Digital Tool Box: Learn How to Invest in the Stock Market

Eager to learn how to invest in the stock market? Some basic info and tools to get you started.

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5 min read

Key Takeaways

  • Understand the basics: What is a stock, and how do I open an account?
  • Learn how to research sectors, industries, and individual stocks

  • Consider starting in a simulated environment without risking a penny

New to investing? Not much market knowledge or experience, but plenty of time, brainpower, and just enough capital to get started? Then let’s make it count: Set your sights on the big picture. Know where you want to go, moneywise. Scan the territory. Scope out your targets. Scoop up the best candidates. Create a solid mix and then add more of or add more to what you have. Remix when necessary. Repeat, and evolve as your goals and objectives change.

There’s your intro. Welcome to the world of investing. Now, on to the details.

Getting Your Share of a Company’s P/L

If you’re trying to learn how to invest in the stock market, it might help to start with the basics. Let’s suppose you like a particular company and think it might do pretty well revenue-wise in the long term. Why not buy “shares” of that company, also known as company stock? If you buy stock, you become a “common shareholder,” meaning you’re entitled to a partial ownership of the company equal to the amount of stock you bought.

If the company is profitable, and if investors buy more of the stock, your investment value will likely go up over time. It may even issue what’s called a dividend—essentially a slice of its earnings—for each share held by investors. But if the company underperforms, and if investors begin dumping their stock, your investment might lose value.

Tools to Help You Gain Knowledge and Experience

So let’s say you’re eager to get started learning the stock market. You open up a brokerage account and load it with some capital. Then what? How will you know which stocks to choose? How might you analyze them? What investing strategy might you use? And if you’ve never invested before, what makes you think that you’d be confident enough to commit to your strategy?

It sounds like you need some tools, not only to analyze stocks and industries, but also to build and test strategies in a simulated market environment. It’s the closest you’ll ever get to a live trading experience.

Gamify Your Strategy to Accelerate Your Skills

Skillful investing takes a lot of practice, but practice can also take up a lot of time. Or does it? Yes and no. You can practice in real time using a stock market simulation called paperMoney®. You can also compress weeks, months, or even years of practice investments into a matter of minutes using a backtesting and forward-testing tool called thinkOnDemand®.

paperMoney allows you to test any trading strategy in real time, but in a simulated environment, and all without risking a penny. You test ideas. You learn what might work, what might not. You make mistakes. You press the “restart” button and try again.

thinkOnDemand is like a customizable market replay that allows you to pick almost any chunk of time in the past—days, weeks, months, years—to try different investing strategies. 

Stock backtesting OnDemand
FIGURE 1: BACKTESTING ON DEMAND. The OnDemand feature is available on the thinkorswim® platform from TD Ameritrade. If you're a TD Ameritrade client, you can download the platform by going to TDAmeritrade.com > Trade > Trading Platforms. Once you've logged into thinkorswim, click the OnDemand button at the upper right. For illustrative purposes only. 

What’s really cool about it is that you can get results in just minutes, or you can watch things unfold in real or accelerated time. So if you wanted to test, say, a 6-month strategy, you don’t actually have to wait six months for results. You just have to wait a few minutes.

 By “gamifying” your investment strategies, you can practice investing in a risk-free environment. It might even add some extra fun to learning the stock market. And the ability to speed up, slow down, or compress “real" time might accelerate your learning and in turn, your (simulated) experience with investing.

Selecting Stocks: Drilling Down the Big Picture

Now that you know that you can gain experience in a simulated environment, you might want to begin picking stocks. But how do you go about selecting them? Here’s a suggestion: consider selecting strong sectors and industries first—the big picture—and then narrow down your selection to individual stocks.

 Not sure how to do that? Try the TD Ameritrade Markets: Sectors & Industries analysis page (requires login).

Stock sectors and industries
FIGURE 2: SECTORS & INDUSTRIES. Want a performance snapshot of the different stock sectors and industries? Log on to tdameritrade.com and, under the Research & Ideas tab, select Sectors & Industries. For illustrative purposes only. Past performance does not guarantee future results.

This page offers an overview of how different sectors have performed relative to one another. You can drill down on a specific sector or industry, or view how different sectors have performed from year-to-date (YTD) to a 5-year period.

Stock sector characteristics analysis
FIGURE 3: SECTOR CHARACTERISTICS. How have different sectors performed relative to one another? For illustrative purposes only. Past performance does not guarantee future results.

Note that this is just one tool among many available to you for making a thorough analysis. As you gain more experience, you can take advantage of even more specific tools that can give you a closer picture of market fundamentals.

Stay Hungry. Stay Frosty.

Markets change. Market technologies change. And skills to stay on top of changing markets and changing technologies also change. In other words, market education is a lifelong pursuit. So, never stop learning.

Fortunately, there are education tools and programs that can help you along the way. If you haven’t already checked it out, the TD Ameritrade Education page offers an immersive curriculum, plenty of articles, videos and webcasts.

Good luck in your first steps, enjoy the journey, and most importantly, keep at it!

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Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical, they did not actually occur and there is no guarantee that the same strategy implemented today would produce similar results.

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Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

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