Investing in stocks may seem complicated at first glance, but trust us, you can easily master it too. You just need to know a few key principles. In this guide, we'll explain step by step what stocks are, how they work, how to start investing, and what the main types of stocks are. And if you find that the stock markets aren't for you, we'll also show you a great alternative – InvestBay.
What stocks are and why you should care about them
When a company needs capital to launch or grow, it can issue shares – "small pieces" of its value that investors can buy. And who is the investor in this case? Often it's large banks or brokers, who then offer them on to ordinary people. But you can also buy them directly yourself, or alternatively through an investment fund.
What's in it for you as an investor? Above all, a stake in the company.
Stocks are not a loan – no one guarantees that you'll get your money back. But if the company does well, its value grows – and with it the value of your share rises too. In addition, some companies regularly pay you dividends, which are a portion of their profit. Others decide to reinvest all the money – for example, into development, expansion, or technology.
Just as an aside: We at InvestBay use the same principle of fractional ownership: you invest in real properties that generate rental income and at the same time grow in value.
Types of stocks every investor should know
If you decide to invest in companies, you'll come across two main types of shares – common and preferred shares. Each of them works a little differently and suits a different investment strategy – or rather a different investment style.
Common shares: when you care about influence and growth
The most common type is common shares. When you buy them, you become a co-owner of the company – and not just on paper. You have voting rights, which allow you to influence important decisions, such as electing the board of directors or approving a dividend.
At the same time, common shares open the door for you to two types of investment return:
- from the growth in the share's value (that is, if the company does well and the price of its shares rises)
- from dividends, if the company distributes part of its profit among shareholders.
In addition, some shares give you a pre-emptive right – that is, the option to buy new shares before others and thus maintain your stake in the company.
Preferred shares: when you want more peace of mind
Preferred shares take a slightly different approach. While they don't give you voting rights and their price usually doesn't rise much, they can bring you a regular fixed income – for example, in the form of a dividend.
And what if the company didn't do well? When money is eventually paid out, preferred shareholders have priority over those with common shares (but only after creditors and bondholders). That's why these shares are often regarded as a lower-risk alternative – mainly for those seeking stability.
Dividend, growth, and value stocks: Money now, or later?
Dividend, growth, or value stocks are rather different ways of looking at stocks from an investment perspective. We label stocks this way based on how they typically behave, what potential they have, and what strategy an investor pursues with them.
But beware: a company's behaviour can change over time, so this classification isn't set in stone. So these aren't legal types of shares, like common or preferred shares.
Dividend stocks: Regular income
The first type consists of dividend stocks. These are popular especially among investors who want a regular income. Companies whose stocks pay a dividend send you a share of their profit at regular intervals (monthly, quarterly, or annually).
Growth and value stocks
At the other end of the spectrum stand growth and value stocks. There you don't expect monthly drops into your wallet, but rather a long-term rain. The goal is to buy a stock that has the potential to rise significantly in value.
These stocks typically don't pay a dividend – the company reinvests all of its profit into further growth. It's similar to buying a property whose value you expect to rise several times over within five years – and only when you sell it do you actually realise the profit.
It's actually similar logic to the one we apply at InvestBay. These are projects with a horizon of several years, where we track the growth in value – and at the end comes the return from the sale. In the meantime, however, rent also comes to you regularly, so we combine both approaches.
And what about fractional shares?
Fractional shares represent part of a single whole share of a company. In the past it was only possible to buy whole shares, but today some platforms allow you to invest even just a certain amount – and you receive a corresponding fraction of a share in return.
Example: If one share costs 1,000 dollars and you only have 100 dollars, you can buy 0.1 of a share. Thanks to this, investing in stocks opens up even to people who don't have a high starting capital.
It's good to know, however, that not every broker offers fractional shares. Moreover, it can happen that not all stocks are available for this type of purchase. And while fractional shareholders usually receive a proportional part of dividends, voting rights aren't a given for them – it depends on the specific platform and conditions.
Which stocks (or investments) are suitable for beginners?
- Stable companies with a long history ("blue chips").
- ETF funds.
- Individual purchase of stocks, for example through a bank, XTB, Revolut, and the like.
Reading tip: Long-term investments can be the key to safely growing your money
Buying stocks in practice: How and where to buy stocks
Buying stocks online: step by step
- Choose a broker (e.g. eToro, Degiro, Fio), or check whether your bank offers the option to buy stocks.
- Verify your identity.
- Deposit funds.
- Find the stocks you want to buy.
- Confirm the purchase.
Where to buy Czech stocks?
Czech stocks are most often bought on the Prague Stock Exchange (BCPP) through brokers such as Fio banka, Air Bank (or other banks), Patria Finance, XTB, Degiro, Portu, and others.
Investments and stocks – how to choose the right ones?
Consider the industry, the company's financial health, price trends, and dividend payouts.
It also helps to follow indices such as the S&P 500 or Nasdaq.
Investing in stocks – a long-term strategy that works
How do you invest in stocks safely and sensibly? Diversify. Don't bet everything on one card. Combine different sectors, geographic regions, and types of stocks.
Read our article on this topic: A comprehensive and practical guide to investment diversification
Investing in stocks vs. speculation: key differences
Investing is a long-term journey – you build wealth through patience.
Speculation is an attempt to get rich quickly – often with higher risk.
Our style at InvestBay is definitely investing: a long-term strategy, real assets, transparent management.
Never put money into something you don't understand. And if someone promises a guaranteed profit, be on your guard.
When to sell stocks and what to watch for when selling
Selling stocks: how to recognise the right time
Sell when:
- you need the money,
- the company's fundamentals have changed,
- you've reached your target profit.
Taxation of profits and other practical questions
In the Czech Republic, you pay tax on the profit from the sale of stocks if you hold them for less than 3 years or exceed the income limit from stocks of CZK 100,000 per year.
Investing in stocks with small amounts: is it even possible?
Thanks to fractional shares, today you can invest as little as just CZK 100 a month. ETF funds are ideal for small investors. ETFs contain multiple stocks and track indices. They are cheap, diversified, and ideal for beginners.
Reading tip: Small investments: How and where to invest small amounts?
InvestBay as an alternative to classic investing
What do we do differently from the usual stock markets? At InvestBay you invest in real properties both abroad and at home – through crowdowning. You don't have to worry about anything.
The benefits of crowdowning and portfolio diversification
- You own a stake in the property
- Regular rental income
- Return from the sale
- Minimum investment from just CZK 2,500
Register for free on InvestBay and join the thousands of people who are already earning smartly. Investing in real estate through InvestBay – if you want a clear and safer alternative to stocks.
Join the investors who are already earning
Investing isn't only for the "big players". Start with just a few hundred – whether in stocks, or even smarter with InvestBay.
You often ask
1. What is a stock?
A stock is an equity security that represents a stake in a joint-stock company. It gives the owner (shareholder) the right to participate in running the company, in its profit (dividend), and in the residual assets when the company is wound up.
2. Is investing in stocks safe?
Every investment carries a certain degree of risk, but it can be managed through diversification and a long-term strategy.
3. How can I invest in stocks with little capital?
Using fractional shares or ETF funds. You can start with as little as a few hundred.
4. Where can I buy stocks?
With online brokers – e.g. eToro, Degiro, or Fio e-Broker.
5. What is the alternative to stocks?
InvestBay offers crowdowning into real estate. You don't have to worry about anything and your returns are regular.
6. How much does one ČEZ share cost?
The current price of one ČEZ share is approximately CZK 1,142 (figure as of 23 April 2025).
7. What is the best way to buy ČEZ shares?
The best way to buy ČEZ shares is through a licensed broker, for example Fio e-Broker, Patria Finance, XTB, or Portu. Czech brokers (Fio, Patria) have an advantage in lower dividend taxation (15%), while foreign brokers (Degiro, XTB) have lower fees but higher dividend taxation (35%).
8. How do you invest as a beginner?
Start by educating yourself about investing, set your goals and risk profile, choose a trustworthy broker, and start with smaller amounts. For beginners, regular investments in ETFs or stocks of large, stable companies are suitable.
Read our article The basics of investing, or How to start investing.
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