Knowing where to start when creating your first portfolio is often a difficult hurdle to get over for the beginner investor. Advice from leading asset management specialists is quite simple to stick to what you know while you are finding your feet in the market.
Prior awareness of the companies you are investing in means that they are highly visible in the sectors they operate. Often, following their day-to-day activity is simplified as it is widely reported on. Another critical consideration when purchasing any stock must be a strong balance sheet that shows relatively low debt compared to cash holdings.
One of the common questions we receive from readers is “What are some safe stocks for beginners to buy.” The answer is that any stock can lose money. However, some companies are stable and likely to increase in the stock price over time. In this article, we give you 9 stocks we recommend you research.
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How to Start Buy Stocks Online?
Before I jump into our safe stocks for new investors, I will answer the question of how to buy stock online. The short answer is that there are many stock broker-dealers that offer online trading. Getting started is as simple as filling out an online form and then depositing funds. You can start investing with just $20.
How to Pick An Online Stock Broker-Dealer?
Two of our favorites are Robinhood and M1 Finance because they are $0 trades, easy to use interface, and fractional shares. Here are three things we recommend to new investors and traders to focus on when getting started. Here are three things for new traders and investors to consider:
- Trade Cost: If you have a small account, paying even $6 per trade can quickly eat in your profits.
- Fractional Shares: You might be wondering what are “fractional shares”? This is where you only buy a part or fraction of a stock. For new investors, this is critical because it allows them to by Amazon stock which is now over $1500 even if they only have $100. It also helps investors buy multiple fractional shares of companies, thus creating portfolio diversification.
- Easy Interface & App: There are many great brokerages, but not all are user friendly for the new investor and trader. Find the one that offers that best interface for your investing, not the one with the most tools or gadgets.
In addition, there are a few things you may want to consider as you learn to invest and grow your portfolio:
- Margin: Margin is simply a “loan” from the broker-dealer. Typically you need to invest at least $2,000 to have a margin account. It can be risky because you are borrowing money to buy a stock or investment. If you buy a stock using margin and the stock price drops, you could end up actually owing money.
- Ability to Trade Options, Futures & Forex: As you progress in trading, you will find many other investment options than stocks. Most of the other investments are far riskier than stocks, so it is best to get a good trading record established before looking at options or other investments.
- Trade Execution Time: Depending on your trading style and strategy, the time for execution and price could be an advantage. This is typically the case for investors that are high frequency and/or narrow profit margins.
Procter & Gamble (PG)
Quite the opposite to Alphabet, for those investors looking for a strong dividend return, P&G may be a safe bet. Even as other companies were cutting or reducing dividend pay-out amid the current economic climate, P&G has recently announced that it will increase its offering. This will mark 64 consecutive years of dividend payment growth and is largely thanks to its offering of products that consumers tend to stock up on during times of uncertainty. While other companies on this list are working hard to mitigate the current climate of recession and pandemic, P&G continues to perform strongly, making it worthy of inclusion on this list.
Berkshire Hathaway (BRK.B)
Chances are that if you haven’t heard of Berkshire Hathaway, then you almost certainly will have heard of its CEO Warren Buffet. He is undoubtedly one of the most successful investors in the world and, as of 2020, has amassed a fortune of almost $80 billion. If you think that’s impressive, the $120 billion in cash reserves is enough to give this investment powerhouse the freedom to provide lifelines to companies in exchange for favorable terms. While the class A shares might be too expensive for novice investors, the class B pricing is much more palatable and still allow you to get a share of that invaluable Warren Buffet wisdom.
When talking of recognizable companies, Amazon is so engrained in the fabric of society that we rely on its services for everything from grocery shopping, running our small businesses, movie streaming, and so much more. While you couldn’t call its stock cheap by any stretch of the imagination, the continued growth still attracts the new players and large wealth management portfolios alike. While Amazon is already the third-largest company by market cap in the world, thanks to its constant innovation in sectors such as Amazon Web Services, Streaming, and Amazon Fresh, it’s safe to say that this company will continue to adapt, grow, and surprise.
From one tech giant to another. Microsoft has been the face of personal computing since the early 90s. While its reign at the top of the software game has been challenged over the year, through product diversification and creating shrewd competitive advantages, it has stood the test of time. Its Windows platform is now so engrained across many business computing applications that the cost of switching has become a barrier to many leaving the Microsoft ecosystem. Despite the numerous ground-breaking products and patents, Microsoft’s strength mainly lies in its brand recognition. All these combined makes for a hefty deterrent to competitors looking for a slice of their market share.
Most people will know Alphabet by its flagship search engine product Google. The success of this internet changing product has allowed the company to diversify its offering and develop some extremely well-known brands. The Alphabet family includes YouTube, Nest, Android, DeepMind, and many more household names in a host of sectors. The balance sheet looks incredibly healthy for this giant with relatively low debt thanks to the revue it generated from its key services. This culture of reinvestment of profits means there is currently no dividend for shareholders, and investors should be looking at the benefits of long-term growth.
Wells Fargo (WFC)
Here is a stock we all know, but possibly not for the best of reasons. Wells Fargo has recently reached a settlement with the government to draw a line under a host of scandals, which has driven the stock price down in recent months. Because of this, long term investors are seeing the benefits of buying in while the price is low and securing a healthy annual dividend yield. Despite some recent setbacks, the balance sheet continues to look healthy, and Charles Scharf, who assumed the position of CEO back in September of last year, is a well-respected leader with a wealth of experience.
Walt Disney (DIS)
Speaking of facing into uncertainty caused by the Coronavirus pandemic, Disney has been hit harder than most through the closures of its theme parks and suspension of its cruise holiday offering. However, that’s to its recent entry into the home streaming market; it has also benefited from growth in the increasing demand for home entertainment, which has propped up its latest trading results. Disney is a highly recognized brand that, while may have once been an expensive proposition for a new investor, falling stock prices in recent months make it a much more accessible proposition that will offer long term growth as the economy opens back up and government restrictions are lifted.
It is fair to say that trading in individual stocks can often be a high-risk strategy as you are aligning yourself to one player in an often crowded arena. This makes picking highly visible companies with a history of strong management and solid performance even more important. As you find your feet as an investor, a mature portfolio should often look to mitigate some of its trading risks by diversifying its holding into mutual funds. While spreading your liability across multiple investments also create economies of scale and simplify managing your portfolio.
Visa is a well-recognized player in the financial services market. The reason it makes it on to this list above any other in the sector is the speed at which it has adopted the latest technologies such as virtual wallets and blockchain, which will undoubtedly give it the edge over many of its competitors. On top of this, it has recently announced that it plans to acquire Plaid, a start-up that strengthens its relationship with backs through app-based banking.
As the first company to surpass $2 trillion in market value, there is little doubt about the Apple brand’s recognition. The firm is well known for its iPhones, iPods, Macs, and much more; however, the real value behind all of these products is the ecosystem that ties you to the apple way of life and creates lasting customer loyalty. As Apple diversifies its product offering into the realms of streaming, banking, home audio, and a whole host of rumored secret projects in the works, it’s a safe bet that Apple will be keeping us guessing how it will disrupt the tech market for many years.