What are the Best Stocks for Beginners to Buy?
Pretend you’re 18 years old and someone hands you a check for $10,000. You want to be smart, so you decide to invest in securities. You open a brokerage account, deposit your money and start looking at stocks. But what are the best stocks for beginners to buy?
Ask this question in a room full of seasoned investors and you’ll get tons of different answers. Put it all in an index fund! Spread it out between FAANG stocks! Diversify among six to eight companies! They’re all valid investing strategies, but they might not apply to you specifically.
The truth is, you’ll need to take a few minutes to think about the type of investor you want to be before you make your initial buy. Here’s how.
Consider Your Investing Strategy
How long do you want to invest your money? What’s your tolerance for volatility? What sectors are you familiar with? Ask yourself a few simple questions and you’ll start to narrow the pool of the best stocks for beginners to buy that apply to you.
Let’s say you’re starting college and want to invest for four years. That way you can take profits when you graduate and begin to pay down your student loan debt. Smart thinking!
Your time horizon is four years, your tolerance for volatility is moderate-to-high and you’re going to college to study computer science. Your best bet for a beginner investment might be tech growth stocks, with a few years of financials. Companies like Zendesk (NYSE: ZEN), Okta (Nasdaq: OKTA) and CrowdStrike Holdings (Nasdaq: CRWD) might be on your radar.
Conversely, you might want to stay invested for 10 years. You can build up a dividend-focused portfolio that you can set and forget while you focus on other wealth generation. You have a low risk tolerance and you don’t have specialized knowledge of any one industry. In this example, companies like Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO) and AT&T (NYSE: T) are the start to a well-diversified portfolio of dividend aristocrats.
Don’t Rush into Trendy Stocks
Most people tend to look online for advice on where to make their first investment. Often, they find trending articles and affiliate write-ups. These resources don’t always take a logical stance and tend to glorify stocks that may not be the best stocks for beginners to buy.
Compare headlines with stock charts and you’re bound to see differences. Just because you keep seeing a company in the headlines or a ticker symbol recommended on a forum doesn’t mean they’re good stocks for beginners. Worth investigating? Sure. An automatic buy? Never.
The Best Stocks for Beginners to Buy are Boring!
It can be tempting to put your money into a stock that looks like a rocket to the moon. Or one that’s always in the news. But the truth is, the best stocks for beginners are often stable stocks that might not move the needle by leaps and bounds overnight.
It’s important for new investors to realize that a boring stock isn’t a bad stock – in fact, it’s quite the opposite! Sure, it might feel good to watch a stock shoot up 11% right after you buy it… but it’s going to feel just as bad when it drops 9% next week.
New investors can split the difference and look at some stocks that slowly gain 2%, without all the ups and downs. These companies are often more stable and may give you less to worry about. That’s a good feeling to have while you’re still figuring out the markets. To learn more, check out these Top 20 Consumer Staples Stocks.
Investing for the first time is exciting. And it’s even more exciting to watch your money grow over time. The best stocks for beginners to buy are often stable companies that fit your investing mindset. Watch them grow over time… but don’t act too quickly or overreact! Feel confident in the position you take and let the markets do what they’ve always done: grow.
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About Brian M. Reiser
Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.
He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.
His primary interests at Investment U include personal finance, debt, tech stocks and more.