Different Ways to Invest in the Stock Market
May 2025 | By Akbar Muhammad
Most investors have waited until they’re adults to learn about investing, but by then, they had already missed out on years of potential profit. Starting now, even when you’re still in high school, can give you a major head start.
Before we dive into different ways to invest, let’s start with the basics. Think of the stock market like a PTA fair. At the fair, you have booths where people are selling different kinds of things—food, games, arts—and students and families walk around deciding what they want to buy.
The stock market works the same way, but there are companies instead of booths. By definition, the stock market is a place where people buy and sell shares of publicly traded companies. Investors (like students at a PTA fair) decide what they want to “buy”. When you invest in the stock market, you’re finding markets to put your money in with the hope that what you buy will be worth even more later.
There are few popular ways you can invest in the stock market. Out of all the different options, this time we’re going to talk about three: individual stocks, exchange-traded funds (ETFs), and mutual funds. Each one works a little differently, and each has its own pros and cons.
The first way is by buying individual stocks. A stock represents a small piece of ownership in a company. In other words, when buying a stock, you’re buying a small piece of a company. If that company does well—like selling more products or making more money—your stock could increase in value. However, if that company struggles, your stock might lose its value. For example, you buy a share of Lululemon because you believe in the future of sportswear. Picking a stock might be exciting, but it can be very risky, especially if you don’t do enough research.
Another way is through ETFs, or Exchange-Traded Funds. An ETF is an investment fund that holds a bunch of different stocks, and it trades on exchange similar to a stock. In simpler terms, think of it as a basket filled with lots of different companies. This is called diversification since you’re buying a little piece of many companies at once instead of just one. It helps lower your risk because if one company doesn’t do well, others might still be doing fine. A popular example of an ETF would be the S&P 500, which tracks 500 of the largest companies in the U.S, like Apple, Microsoft, and Coca-Cola.
Finally, there are mutual funds. A mutual fund collects money from lots of investors and is managed by a professional who decides what to invest in. When you invest in a mutual fund, you’re basically hiring someone to choose an investment for you, making it very useful for those who don’t do enough research. However, mutual funds often have higher fees to pay the professionals. Unlike stocks where you can buy or sell at any time, mutual funds shares can only be bought or sold at the end of the trading day.
At this point, you should be asking yourself which one to invest in. Well, there’s no single answer. If you like the idea of picking whatever you believe in and willing to take the big risk, you might enjoy investing in individual stocks. If you want to spread your risk and make things easier for yourself, ETFs are the one. If you prefer someone experienced and educated to make the decision for you, mutual funds might be the way to go.
Starting small is better than not starting at all. Whether it’s buying your first stock, picking an ETF, or investing through a mutual fund, every step you take leads to a better future. Even setting aside a small part of your allowance and putting it in the market can make a big difference over time. The earlier you plant the seeds, the bigger your money tree can grow.
Glossary
Stock - A share of ownership in a company. When you buy a stock, you're buying a small piece of that company.
Stock Market - A place where people buy and sell stocks of publicly traded companies. It's like a big marketplace for businesses.
ETF (Exchange-Traded Fund) - An investment fund that holds a group of different stocks. It’s traded on the stock market like a regular stock and offers easy diversification.
Mutual Fund - A collection of investments managed by a professional. Investors pool their money, and the manager decides what to buy and sell.
Diversification - Spreading your money across different companies or investments to reduce risk. If one company does badly, others may still do well.
Risk - The chance that you could lose money on an investment. Higher risk often comes with higher potential reward—but also more uncertainty.
S&P 500 - An index made up of 500 of the biggest companies in the U.S., such as Apple, Microsoft, and Coca-Cola. It’s often used to show how the overall stock market is doing.
Trading Day - A weekday when the stock market is open (usually Monday to Friday, excluding holidays). Stocks and ETFs can be bought or sold throughout the day, while mutual fund trades happen only after the market closes.
