How to pick your first stock: our five-step guide

The value of your investments and the income you receive from them can go up and down, and you may get back less than you invest. Any examples are for illustration purposes only.

Ask around among experienced investors and they’ll likely agree their approach to stockpicking looks a bit different now, compared with the first time they invested. That should be the case - we’re always trying to become better investors. If you find someone who’s still doing what they did when they didn’t know very much, it should ring alarm bells.

The important part is to actually get started, though. But, whether it’s through fear, lack of confidence or not knowing where to begin investing, UK savers are now sitting on more than £600bn in cash that could potentially be put to better use in investments, according to Barclays. [1] Our Freedom to Invest survey highlighted these barriers to investing and, importantly, gives us a chance to help break them down.

With that in mind, here are five guiding principles to help make that first stock pick less daunting.

Your “why” sets the tone. Like a film director, it makes sense to think about the story you want to tell before you cast the lead actor. Starting with Jack Black and only then deciding you want to make a gritty Danish drama might be doable but is Shallow Hal really the best star to get you there?

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How to start investing

What assets can I invest in?

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Figure out what your financial goals are, how long you have to invest and how bumpy a ride you’re prepared to put up with. Once you have your answers, you’ll be able to see whether you want to explore companies targeting fairly stable earnings and steady dividends at the expense of huge growth, or growth-hungry outfits that come with more risk but possibly higher returns. Holding a range of assets with different personalities (diversification) could help spread risk and tap into broader opportunities too.

Your first stock is a case study, not a ticket to sudden riches. Use it as a learning resource to get a feeling for what this whole investing thing is all about. What happens to the stock when news comes out about the company underneath it? What type of company news is the market actually swayed by? Is that different to what you would have thought? How are you building up a more colourful view of the stock, its sector and the wider economic environment? Having a stake in the market is a good way to keep you interested and invested, in more ways than one.

Notice we haven’t talked about outcomes here. Don’t go into your first stock expecting an instant share price boom that will let you gloat your way through early retirement. That type of ‘hit and hope’ approach is more akin to gambling and it may be worth re-examining your own mindset before investing, if that’s the case.

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Instead, like a golfer picking up a club for the first time, give yourself permission to focus on the process rather than the end result. As long as you are learning about how the global economy and corporate news shift share prices, and how your company is shaping its own future, don’t worry about being the perfect investor. And if you’re worried about getting a stock pick wrong, remember that the best investors out there don’t get anywhere near a perfect scorecard.

For a minute, think about the industry you work in. Which companies do you rate highly? Which products do you love using and which frustrate the life out of you? Who are the up-and-comers and who have seen better days? Investing in a sector you already have a working knowledge of means you probably already have a lot of valuable insight, and means you’ll be able to understand and contextualise things like earnings reports and corporate outlooks. You don’t have to stay wedded to an industry but, for that first stock pick, the familiarity could be useful - like turning up to a party on your own and seeing a friend already there.

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None of this means buying the first thing you can think of though. Here are a few pointers that might come in handy when you’re whittling down your shortlist:

• Lift up the bonnet. Are revenues rising? Are profits and margins consistent year to year? Is debt manageable or is it growing too? Dive into the earnings reports to see how healthy the company really is.
• Think long-term. Listen to the company - is it setting itself up for long-term success or are its plans a bit meh? Remember, you are buying into the future of a business so you need to be confident it will be relevant and thriving for years to come.
• Research, don’t react. Rather than letting your nerves be thrown around by the latest news headline, focus on developing as complete a knowledge of a company and sector as you can. Analyst reports, company filings and shareholder letters all help much more than clickbait social media posts.

Any fan of heist movies knows you haven’t completed the job until you’ve left the building and are driving off into the sunset. Investing should be a lot less Ocean’s Eleven but the point about making sure you have a clear exit strategy still rings true.

This doesn’t mean hovering over the sell button and sniping when the number turns positive. Instead, it means thinking about what would make you sell before it happens. It could be that you think you’ve spotted an overlooked share that’s going through a turnaround, and plan to sell when that part of its life is complete. It could be that you plan to hang onto a share for the long term but aim to sell if management starts to stray from its current plans. Whatever the reason, decide now, so you don’t end up putting pressure on your future self in the heat of the moment.

It might seem like the choice of stock is the most important aspect of this whole equation but, in reality, it’s much more important to think about your own behaviour. If you bought your first stock, which you sold after a quick rise you really wouldn’t have learnt anything. Did you get lucky? Was it skill? You’d never know.

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Should I still invest when the market hits all-time highs?

What we really want to develop is a consistent, repeatable process for identifying good stocks, buying them at the right price, dealing with ups and downs calmly, and exiting according to the plan we set out when we began. It sounds simple but the market does its best to test us. There can be long periods when nothing seems to happen, bouts of heavy volatility, corporate shake-ups, geopolitical knock-on effects - you need to do your best to act sensibly in the calm times and put systems in place to stop rash or emotion-fuelled decisions when the pressure rises.

You can always get used to volatility by seeing how a small amount of your money moves day to day. Use it to train yourself and your own reactions to seeing those price changes, and steer clear of congratulating or chastising yourself too much. Start with a little, learn a lot.

Source: [1] Financial Times, September 2025

Important information

When investing, your capital is at risk. The value of your investments, and the income you receive from them, can go down as well as up and you may get back less than you invest. Forecasts aren’t a reliable guide to future results or returns.

Make sure to do your own research on what investments are right for you before investing or consider seeking expert financial advice. Please note that this article is meant for information and does not constitute any financial advice. This is not an offer, recommendation, inducement or invitation to buy, sell, or hold any securities, or to engage in any investment activity or strategy.