How to invest in stocks: a beginner’s guide to buying shares

You want to invest in stocks but wonder how it actually works? Getting started in the stock market often seems more complicated than it is. With the right knowledge, you can invest in stocks easily. In this article, we explain how to invest in stocks, what beginners should keep in mind and which strategies might be suitable.

• Understand the basics: The stock market allows you to invest directly in companies, with price movements driven by supply and demand.

• Invest step by step: A clear plan, the right platform and realistic goals help you invest in stocks in a structured and long-term way.

• Think long term: Those who are patient and can withstand fluctuating stock prices can build wealth over time.

• Add sensibly: ETFs and commodities offer additional diversification and can broaden your stock portfolio.

What is the stock market and how does it work?

The stock market is a central place where stocks, which are company shares, are bought and sold. These markets connect investors who want to invest with companies that need capital. Buying a stock makes an investor a shareholder, who may benefit from potential profits but can also suffer losses due to negative price developments.

This is how the stock market works:

• Companies issue stocks to raise capital through the stock exchange.

• Investors buy these stocks and in return receive shares in the company.

• Stock prices are driven by supply and demand in the market.

• The market responds to economic data, company performance and investor sentiment.

The stock market reflects how well a company performs, how the economy is developing and how investors perceive the situation. If you’re thinking about investing in stocks, keep in mind that prices constantly fluctuate. This opens up opportunities for gains but also involves the risk of losses.

What are the advantages of investing in stocks?

Investing in stocks means directly participating in companies. Unlike derivatives, this involves actual ownership. You hold a stake in the company, not just a speculative financial product. This brings long-term opportunities for value growth, voting rights at annual general meetings and often dividends too.

Stocks are a way to build wealth over the long term. The key is to get familiar with the market, have realistic expectations and gain experience step by step.

For beginners just starting to invest in stocks, this form of investment offers several advantages:

• direct participation in the economic success of companies

• opportunities for long-term returns through rising prices

• possibility of earning regular income through dividends

• wide range of companies across different industries and countries

But keep in mind: When you invest in stocks, you also take on risks. Prices fluctuate,  sometimes significantly. Companies can make profits but also incur losses. A total loss is rare but not impossible. That’s why it’s important to diversify and think long term.

Step by step: how to invest in the stock market

How do you actually invest in stocks the right way? Especially for beginners, it’s helpful to break the process down into individual steps. That makes it easier to understand the basics and stay on top of things, even if the stock market seems complex at first.

The following overview explains how you can invest in stocks step by step:

1. Choose a platform

2. Set clear investment goals

3. Learn about the companies

4. Choose a suitable strategy

5. Decide between savings plan or one-off payment

6. Start your investment

Choose a platform

Before you can invest in stocks, you need access to the stock market via a platform where you can trade real securities. For beginners, it’s especially important to open an account with a reputable provider that makes it easy to get started and offers transparent conditions.

A good platform should offer the following:

• access to real stocks, not derivative products

• clear information about fees and costs

• easy-to-use interface, especially if you’re investing in stocks for the first time

• a secure environment regulated by the financial market authority

Want to get started in the stock market? Bitpanda makes it straightforward to begin.

Trade stocks and ETFs at €1 fee per trade with no custody fees. You can buy full shares or fractions, use Bitpanda Limit Orders or automate your strategy with savings plans*. This helps you build your strategy step by step in a safe, flexible and transparent way.

Set clear investment goals

Before you buy stocks, you should consider what you want to achieve. Clear goals help you select suitable companies, better assess your risk and stay committed in the long term. Investing in stocks without a clear purpose can lead to impulsive decisions.

Typical goals when investing in stocks may include:

• Growth: You invest to achieve the highest possible return over time. This involves selecting companies with potential to increase their value. Price fluctuations are part of long-term investing, but ultimately, it’s the company’s value over your investment period that matters.

• Dividends: Some companies regularly distribute a portion of their profits to shareholders. If steady income is important to you, focusing on dividend-paying stocks can be worthwhile

• Diversification: You want to spread your money widely to reduce risk? Investing across different sectors, regions or company sizes helps create a balanced portfolio

Learn about the companies

Another key step to investing in stocks the right way is gaining a solid understanding of the companies you want to invest in. Behind every stock is a business whose financial health influences its price. Without insight into the business model, industry or profit potential, it’s difficult to assess a company’s value.

These points can help you make good choices when investing in stocks:

• Revenue and profit: Check how much a company earns, as revenue and profit show how economically it operates and whether the business model is sustainable.

• Industry and environment: The sector a company operates in can reveal its potential, especially if it benefits from trends or government support.

• Future potential: A company with innovative products, new markets or fresh ideas often has better chances of gaining value long term.

• Debt: The more debt a company carries, the more vulnerable it can be during economic downturns, increasing your risk as an investor.

• Market valuation: Metrics like the price-earnings ratio (P/E) help you judge whether a stock seems cheap or expensive compared to others.

• Transparency and communication: Companies that report openly on their figures and strategies build more trust with investors.

Choose a suitable strategy

Without a plan, investing quickly becomes guesswork. A clear strategy helps you make deliberate decisions , from buying a stock to knowing when to hold or sell. Especially for beginners investing in stocks, it’s important to have a direction that fits your goals and risk tolerance. If you don’t want to pick individual stocks, you can use funds to access professionally managed stock bundles.

When investing in stocks, you can follow strategies such as:

• Buy and hold: You buy stocks and hold them for the long term, often for years. The aim is to benefit from the company’s growth. This strategy requires patience and suits those who want to build wealth steadily without constant trading.

• Dividend strategy: You build a portfolio of companies that regularly pay dividends. This gives you ongoing income alongside potential price gains. It’s a good fit if you’re planning long term and value regular payouts.

• Sector or theme strategy: You invest in specific industries or trends, like technology, environment, healthcare or digitalisation. This lets you put your money into areas you believe in. Just remember that some sectors can be more sensitive to market shifts than others.

Savings plan or one-off investment

Once your portfolio is set up, the next question is: how do you want to invest your money in stocks, all at once or gradually through a savings plan? Both can be effective, but they differ in how you spread risk and how flexible you remain.

Savings plan

• a fixed amount is invested automatically on a regular basis

• entry at different price points lets you benefit from the cost-averaging effect

• lower risk of investing everything at the wrong time

• suitable for long-term wealth building, even with small amounts

One-off investment

• a larger amount is invested all at once

• advantageous in a favourable market situation

• higher risk if timing is poor

• capital is fully invested in the market immediately

Start your investment

Now it’s time: You’ve chosen a platform, opened a portfolio and set your strategy. Now you can buy your first stock.

This is how to get started:

1. Choose the stock you want

2. Enter how much you want to invest

3. Review the details and confirm the purchase

After buying, the stock appears in your portfolio. There, you can always track the current price, your investment share and your portfolio’s performance, including potential gains or losses. Especially for your first investment, it helps to start small and gain experience. That way, you’ll learn step by step how the stock market works.

How can I complement my stocks effectively?

Stocks are one building block of investing. They let you take part directly in the success of companies. Historically, stocks have often delivered higher returns than many other asset classes over long periods. Still, past performance is not a guarantee of future returns. A portfolio doesn’t need to consist of individual stocks alone. Other asset classes help distribute risk and react to different market developments.

Complementary investment options include:

• ETFs (Exchange Traded Funds): An ETF is a fund traded on the stock exchange that tracks the performance of an index, such as the DAX or MSCI World. Many ETFs hold stocks, though some also include a greater proportion of bonds or other securities. With one product, you can invest in many companies at once and better cushion the impact of individual losses. This makes exchange-traded funds a valuable addition and helps diversify your portfolio.

• Commodities: Commodities like oil, metals or agricultural products often behave differently from company stocks. They can serve as protection against inflation or as a hedge when traditional stock markets underperform.

• Cryptocurrencies: Digital currencies give you the chance to benefit from technological developments and the growing relevance of digital finance. Since cryptocurrencies can be more volatile than traditional investments, it’s best to include them in a focused and appropriate portion of your portfolio. However, crypto prices often move independently of classic capital markets and can therefore add extra diversification.

At Bitpanda, you can buy ETFs, selected commodities and cryptocurrencies right alongside your stocks, all in one portfolio with a central overview of your assets.

Frequently asked questions about investing in stocks

Now you’ve got a solid overview of how to invest in stocks. In our FAQ, you’ll find even more insights around the topic of stocks.

Can I trade stocks around the clock?

No, stocks can only be traded during official exchange hours. These vary depending on the exchange and region, but in Europe they’re typically between 9:00 and 17:30. Outside of these hours, orders can be placed but will only be executed when trading reopens.

How do I choose the right stocks?

Which stocks suit you depends on how you want to invest. Start by identifying your goal. Then you can search for companies that match your strategy, risk profile and time horizon.

Helpful criteria when selecting stocks:

• Business model: Do you understand how the company makes money, and is the model future-proof?

• Industry and market environment: Is the sector the company operates in currently growing or declining?

• Financial indicators: Figures like the price-earnings ratio (P/E), cash flow or return on equity show how efficiently the company operates.

• Growth potential: Are there new products, markets or developments that could increase the company’s value?

How risky are stock investments?

Stocks are subject to price fluctuations, meaning their value can go up or down. Short term, risk can be high – for example, due to company news, political events or market changes. The longer your investment horizon, the more these fluctuations tend to even out statistically. That’s why investing in stocks is especially suitable for long-term investors. If you want to spread risk further, you can also use ETFs.

More topics on investing

Want to learn more about investing – not just in stocks, but also ETFs, derivatives and the differences between asset classes? In the Bitpanda Academy, you’ll find clear explanations and practical insights to help you refine your strategy and understand the financial market better, whether you’re just starting or already investing.

• How to invest in ETFs

• Stocks vs. ETFs

• Stocks vs. derivatives

• Investing in securities: full guide