7 Essential Concepts You Must Know Before Starting Stock Investing - 주식 & ETF 전략 (Stock & ETF Strategy)

Make smart and safe investing decisions by mastering the basics.

Jumping into the stock market without understanding the fundamentals is a fast track to losses. This post will guide you through key concepts that every beginner investor should know before making their first trade. Start your investment journey the smart and safe way.

Table of Contents

1. 📈 What is a Stock?

A stock represents ownership in a company.
Owning a company’s stock means you own a portion of that business.
Stock prices fluctuate based on a variety of factors—company performance, economic conditions, and market sentiment.

⚠️ However, it’s often difficult to think of stocks as company ownership. Most people focus on the price movements, feeling tempted to sell during dips. Overcoming this emotional response to price volatility is a skill that must be trained.
For beginners, this may be tough, but with time and discipline, you’ll learn to stay calm during market fluctuations.

2. 🧮 Stock Price vs. Market Capitalization

Stock price: The cost of one share.
Market capitalization = Stock price × Total shares outstanding.

For example:
Company A’s stock price = $10 / Total shares = 100 million → Market cap = $1 billion.

⚠️ A low stock price does not always mean a company is undervalued. Always consider market cap and intrinsic value together.

3. 📊 Investment Ratios: PER and PBR

PER (Price-to-Earnings Ratio) = Stock price ÷ Earnings per share (EPS) → Lower values suggest undervaluation.
PBR (Price-to-Book Ratio) = Stock price ÷ Book value per share (BPS) → Values below 1 often indicate a discount to book value.

These metrics help investors evaluate a company’s worth using concrete numbers.

🧠 Benjamin Graham, Warren Buffett’s mentor, emphasized buying stocks with PER between 10 and 15. However, these benchmarks can vary by industry, so use them as guidelines—not rules.

4. 🔁 The Power of Diversification

“Don’t put all your eggs in one basket.”
Investing all your money in one stock is extremely risky.
Spread your investments across different sectors and companies to reduce risk.

✔️ Personally, I believe diversification is one of the most crucial principles. While Buffett promotes concentrated investments, I believe average investors should focus on diversification for safety and stability.

5. 🕰️ Long-Term vs. Short-Term Investing

Short-term investing: Buying and selling quickly for price gains. High risk.
Long-term investing: Holding onto quality companies over time. Lower risk and allows compound growth.

✔️ Long-term investing is one of my top strategies. It’s simple in theory, but hard to practice. However, making it a habit is the key to building wealth through the stock market.

6. 💰 Dividends and Dividend Yield

Dividends are portions of a company’s profit paid to shareholders in cash.

Dividend yield = Annual dividend ÷ Stock price.

Investing in dividend-paying stocks can provide consistent income along with potential stock price appreciation.

✔️ Like diversification and long-term investing, dividends are essential. They make it easier to stick to a long-term plan by generating steady cash flow.

7. 🧠 Investor Psychology and Emotional Control

The stock market is a psychological battlefield.
Fear makes people sell low. Greed makes them buy high.
Success comes from sticking to your personal rules and avoiding emotional decisions.

✅ Final Thoughts: Know the Basics Before You Invest

Stock investing is not gambling.
Understanding fundamental concepts and learning to analyze companies and the market are essential for success.

I hope this post helps you take your first confident step into the world of investing.

Amazon) Here are the latest Laptops you should consider

“This post contains affiliate links. If you use these links to buy something, I may earn a commission at no extra cost to you.”