Stocks are one of the most popular ways to let your money work for you, but before you start investing in stocks, it’s important to understand the basics. How to Invest in Stocks.

Stocks are a form of ownership in public companies. When a company is successful, its share price goes up, which makes your shares worth more than you paid for them. Some companies also share a portion of their profits with shareholders in the form of dividends. But, while stocks can yield higher rates of return than bonds or cash, they are more volatile and come with a risk of losing value.

How to Invest in Stocks: A Step-by-Step Playbook for Beginners

You can buy individual stocks or purchase shares in a stock mutual fund or exchange traded fund (ETF). Mutual funds and ETFs have built-in diversification and lower fees, making them popular with beginning investors. If you choose to buy individual stocks, you can invest with any amount, but it’s important to remember that the more money you put into a stock, the better your chance of a return.

Pinpointing how much you can comfortably invest depends on a clear-eyed assessment of your finances and the amount you have available to spare. A good starting point is to set aside an emergency fund that can cover a few months’ worth of expenses, and then create a budget to determine how much you can put into investments without depleting your savings or risking your financial stability. You should also assess your investor profile to gauge how much risk you can comfortably take and your time horizon, or when you will need access to your money.