How To Invest In Stocks: Stock Market Investing For Beginners In 2021 (2024)

While the pandemic has disrupted the global economy, the stock market and many top growth stocks have rebounded to new heights. This volatility may leave new investors wondering how to invest in stocks as we head into 2021.

Newer IPO stocks like Zoom Video (ZM), Chegg (CHGG) and DocuSign (DOCU) have ridden the Covid-19-driven zeitgeist to new heights.

Longtime stock market winners like Apple (AAPL), Amazon.com (AMZN), Nvidia (NVDA) and Microsoft (MSFT) have also rebounded from the initial coronavirus crash.

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Does this roller-coaster volatility change the basics of how to invest in stocks? Will the stay-at-home, work-from-home and online classes phenomena last? And for people just starting out, has this new environment altered investing in stocks for beginners?

Over a hundred years of stock market history shows that while the company names and technologies will change, the time-tested principles of how to invest in stocks remain essentially unchanged.

Investing In Stocks For Beginners: CAN SLIM Growth Stocks

In the early 1960s, future Investor's Business Daily founderWilliam J. O'Neil asked a simple question: What do the best stocks look like just before they make their biggest moves?

How To Invest In Stocks: Stock Market Investing For Beginners In 2021 (1)

To find the answer, O'Neil launched a groundbreaking, ongoing study, looking for common traits shared by the best stocks. He found seven.

Those traits form the basis of what is now known as the CAN SLIM Investing System. The concept behind CAN SLIM is simple: To find the best stocks to buy and watch, look for stocks displaying those same seven traits right now.

Using CAN SLIM as a blueprint for a stock-picking checklist helps investors identify the best stocks to watch early in their runs. Stock lists based on the CAN SLIM system have continued to dramatically year after year.

As stock market leaders like Apple, Microsoft, Amazon, Zoom Video, DocuSign, Chegg and many others have made their big moves, they've all displayed CAN SLIM traits and appeared on IBD stock lists.

So for new investors wondering how to start investing in stocks, start by learning the seven CAN SLIM characteristics. Together with tracking stock lists like the IBD 50, IBD Long-Term Leaders, Sector Leaders, IBD Big Cap 20 and IPO Leaders, following the CAN SLIM system will help you identify the next crop of stocks to watch.

Here are three basic rules to help streamline and enhance your search.

How To Invest: Only Buy Stocks In An Uptrend

Here's one of the most important tenets of investing in stocks for beginners and seasoned investors alike: Only buy stocks in a market uptrend. Take defensive action in a weakening stock market.

You can identify the current market trend by regularly checking the Market Pulse in The Big Picture. Each day, the column shows you which of three possible stages the stock market is currently in: Confirmed uptrend, Uptrend under pressure or Market in correction.

Over 100 years of stock market history shows that three out of four stocks move in the same direction as the general market. You don't want to fight those odds! Instead, learn to stay in sync with the market and only make new buys when the odds are in your favor and the indexes are trending higher.

As AAPL, MSFT, AMZN and virtually all leaders got hit in the coronavirus crash, the importance of this one rule is clear. The quick and remarkable stock market rebound beginning in March 2020 only reinforces that tenet on the flip side.

While many people new to investing in stocks focus on individual companies, understanding general stock market trends is critical. So before considering which stocks to buy, first make sure you understand the current stock market environment.

How To Invest In Stocks: Identifying The Best Growth Stocks

After understanding current stock market trends, focus on stocks with big earnings and sales growth driven by new, innovative products and services. These traits entail the first three letter of the CAN SLIM system: C — current earnings, A — annual earnings and N — new product, service or industry.

Stocks like Apple, Microsoft, Nvidia, Zoom Video, DocuSign and countless others become big winners as they post exceptional earnings per share and revenue gains.

These gains typically come from companies that are flashing something "new" — a new product, new management, or a new industry trend. This can also apply to IPO stocks to watch like ZM stock and DOCU stock have that have gone public in recent years.

Growth stocks that gain 50%, 100% or much more in a short period of time do so for a reason. That reason is usually because the companies are strongly displaying the CAN SLIM traits, particularly the C, A and N.

Which Stocks To Buy: Buy Stocks The Best Funds Are Buying

Another key factor for successfully investing in stocks is to buy stocks being heavily bought by large, institutional investors, and avoid those they're selling aggressively.

Mutual funds, pension funds, banks, and other large money managers account for the bulk of all trading in the market — not individual investors. Since these professional portfolio managers have the power to significantly move a stock up or down, it's crucial that you pay attention to what they are buying and selling.

Each month, you'll find a list of new buys by the best mutual funds. To increase the performance of your own portfolio, pay close attention to where these leading money managers are investing their money. For example, in the latest report, top funds invested heavily in AAPL, NVDA, MSFT, DOCU and ZM stock, just to name a few.

You can also see what fund managers are investingbyusing stock charts to track the price and volume action. With stock charts, you can get a truly objective look at the health of your stocks, without relying on rumors or hearsay.

Investing For Beginners: Start With This 3-Step Routine

Once you have a basic understanding of how to invest in stocks, put them into practice with this simple and streamlined three-step routine. By following these steps, you can track stock market trends, find stocks to watch with the most important CAN SLIM traits, and see which stocks the best mutual funds are heavily buying (or selling).

The key is to follow the routine regularly. It will help you stay in sync with the market, identify ideal buy points, and get a timely look at the best stocks to buy and sell.

Learning how to invest in stocks takes time. But you can shorten the learning curve and stay profitable and protected by following these basic, time-tested rules.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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How To Invest In Stocks: Stock Market Investing For Beginners In 2021 (2024)

FAQs

How To Invest In Stocks: Stock Market Investing For Beginners In 2021? ›

One of the best ways for beginners to learn how to invest in stocks is to put money in an online investment account and purchase stocks from there. You don't have to have a lot of money to start investing. Many brokerages allow you to open an account with $0, and then you just have to purchase stock.

How to invest in stocks for beginners 2021? ›

One of the best ways for beginners to learn how to invest in stocks is to put money in an online investment account and purchase stocks from there. You don't have to have a lot of money to start investing. Many brokerages allow you to open an account with $0, and then you just have to purchase stock.

How much money do I need to invest to make $1000 a month? ›

Reinvest Your Payments

The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.

How do I start investing in the stock market as a beginner? ›

How to start investing in the stock market — A step by step guide
  1. Open a demat account. ...
  2. Open a trading account. ...
  3. Login to your demat account. ...
  4. Identify the stock you want to invest in. ...
  5. How much do you want to invest? ...
  6. Buy the stock(s) at their listed prices along with units. ...
  7. Executing the purchase order.
Feb 12, 2024

Is $500 enough to start investing in stocks? ›

Consider investing $500 in an individual retirement account (IRA), which gives you options, including stocks, bonds and mutual funds. If you don't have an IRA, $500 would easily get you started at many banks and credit unions. You can also open up IRAs at online brokerages and investment companies.

What type of stock is best for beginners? ›

Best Stocks To Invest In 2024 For Beginners
  • UnitedHealth Group Incorporated (NYSE:UNH) Number of Hedge Fund Holders: 104. Quarterly Revenue Growth: 14.10% ...
  • JPMorgan Chase & Co. (NYSE:JPM) Number of Hedge Fund Holders: 109. ...
  • Advanced Micro Devices, Inc. (NASDAQ:AMD) ...
  • Adobe Inc. (NASDAQ:ADBE) ...
  • Salesforce, Inc. (NYSE:CRM)
Feb 7, 2024

How much money do I need to invest to make $3 000 a month? ›

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

How much will I have if I invest $500 a month for 10 years? ›

What happens when you invest $500 a month
Rate of return10 years30 years
4%$72,000$336,500
6%$79,000$474,300
8%$86,900$679,700
10%$95,600$987,000
Nov 15, 2023

How much will I make if I invest $100 a month? ›

Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.

How much money do I need to invest to make $500 a month? ›

Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.

How many stocks should a beginner start with? ›

Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings.

How much should a beginner put in the stocks? ›

“Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine. The important part is that you actually start.”

Where is the best place to buy stocks? ›

The best online brokers for stocks in April 2024:
  • Charles Schwab.
  • Fidelity Investments.
  • Robinhood.
  • E-Trade.
  • Interactive Brokers.
  • Merrill Edge.
  • Ally Invest.
  • Tastytrade.

How much is $500 a month for 20 years? ›

For example, an investor who holds their portfolio for 10 years will put $60,000 into it (10 years of investing x 12 months per year x $500 per month), while an investor who holds the same portfolio for 20 years will contribute $120,000 worth of capital.

How do I learn to invest money? ›

  1. 10 Step Guide to Investing in Stocks.
  2. Step 1: Set Clear Investment Goals.
  3. Step 2: Determine How Much You Can Afford To Invest.
  4. Step 3: Determine Your Tolerance for Risk.
  5. Step 4: Determine Your Investing Style.
  6. Choose an Investment Account.
  7. Step 6: Learn the Costs of Investing.
  8. Step 7: Pick Your Broker.

How much money should you get before investing? ›

Aim for building the fund to three months of expenses, then splitting your savings between a savings account and investments until you have six to eight months' worth tucked away. After that, your savings should go into retirement and other goals—investing in something that earns more than a bank account.

How to invest your first $100 in stocks? ›

  1. Our six best ways to invest $100 starting today. ...
  2. Use a micro-investing app or robo-advisor. ...
  3. Invest in a stock index mutual fund or exchange-traded fund. ...
  4. Use fractional shares to buy stocks. ...
  5. Put it in your 401(k) ...
  6. One way not to invest $100. ...
  7. Related investing topics.
  8. Don't wait to invest.
Nov 29, 2023

How much money can you make from stocks in a month? ›

Well, there is no limit to how much you can make from stocks in a month. The money you can make by trading can run into thousands, lakhs, or even higher. A few key things that intraday profits depend on: How much capital are you putting in the markets daily?

How much money do I need to start stocks? ›

Yes, you can technically start trading with $100 but it depends on what you are trying to trade and the strategy you are employing. Depending on that, brokerages may ask for a minimum deposit in your account that could be higher than $100. But for all intents and purposes, yes, you can start trading with $100.

How can I invest $10 and earn daily? ›

If you want to invest $10 and earn daily, opening a high-yield savings account is a great option. High-yield savings accounts offer higher interest rates than traditional savings accounts, which means you can grow your wealth faster. These accounts are also a safe place to keep your emergency fund.

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