Learn Investing from Zero: Your First Practical Guide to Global Stock Markets

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When people around you talk about stocks, do you also want to put your money to work but don’t know where to begin? You may worry that your savings are shrinking due to inflation. For example, an annual inflation rate of 3.8% is enough to erode your purchasing power year after year.

Actually, you are not alone. In the United States, the percentage of households participating in investing is steadily rising:

This guide provides you with a clear roadmap. It will walk you through completing your first trade and easily start your global stock market investment journey. For beginners, the safest first step is investing in index funds (ETFs) through an online broker.

Key Takeaways

• Investing helps your money fight inflation and grow your wealth.
• Compound interest makes your money grow exponentially, so start investing as early as possible.
• Index funds (ETFs) are the best choice for beginners—they diversify risk and save time and effort.
• Choose a safe broker, open a cash account, and transfer money into it.
• Use limit orders to buy your first ETF so you can control the purchase price.

Investing Lesson One: Why You Must Invest

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You may think keeping money in the bank is the safest option, but an invisible “thief” is quietly eroding your wealth—its name is inflation. Investing is the most effective tool for ordinary people to combat inflation and grow wealth.

Fight Inflation: Protect Your Purchasing Power

Inflation means prices rise and the same amount of money buys less. If your wealth grows slower than inflation, your purchasing power declines year by year.

Investing in quality assets is the key to beating inflation. Take the S&P 500 index as an example—it represents the overall performance of 500 major US listed companies. Its long-term average annual return is about 10%, and even after adjusting for inflation, the real annual return reaches 6% to 7%.

This means that through investing, your money not only preserves value but also achieves real growth.

Understand Compound Interest: Let Time Work for Your Money

Einstein once called compound interest the “eighth wonder of the world.” Compound interest is like a snowball—the interest you earn joins the principal and continues to generate returns in the next period. The longer the time, the bigger the snowball and the faster wealth grows.

Assume you invest $10,000 at a 7% annual return and see how compound interest works its magic:

As you can see, starting early and holding long-term are the two core elements to unleash the power of compound interest.

Build Passive Income: What Are Dividends?

When you invest in stocks, besides gains from price appreciation, you may also receive dividends. Dividends are cash payments companies distribute to shareholders from profits. This provides you with “passive income” that does not rely on active work.

Many excellent companies not only pay dividends consistently but also increase them year after year.

Investing in such companies is like owning a goose that lays golden eggs. According to historical data, the S&P 500’s average dividend yield over the past decade was about 1.722%, providing stable cash flow returns.

Beginner Toolbox: Stocks, Bonds, and Funds

Having understood the importance of investing, the next step is to get to know your tools. There are many investment products in the stock market, but as a beginner, you only need to understand the three core ones first: stocks, bonds, and funds.

Stocks: Become a Small Shareholders of Companies

Buying a company’s stock means you become a “small shareholder” of that company. You share in the company’s growth while also bearing corresponding risks.

As a shareholder, you have some basic rights but also face risks:

• Participate in Growth: If the company does well, the stock price rises and you profit. The company may also distribute part of its profits to you as dividends.
• Voting Rights: You can usually vote on major company matters such as electing the board of directors.
• Limited Liability: Your maximum loss is limited to your invested capital; you are not responsible for the company’s debts.
• Liquidation Risk: If the company goes bankrupt and liquidates, you rank behind creditors and preferred shareholders.

Stocks offer high potential returns but also high volatility, requiring deep company understanding.

Bonds: More Stable Investment Option

If you lend money to the government or a large company with an agreed interest rate and repayment date, that “IOU” is a bond. Compared to stocks, bonds are a more stable investment.

The table below clearly shows the core differences between stocks and bonds:

Bonds are divided into government bonds and corporate bonds. Government bonds have extremely low risk but relatively limited returns. Corporate bonds offer higher returns but carry the risk of company default.

Index Funds/ETFs: The Best Choice for Beginners

If researching individual stocks feels too complicated and you want higher returns than bonds, then index funds (ETFs) are tailor-made for you.

An ETF is like a “shopping basket” filled not with one item but a basket of different stocks or bonds. For example, an ETF tracking the S&P 500 lets you invest in America’s 500 largest companies at once.

Even financial experts and “stock god” Warren Buffett recommend index funds to most people because they have three core advantages:

• Automatic Risk Diversification: You no longer rely on any single company’s performance, effectively reducing investment risk.
• Time-Saving and Effortless: No need to spend lots of time researching individual stocks—just choose the market index you believe in.
• Very Low Cost: ETF management fees are usually extremely low, letting you keep more returns.

For beginners, starting with low-cost index fund ETFs is the simplest and safest way to enter the investment world.

Enter Global Stock Markets: Understand Major Markets

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Once you decide to invest, excellent companies worldwide are open to you. Investing in global stock markets means you can share in global economic growth dividends. For beginners, the two most important markets to understand are US stocks and Hong Kong stocks.

US Stock Market: NYSE and Nasdaq

The United States has the world’s largest and most mature stock market. It mainly consists of two exchanges: the New York Stock Exchange (NYSE) and Nasdaq. Think of them as two “malls” with different styles.

Different exchanges attract different types of companies. Understanding their characteristics helps you better choose investment targets.

Simply put, if you want to invest in well-known stable giants, you’ll mostly find them on the NYSE. If you are bullish on emerging technology and future trends, Nasdaq is your first choice.

Hong Kong Stock Market: Your Nearby International Window

The Hong Kong stock market is an excellent starting point for investing in global markets. It serves as a financial bridge connecting mainland China and the world, gathering many well-known outstanding Chinese companies, especially in finance and technology.

However, every market has volatility. The chart below shows the Hang Seng Index annual returns over the past nearly 20 years—some years soared, others fell. This reminds us that investing requires patience and a long-term perspective.

Initial Investment Strategies: Buy-and-Hold vs Dividend Investing

After understanding markets, you need a simple strategy. For beginners, the two most common approaches are pursuing capital appreciation and seeking dividend income.

Which strategy to choose depends on your personal goals. Do you want rapid asset growth or stable passive income? Clarifying this makes your investment path much clearer.

Three Practical Steps: Complete Your First Investment

You’ve mastered the theory—now it’s time to roll up your sleeves and take the real first step in investing. Don’t worry; the process is simpler than you think. Just follow these three steps to easily complete your first global stock market investment.

Step 1: Choose and Open a Brokerage Account

A broker is your “passport” to the stock market. Choosing a safe, reliable, and user-friendly broker is crucial. For beginners, you should focus on the following criteria:

1. Licensing and Safety: Ensure your broker is strictly regulated. In the US, compliant brokers are regulated by the Financial Industry Regulatory Authority (FINRA) and are members of the Securities Investor Protection Corporation (SIPC). SIPC provides up to $500,000 insurance per account (including up to $250,000 in cash), protecting your assets from broker bankruptcy and similar issues.
2. Cost of Fees: Trading fees directly affect returns. Main fees include commissions, platform fees, and account management fees. Choosing a low-cost broker lets more money work for you.
3. Platform Experience and Chinese Support: A clear, smooth app greatly improves the experience. For Chinese users, a full Chinese interface and responsive Chinese customer service are equally important.

Beginner Tip: Start with a Cash Account When opening an account, you’ll choose between cash account and margin account. Cash accounts trade with your own money and have controllable risk. Margin accounts allow borrowing from the broker, amplifying both gains and losses. As a beginner, always choose a cash account to ensure maximum loss does not exceed your invested capital.

To give you a clearer picture, here’s a comparison of three very popular online brokers among Chinese investors:

There’s no absolute best broker—it’s about finding the one that best fits your current needs.

Step 2: Fund Your Account

After opening the account, the next step is to transfer money into your brokerage account—this is called “funding.” For investors in mainland China, the two most common funding methods are:

• Hong Kong Bank Account Transfer: If you have a Hong Kong bank account, this is the most recommended method. First convert RMB to USD or HKD, then transfer directly to the broker’s designated account via your Hong Kong banking app. This method is fast and straightforward.
• Cross-Border Wire Transfer: You can use a mainland China bank’s mobile app or visit a branch for a cross-border wire. You need to provide the broker’s receiving bank details, including recipient name, account number, bank name, address, and SWIFT code.

Convenient New Option: Third-Party Payment Services In recent years, platforms like Biyapay have provided convenient solutions. They partner with compliant institutions to simplify currency exchange and cross-border transfers compared to traditional wires.

Whichever method you choose, pay attention to:

• Source of Funds: Ensure funds are legal and compliant.
• Same-Name Account: The transferring bank account must be in your name and match the brokerage account name exactly.
• Fee Check: Cross-border wires usually incur handling fees, including sending bank wire fees and possible intermediary bank fees, totaling $20 to $50. Confirm fees beforehand.

Step 3: Buy Your First ETF

Congratulations—your funds have arrived! You are now just one step away from becoming a real global investor. We’ll use buying the Vanguard S&P 500 ETF (VOO) as an example to walk you through the entire trading process.

Step 1: Search for the ETF Symbol Open your broker app and type the ETF symbol in the top search box. Here, we enter VOO.

Step 2: Enter the Trading Page Click VOO in the search results to enter its detail page. You’ll see real-time price, charts, etc. Click the “Trade” or “Buy” button at the bottom.

Step 3: Fill in Order Details This is the most critical step. You need to fill in two core pieces of information: order type and buy price/quantity.

For beginners, limit orders are strongly recommended. They let you set the maximum price you’re willing to pay. The order executes only when the market price reaches or is below your set price, effectively preventing buying at too high a price.

Suppose VOO’s current market price is $480.50. You can set a limit price of $480.00 and enter the quantity, e.g., 1 share.

Step 4: Confirm and Submit Carefully check: Buy, VOO, Quantity: 1, Price: $480.00. If correct, click “Buy” or “Submit.” After submission, you can see the order status in your positions or order list.

Once the order fills, congratulations! You have successfully bought your first ETF and officially started your investment journey.

Investing is not out of reach. You have now mastered the complete basics from account opening to trading. What you need to do next is take action and use dollar-cost averaging to combat emotional volatility. This strategy lets you invest consistently regardless of market ups and downs—it’s the simplest way to participate in global markets. Put aside hesitation—even a small monthly amount works.

Today is the earliest investment moment in your next ten years.

FAQ

Do I need a lot of money to invest?

You don’t need much money. Many brokers support fractional shares. This means you can start investing with as little as $5 or $10. The key is to start, not the initial amount.

How often should I invest?

For beginners, dollar-cost averaging is the best. Set a fixed amount to invest monthly or quarterly. This averages your purchase cost and smooths market volatility impact.

Do I have to pay taxes on investment returns?

Yes, investment returns are generally taxable. There are two main types:

Specific rates depend on your tax residency. It is recommended to consult a professional tax advisor.