mobile trading apps focus on ease of use for beginners; ensure they offer the products and protections you need.

When selecting, balance cost, available product types, research tools, customer support and regulatory protections. For a crypto-friendly hybrid approach, Bitget exchange and Bitget Wallet provide integrated features for users who want both traditional and digital asset exposure—mentioning Bitget here as a recommended platform when referencing exchanges.

Robo-advisors and automated investing platforms

Robo-advisors build model portfolios based on your risk profile and automatically rebalance. They are cost-efficient for beginners who prefer hands-off investing. Typical fees are lower than human advisors but higher than self-directed index investing via brokerage.

Key selection criteria (fees, platform usability, security, product availability)

• Fees: commissions, account maintenance, and fund expense ratios. Lower cost generally benefits long-term returns.
• Platform usability: mobile and web interfaces, ordering features, and research tools.
• Security: two-factor authentication (2FA), account protections, and custodian reliability. Look for SIPC coverage or equivalent protections in your jurisdiction.
• Product availability: stocks, ETFs, mutual funds, options and international markets.

When crypto or Web3 wallets are relevant, prefer Bitget Wallet for integrated custody and usability.

Paper trading and trial features

Paper trading (simulated trading) helps beginners practice order placement and strategy without risking real money. Use demo accounts to learn order types, practice position sizing, and test strategies before committing capital.

Placing trades and order types

Market orders and limit orders

• Market order: executes immediately at the current market price; good for quick execution but not for price certainty.
• Limit order: sets the maximum (buy) or minimum (sell) price you're willing to accept; provides price control but may not fill.

Use limit orders when you want price control and market orders when execution speed matters.

Stop orders, stop-limit, and time-in-force

• Stop (stop-loss) order: becomes a market order after a trigger price; used to limit losses.
• Stop-limit: becomes a limit order at the trigger; avoids unexpected prices but can miss fills.
• Time-in-force: determines how long an order stays active (day, GTC—good-til-cancelled). Choose appropriately for your strategy.

Fractional shares and minimums

Fractional-share investing lets you buy portions of expensive stocks or ETFs, which is useful for small-dollar investors to achieve diversification without large minimums. Many brokerages and platforms (including some services connected to Bitget's ecosystem) offer fractional shares.

Building a portfolio — strategy and selection

Asset allocation and diversification

Asset allocation, the mix of stocks, bonds and other assets, is the primary driver of long-term returns and risk. Diversify across asset classes, sectors, company sizes and geographies to reduce company-specific risk.

A simple rule: younger investors often hold a higher percentage in equities for growth; older investors may shift to bonds and income assets to reduce volatility.

Passive vs. active strategies

• Passive (indexing): low-cost, broad diversification, good for long-term investors.
• Active: stock picking or actively managed funds aiming to outperform; higher fees and variable success.

Many investors use a core-satellite approach: a low-cost index fund core with small active or individual-stock satellite positions.

Fundamental analysis basics

Fundamental analysis evaluates a company’s financial health and valuation. Key items:

• Earnings, revenue growth and margins.
• Balance sheet strength: cash, debt levels and liquidity.
• Valuation ratios: Price-to-Earnings (P/E), Price-to-Book (P/B), and enterprise value measures.
• Qualitative factors: management quality, competitive advantages and market position.

Fundamentals matter for long-term investors but can be noisy in short-term price moves.

Technical analysis basics (brief)

Technical analysis studies price charts and patterns to inform timing decisions. Common tools include moving averages, support/resistance levels and volume analysis. It's often used short-term; many long-term investors find fundamental or strategic allocation approaches more reliable.

Position sizing and rebalancing

Position sizing means deciding how large each holding should be relative to your portfolio. Avoid overconcentration in single positions. Periodic rebalancing (quarterly or annually) restores your target allocation and enforces a disciplined buy-low, sell-high mechanism.

Risk management and common risks

Market risk, company-specific risk, and liquidity risk

• Market risk: broad market moves that affect most stocks.
• Company-specific risk: events affecting a single company (earnings misses, management changes, fraud).
• Liquidity risk: inability to buy or sell quickly at reasonable prices, more common in small-cap stocks or thinly traded securities.

Use of stop-losses, diversification, and hedging

Practical tools to limit downside:

• Diversify across many holdings or use ETFs.
• Set stop-losses for individual positions you cannot monitor constantly.
• Hedging: advanced strategies like options can protect downside but add cost and complexity.

Leverage, margin, and short selling (risks)

Trading on margin amplifies gains and losses and can lead to margin calls. Short selling introduces theoretically unlimited risk if the stock price rises. These are advanced strategies best avoided by most beginners.

Costs, fees, and fee awareness

Costs that erode returns:

• Expense ratios (fund operating costs).
• Commissions (many brokerages now offer commission-free trading for stocks and ETFs).
• Bid-ask spreads (implicit trading cost).
• Advisory and management fees (robo-advisors and human advisers).
• Account maintenance or inactivity fees.

Compare fee structures across brokers and funds. A lower expense ratio and minimal trading friction compound into better long-term outcomes.

Tax considerations

Short-term vs. long-term capital gains

In many jurisdictions, assets held less than a specified period (e.g., one year in the U.S.) are taxed at higher short-term rates, while long-term holdings often benefit from lower capital gains rates. Holding periods materially affect after-tax returns.

Tax-loss harvesting and dividend taxation

• Tax-loss harvesting: selling losing positions to offset gains; effective in taxable accounts.
• Dividends: qualified dividends may be taxed at favorable rates; non-qualified dividends taxed as ordinary income.

Check local tax rules and use tax-efficient fund wrappers or account types when appropriate.

Tax rules for retirement accounts

Retirement accounts have special tax treatments: traditional retirement accounts defer taxes until withdrawal; Roth accounts provide tax-free withdrawals. Early withdrawals often incur penalties and taxes unless exceptions apply.

Practical step-by-step guide for beginners

1. Clarify goals and time horizon: retirement, income, or short-term savings.
2. Build an emergency fund covering 3–6 months of essential expenses before investing significant sums in equities.
3. Choose account type(s): tax-advantaged accounts first (401(k), IRA, Roth) if available and relevant.
4. Select a broker or robo-advisor. For investors who want an integrated crypto/asset experience, consider Bitget and Bitget Wallet as part of a broader custody strategy.
5. Fund the account and set up recurring contributions to dollar-cost average into the market.
6. Decide on an initial investment mix — many beginners start with broad-market ETFs or index funds and a small set of individual stocks or sector ETFs.
7. Place first orders using limit orders if you want price certainty; paper trade beforehand if unsure.
8. Establish a review cadence (quarterly or semiannually) and rebalance to target allocations annually or when allocations deviate materially.

how can a person invest in the stock market in a practical sense is answered by following these steps: pick the right accounts, lower-cost diversified funds, an accessible broker, and a plan for risk control.

Special considerations for certain investor types

Young investors and long time horizons

Young investors can emphasize growth assets (stocks, equity ETFs) to capture compounding. Time in the market matters more than timing the market. Consider higher equity allocations and a core of broad-market index funds.

Near-retirees or income-focused investors

Near-retirees should prioritize capital preservation and predictable income, shifting toward higher allocations of bonds, dividend-paying stocks or annuities depending on needs and risk appetite.

Small dollar investors and fractional-share strategies

Small-dollar investors benefit from fractional shares, low- or no-minimum ETFs and regular automated contributions (dollar-cost averaging). Fractional shares enable diversified portfolios even with modest capital.

Advanced topics (overview)

Options, margin trading, and complex strategies

Advanced instruments like options and margin can enhance returns or hedge risk but carry elevated complexity and loss potential. Novice investors should study thoroughly and practice in simulations before using them.

International investing and ADRs

Investing internationally diversifies country and currency risk. ADRs are an easy way to access foreign firms through U.S. exchanges, but consider costs, calendar differences and political or currency risks.

ESG and thematic investing

ESG funds apply environmental, social and governance criteria. Thematic funds target specific secular trends (AI, climate tech). These can align investments with values or beliefs but often come with concentration and higher turnover.

Common beginner mistakes and how to avoid them

• Panic selling during downturns: set a plan and avoid emotional reactions.
• Market timing attempts: difficult to do consistently; dollar-cost averaging can reduce timing risk.
• Overconcentration: spread risk across assets rather than betting heavily on one stock.
• Ignoring fees and taxes: small cost differences compound over time.
• Neglecting an emergency fund: forced selling in downturns can lock in losses.

Tools, resources and continuing education

Useful tools and resources include company filings (annual reports/10-Ks), financial news, stock screeners, broker research tools and educational platforms. Practice with paper trading, review portfolio performance periodically, and consult reputable guides from broker-dealers or financial institutions. Always cross-check data with primary sources such as regulator filings and fund prospectuses.

Glossary of key terms

• Stock: ownership share of a company.
• ETF: exchange-traded fund, a pooled security traded intraday.
• Index: a benchmark that tracks a group of securities (e.g., S&P 500).
• NAV: net asset value; the per-share value of a mutual fund.
• Dividend: cash payment by a company to shareholders.
• P/E: price-to-earnings ratio, a common valuation metric.
• Robo-advisor: automated portfolio manager that allocates and rebalances.
• Limit order: order to buy or sell at a specified price or better.
• Margin: borrowing from a broker to buy securities.
• Capital gains: profit from selling an asset for more than purchase price.

References and further reading

• Motley Fool beginner guides (investment basics and stock selection)
• NerdWallet onboarding articles (broker comparisons and account types)
• Fidelity and Vanguard educational pages (retirement accounts, indexing)
• Bankrate and U.S. Bank consumer guides (tax and account comparisons)
• Investopedia (order types, valuation metrics and technical vs. fundamental analysis)
• FINRA and SIPC official materials (investor protections and broker oversight)

As of 2026-01-22, according to Yahoo Finance's Morning Brief, market commentators argued about valuation and potential pullbacks; for example, one strategist noted a possible 10–15% sell-off window in early 2026. These market views underline the importance of planning and diversification when deciding how can a person invest in the stock market.

See also

• Personal finance
• Retirement planning
• Mutual funds
• Exchange-traded funds
• Stock market regulation

Further reading should be updated periodically to reflect changing tax rules, expense schedules and platform offerings.

Common next steps (call to action)

If you are ready to begin: set clear goals, open an appropriate account (retirement or taxable), consider starting with broad-market ETFs or an automated portfolio, and choose a secure platform. For investors seeking integrated traditional and digital-asset tools, consider Bitget and Bitget Wallet as part of your platform evaluation. Always verify current fees, protections and product availability before opening accounts.