Guide to Buying Stocks For First-Time Investor

IN four years, Lynn Thornwall has gone from being ''unable to balance a checkbook,'' to having some expertise in the United States stock market. ''I'd never even deposited a check in a bank,'' she laughs, looking back at her decision, in 1991, to educate herself on the intricacies of personal finance.

Ms. Thornwall, a store-display designer who lives in Bergen County, N.J., bought several shares of IBM Corporation. The stock has wobbled up and down in value since then, but Thornwall branched out. She joined an investment club, bought shares of additional companies, and invested in mutual funds. Best of all: She made money.

With inflation, high college costs, and the need for adequate retirement income, financial analysts say people should make every effort to invest in common stocks as soon as they have some discretionary funds.

''Most people should have at least some assets in equities [stocks],'' whatever their age or gender, says James Fraser, president of Fraser Management Associates in Burlington, Vt., a financial-management firm. Stocks are important for younger people, he says, because ''statistics indicate that, over time, such as for periods of 10 years or longer, stocks consistently outperform other financial investments such as bank certificates of deposits, bonds, and real estate.''

A ''stock'' is an ownership stake in a company. There are diverse ways to acquire stocks, experts say. You can buy shares directly from a broker; buy mutual funds; acquire stocks through your company's investment/retirement plan; or buy stocks through direct purchase, dividend-reinvestment plans offered by about 1,000 US corporations.

You can also acquire stocks through participating in a local investment club, such as those sponsored by the American Association of Individual Investors (625 N. Michigan Ave, Chicago, IL 60611) or the National Association of Investment Clubs (711 W. Thirteen Mile Road, Madison Heights, MI 48071). Investment clubs are typically composed of amateur investors who may pool funds and buy stocks, slowly building a stock portfolio. Each member contributes a modest amount, perhaps $100 to join and then $15 on a monthly basis. Club members meet regularly to share information about publicly traded companies. Brokers or local company executives sometimes address the clubs. And the national organizations often sponsor regional investment ''fairs'' where they invite company officials to promote their stocks.

Thornwall originally went to a full-service brokerage firm for help. For the first-time investor, going to a broker can make good sense, financial analysts say.

If you choose to hire a broker, what should he, or she, tell you?

''I wouldn't tell you anything,'' says John Koulopoulos, assistant manager of the New England regional office of investment house A.G. Edwards & Sons Inc., in Hingham, Mass. ''Rather, I'd want to ask you questions, identifying your personal investment needs,'' both short-term and long-term. Once your priorities are clear, he says, you can put together a balanced investment plan.

Koulopoulos believes that ''smaller investors'' -- persons investing under $25,000 -- are better off buying into a mutual fund. Mutual funds, as a rule, offer instant diversification, since a fund's portfolio includes a variety of stocks. But if a person does buy individual shares, Koulopoulos suggests they acquire ''high quality'' firms that pay dividends, are listed on the New York Stock Exchange, and have a ''history of [price] appreciation.''

If you open a brokerage account, Koulopoulos says, you must decide on an individual account, a joint account, or a specialized plan, such as an individual retirement account. Suppose you select an individual account. You provide the investment house with your Social Security number, home address, and phone number.

You then deposit money with the brokerage house; the firm puts it in a money market account. When the broker buys your selected stocks, they will take the funds out of the account to pay for the transaction.

Alternatively, some brokers will have you pay directly for the stock you order. Currently, you have five business days to pay for the purchase. In June, the transaction period will drop to three working days.

Shares can be purchased individually, in ''odd lots'' under 100 shares, in ''round lots,'' that is, multiples of 100 shares, or in ''block shares,'' purchases of more than 10,000 shares. Your ''cost'' per trade will be more expensive at a ''full service'' brokerage house (such as Merrill Lynch) than a ''discount'' house (such as Charles Schwab) that does not give advice, but merely executes trades.

*Next Monday: How to buy mutual funds.