By Jamie Johnson, WCI ContributorIf you’re a new investor without a lot of money to invest, you may assume your options are fairly limited. But this isn’t the case. Most brokerage accounts let you get started for free, and thanks to fractional shares, you can buy any stock for as little as $1. Let’s look at the four best stocks and how you can start investing as a beginner.
4 Best Stocks for Beginners with Little Money
Investing in the stock market comes with risk, but it has a long history of growth and recovery from economic downturns. However, it’s important to do research and invest in well-established companies with track records of success. Let’s look at the four best stocks for beginners.
#1 Apple (AAPL)
Market cap: $2.427 trillion
P/E ratio: $35.46
Dividend yield: 0.43%
Apple is one of the largest and best-known companies in the world. The company is known for products like the iPhone, Apple Watch, and Mac, and it continues to innovate and come up with new offerings.
Apple stock is a good option for beginners, thanks to the company’s strong financials and loyal customer base. The company continues to expand its AI functionalities, so it’s well-positioned for continued growth.
#2 Alphabet (GOOG)
Market cap: $2.057 trillion
P/E ratio: $23.99
Dividend yield: 0.48%
Alphabet is the second-largest technology company after Apple and is the parent company of Google. But Alphabet is a holding company that owns many different brands, including YouTube, Waze, DoubleClick, Nest, Looker, Fitbit, and Mandiant.
The company is poised to expand its market share in cloud computing and advertising. It’s an excellent stock for beginners, thanks to its strong financial standing and continued growth.
#3 Walmart (WMT)
Market cap: $649.651 billion
P/E ratio: $42.06
Dividend yield: 1.03%
Walmart is a multinational retail corporation that operates a large chain of discount stores. With more than 11,000 stores worldwide, Walmart employs more than 2.1 million people.
Walmart is a good option for beginners, thanks to its strong brand recognition and positive financial projections. Companies like Walmart tend to continue to perform well during economic downturns since many people gravitate toward the company’s low-cost products. The company also offers a solid dividend to its investors.
#4 Coca-Cola Company (KO)
Market cap: $309.47 billion
P/E ratio: $29.21
Dividend yield: 2.70%
Coca-Cola Company is a multinational beverage company known for its flagship product, Coke. The company also owns Sprite, Fanta, Dasani, Smartwater, Vitaminwater, and Powerade, among many others.
The company offers an excellent dividend yield, which is attractive for investors who don’t have a lot of money to invest. And Coca-Cola has continued to increase its dividend for 59 consecutive years. The stock is a good choice, thanks to its stable growth and diversified product portfolio.
How to Start Investing as a Beginner
Investing can be confusing for beginners, but it’s the cornerstone of building a strong financial future.
It's also important to note that investing should be boring. At The White Coat Investor, we don't typically endorse the idea of buying a plethora of individual stocks. Instead, low-cost index funds (many of which will already have the aforementioned individual stocks above inside their funds) are a tried and true formula to build wealth over time.
For example, an S&P 500 fund, like VOO or FXAIX, will track the S&P 500 index, meaning you'd automatically own Apple, Alphabet, Walmart, and Coca-Cola without having to buy individual shares of those specific stocks. A total stock market index fund, like VSTAX or FSKAX, that tracks the entire stock market would also include those companies. Using an index fund and its low expenses would likely be a cheaper way to have all of those stocks in your portfolio rather than buying them individually and paying whatever fees it would cost.
Here are the steps you’ll take to begin building your investment portfolio.
Outline Your Financial Goals
Before you start investing, it’s important to take some time to determine your financial goals. For example, are you saving for retirement, college planning, or a short-term goal like a down payment on a house? Knowing your objectives will determine the steps you take going forward.
Set goals that are specific and realistic, given your current financial circumstances. Once you’ve determined your goals, you’ll want to assign each of them a timeline. If you’re saving for your children’s education fund, determine how much you want to have saved and by when.
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Choose the Right Investments
Next, you need to select the right investments for your portfolio. Your timeline and risk tolerance will largely determine the investments you choose. For example, if you’re nearing retirement and have a low-risk tolerance, you may want to pick safer investments like bonds. Meanwhile, someone in their 30s with a high-risk tolerance might choose to invest in low-cost index funds and individual stocks.
It’s also important to create a diversified portfolio to manage your risk level. A diversified portfolio includes many different types of investments that perform differently over time. You can also diversify your investments by buying stocks from different sectors.
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Investing Doesn’t Have To Be Complicated
Continue to Monitor Your Portfolio
The market will continue to fluctuate, so you need to monitor and rebalance your portfolio over time. Rebalancing involves reallocating your funds to meet your targeted allocations. For example, if you plan to invest 70% of your portfolio in stocks and 30% in bonds, you’ll need to monitor your portfolio to ensure it stays within these proportions.
Rebalancing from time to time is necessary, but it’s important not to react to every market fluctuation. Consistent investing over time is what leads to the best results, so you never want to make rash decisions and sell prematurely.
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