Beginner's Guide
Stock Market for Beginners
How to start investing — from someone who lost money first.
Written by Glen Bradford — real investor, public track record, Lehman Brothers survivor.
My Qualification for Writing This Guide
I started investing in 2008 by buying Lehman Brothers call options right before it went bankrupt. That is my qualifier for writing a beginner's guide.
Since that auspicious beginning, I have spent 12+ years as a concentrated value investor focused on GSE preferred stock (Fannie Mae and Freddie Mac). I ran a hedge fund called Global Speculation LP. I have a public trading record of 2,068 trades that you can audit. My options record is 1-8. I am not writing this guide because I am some guru who figured it all out — I am writing it because I have made enough mistakes to know what actually matters.
This page is the guide I wish someone had given me in 2008 instead of letting me buy calls on a company that was about to become the largest bankruptcy in American history.
What You'll Learn
Open a Brokerage Account
Before you can buy a single share of anything, you need a brokerage account. This is just a special account that lets you buy and sell stocks, bonds, and ETFs. Think of it like a bank account, but for investments instead of cash.
The good news: in 2026, every major brokerage offers $0 commissions and $0 account minimums. There is literally no barrier to entry. You can open an account in 15 minutes with your phone.
I use Charles Schwab. I have used it for over a decade. I have no affiliate deal with them — I just like the platform, the research tools, and the fact that I can call a human when something goes wrong. Here is how the big three compare:
Charles Schwab
Glen uses this oneCommissions: $0
Minimum: $0
Fractional Shares: Yes
Excellent research tools, merged with TD Ameritrade. Full-service brokerage with physical branches. The thinkorswim platform is best-in-class for active traders.
Fidelity
Best for retirement accountsCommissions: $0
Minimum: $0
Fractional Shares: Yes
Zero expense ratio index funds (FZROX, FZILX). Outstanding 401(k) and IRA options. Excellent customer service. Slightly better for buy-and-hold investors.
Vanguard
Invented index investingCommissions: $0
Minimum: $0 (ETFs)
Fractional Shares: No (ETFs only)
Jack Bogle founded Vanguard and literally invented the index fund. Lowest expense ratios in the industry. The interface is dated, but you are here to invest, not admire a dashboard.
My honest take: Pick any of these three and you will be fine. The differences are marginal. Do not spend three weeks researching brokerages instead of actually investing — that is a form of procrastination disguised as due diligence.
Understand What You're Buying
The stock market is not one thing. It is a marketplace where you can buy several different types of financial instruments. Here are the main ones you need to know:
Stocks
Risk: HighOwnership shares in a company. When you buy Apple stock, you literally own a piece of Apple. Stocks offer the highest long-term returns but also the most volatility. A single stock can go to zero (ask me about Lehman Brothers).
Bonds
Risk: Low-MediumLoans you make to a government or corporation. They pay you interest on a fixed schedule and return your principal at maturity. Lower returns than stocks, but much less volatile. Think of them as the seatbelt of your portfolio.
ETFs (Exchange-Traded Funds)
Risk: VariesA basket of stocks or bonds bundled into one ticker you can buy like a single stock. SPY holds all 500 S&P 500 companies. VTI holds the entire U.S. stock market. One purchase, instant diversification, and expense ratios under 0.10%.
Preferred Stocks
Risk: Medium-HighA hybrid between stocks and bonds. Preferred shareholders get dividends before common shareholders and have priority in bankruptcy. This is what I primarily invest in — specifically GSE preferred stock (Fannie Mae and Freddie Mac). It is a niche, and it is not for beginners.
Want to go deeper on preferred stocks? Read my preferred stock guide. But fair warning — that is a rabbit hole, and you should probably master the basics first.
Start with Index Funds (Seriously)
I am going to be honest with you in a way that most investing content is not: most people should just buy SPY or VTI and call it a day. I do not do this because I am stubborn and I believe I have an edge in a specific sector, but the data says you should.
Over the last 15 years, approximately 92% of professional fund managers have underperformed the S&P 500 index. These are people with MBAs from Wharton, Bloomberg terminals, and teams of analysts. They still cannot beat the index. The odds that you — a beginner reading a guide written by a guy whose first trade was Lehman Brothers calls — will beat it are not great.
And that is perfectly okay. Here is why:
The Power of “Average” Returns
$300/mo
Monthly investment
10%
S&P 500 avg. annual return
$1.9M
Value after 40 years
“Average” returns of 10% per year turn $300/month into nearly $2 million over a career. You do not need to be a genius. You need to be consistent.
What to buy: VTI (Vanguard Total Stock Market ETF) gives you the entire U.S. stock market in one ticker for 0.03% per year. VOO (Vanguard S&P 500 ETF) gives you the 500 largest U.S. companies. Either is an excellent choice. Buy whichever one your brokerage makes easiest, set up automatic monthly purchases, and go live your life.
Use the compound interest calculator to see what your specific numbers look like over time. It is genuinely motivating.
Learn to Read Financial Statements
If you stop at Step 3 and just buy index funds forever, you will do better than 90% of investors. Seriously. You can skip this step and be fine.
But if you want to pick individual stocks — or if you just want to understand what is actually happening under the hood — you need to learn how to read three documents:
Income Statement
How much the company earned (revenue), how much it spent (expenses), and what was left over (net income). Think of it as the company's report card for the quarter or year.
Balance Sheet
What the company owns (assets), what it owes (liabilities), and the difference (equity). This tells you whether the company is financially healthy or drowning in debt. Lehman Brothers' balance sheet would have saved me if I had known how to read it.
Cash Flow Statement
Where the money actually came from and where it actually went. A company can show positive earnings on the income statement while bleeding cash. The cash flow statement is the hardest to manipulate and the most honest of the three.
For a deeper dive into how I analyze companies and think about intrinsic value, read my value investing guide. It covers Benjamin Graham, Warren Buffett, margin of safety, and the mental models I actually use when making investment decisions.
Understand Risk
Risk is not just “stocks go down sometimes.” Risk is the permanent loss of capital — buying something at $50 that turns out to be worth $0 and never comes back. The S&P 500 going down 30% in a crash is volatility. Lehman Brothers going to zero is risk. You need to understand the difference.
Position sizing is the most important risk management tool. Never put so much money into a single stock that it ruins your life if it goes to zero. For beginners, no single stock should be more than 5% of your portfolio.
Diversification is the second most important. Own many different companies across many different sectors. An index fund does this for you automatically — VTI holds over 3,600 stocks.
Honest Disclaimer: What I Do Is Not for Beginners
My own approach is concentrated value investing in GSE preferred stock — a single sector, with significant position sizes. This is the opposite of what I am telling you to do. I have spent 12+ years studying these specific securities, I understand the legal and political dynamics, and I am comfortable with the risk. My options record is still 1-8. My approach requires deep expertise in a narrow area, and even with that expertise, I have made expensive mistakes. Start diversified. Concentrate only after years of study, if ever.
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What Glen Actually Does Differently
I practice concentrated value investing in GSE preferred stock — specifically Fannie Mae and Freddie Mac preferred shares. I have held these positions through government conservatorship, multiple administrations, and years of legal battles. You can read the full story at Fanniegate.
My thesis is simple: these securities have a par value significantly higher than their market price, and the legal and political winds are shifting in favor of shareholders. It is a deep value play with binary risk characteristics.
Let me be clear about my track record:
- My options record is 1-8. One win, eight losses. Do not trade options because of me.
- I have analyzed 2,068 of my own trades publicly. You can see every win and every loss.
- My worst trades page exists because I believe you learn more from failures than successes.
- I am a Purdue engineer who taught himself investing. I am not a CFA, not a financial advisor, and not someone you should blindly follow.
The whole point of this section is: do not do what I do. My approach requires a decade of domain expertise and a stomach for volatility that most people do not have. Start with index funds. Seriously.
Common Mistakes (I Have Made Most of These)
✕Chasing momentum
By the time a stock is all over Twitter and Reddit, the easy money has been made. GameStop, AMC, Bed Bath & Beyond — every meme stock eventually reverts to fundamentals. If your investing thesis is 'it is going up,' you do not have a thesis.
✕Ignoring fees
A 1% annual fee sounds small. Over 30 years, it eats roughly 25% of your total portfolio value. Use index funds with expense ratios under 0.10%. Avoid loaded mutual funds, most financial advisors who charge AUM fees, and any platform that charges commissions in 2026.
✕Panic selling
The S&P 500 has recovered from the Great Depression, World War II, the dot-com crash, 2008, and COVID. Every. Single. Time. If you sell during a crash, you lock in your losses and miss the recovery. The stock market transfers money from the impatient to the patient.
✕Not understanding what you own
If you cannot explain in two sentences what a company does, how it makes money, and why it is undervalued, you are speculating, not investing. Peter Lynch called this 'buying what you know.' I spent years studying Fannie Mae and Freddie Mac before I bought a single share.
✕Overtrading
Every trade has a cost — commissions (less relevant now), bid-ask spreads, and taxes on short-term gains. My own trading analysis shows that my best returns came from positions I held for years, not days. My worst losses came from options trades I should never have made.
✕Putting all eggs in one basket (unless you really know the basket)
Diversification is the only free lunch in investing. I run a concentrated portfolio in GSE preferred stock, but I have been studying that sector for 12+ years. If you are a beginner, spread your money across hundreds of companies via an index fund. You can concentrate later when you have the knowledge to justify it.
Free Tools to Get Started
I built these calculators and tools for my own site. They are free, no sign-up required, and they actually work. Use them to run the numbers on your own situation.
Books That Changed How I Think About Investing
These are not affiliate-bait recommendations. These are the four books that genuinely shaped how I approach investing. I have read each one at least twice.
Security Analysis
Benjamin Graham & David Dodd (1934)
The bible of value investing. Dense, academic, and absolutely foundational. This is the book that taught Warren Buffett how to think about investing. I have read it twice. You probably do not need to start here, but you should get to it eventually.
The Intelligent Investor
Benjamin Graham (1949)
The accessible version of Graham's ideas. Chapter 8 (Mr. Market) and Chapter 20 (Margin of Safety) are worth the price of the book alone. Buffett calls it 'by far the best book on investing ever written.' Start here if you are serious.
Common Stocks and Uncommon Profits
Philip Fisher (1958)
Fisher's 'scuttlebutt' method — talk to customers, suppliers, competitors, and employees before investing. Where Graham taught you to buy cheap, Fisher taught you to buy great. Buffett says he is '85% Graham, 15% Fisher.' This book is the 15%.
One Up on Wall Street
Peter Lynch (1989)
Lynch ran the Magellan Fund and returned 29% annually for 13 years. His thesis is simple: ordinary people can find great investments by observing the world around them. The most fun investing book you will ever read, and genuinely useful for beginners.
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Frequently Asked Questions
How much money do I need to start investing?
You can start investing with literally $1. Schwab, Fidelity, and Vanguard all have $0 account minimums and offer fractional shares. You do not need $10,000 to begin. I started with a few thousand dollars I had saved from tutoring in college. The amount matters far less than the consistency. Start with whatever you have and add to it every month.
Is the stock market gambling?
No, but it can be if you treat it that way. Buying a diversified index fund and holding it for 30 years is not gambling — it is owning a piece of every major business in America. The S&P 500 has returned roughly 10% annually since 1957 and has recovered from every single crash. Buying weekly options on meme stocks based on Reddit posts? That is gambling. The difference is your time horizon and whether you understand what you own.
Should I invest in individual stocks or index funds?
Start with index funds. Seriously. Over 90% of professional fund managers fail to beat the S&P 500 over a 15-year period. You are not going to outsmart them on day one. I pick individual stocks because I spent 12 years studying a single sector (GSE preferred stocks), and my options record is still 1-8. If you want to try individual stocks, limit it to 5-10% of your portfolio and put the rest in broad index funds like VTI or VOO.
What is a good return on investment?
The S&P 500 has averaged about 10% per year before inflation (roughly 7% after inflation) since 1957. If someone promises you 20-30% annual returns consistently, they are either lying or taking enormous risk. A realistic goal for a passive index fund investor is 8-10% annually over the long term. Some years you will be up 30%. Some years you will be down 30%. The average is what matters, and it requires patience measured in decades, not months.
How do I pick stocks?
If you are going to pick individual stocks, start by learning to read financial statements — the income statement, balance sheet, and cash flow statement. Understand what a company earns, what it owes, and how it generates cash. Then figure out what the business is worth (intrinsic value) and only buy when the price is significantly below that value. This is called value investing, and it is the approach used by Benjamin Graham, Warren Buffett, and me. It is simple in theory and brutally difficult in practice.
What are the best stocks for beginners?
The best 'stock' for beginners is not a stock — it is an index fund. VTI (Vanguard Total Stock Market ETF) or VOO (Vanguard S&P 500 ETF) gives you instant diversification across thousands of companies for an expense ratio of 0.03%. If you insist on individual stocks, start with large, profitable companies you actually understand — businesses with strong balance sheets, consistent earnings, and products you use every day. Avoid penny stocks, meme stocks, and anything someone on social media told you was about to moon.
The Best Time to Start Was Yesterday
Every day you wait costs you compound interest. Open a brokerage account, buy an index fund, set up automatic monthly contributions, and go live your life. You can learn the fancy stuff later. The first step is the one that matters.
If I can recover from buying Lehman Brothers calls at the worst possible moment in financial history, you can handle opening a Schwab account and buying some VTI.
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Occasional thoughts on AI, Claude, investing, and building things. Free. No spam.
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