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Stocks are one of the most common investments, and also one of the most risky ones as well. If you are looking to get into investing, you should do your research before buying a stock. There are several ways to do this, but the easiest way is to check out this article for some tips on what stocks beginners should invest in.
What Are Stocks?
Stocks are a type of security that represents a fraction of ownership, or an interest, in a company's assets. Shares of stock are valued per share, and investors commonly refer to themselves as stockholders. When you buy shares of stock, you are claiming ownership of a company's assets and its future earnings.
What Makes A Stock Good For Beginners?
What novice investors want is to earn the highest possible returns from their stock investments for as long as possible. But one of the ways that new investors differ from veteran investors is that they aren't capable to ride out the ups and downs that are inherent in owning stocks. Those who overreact to market movements by selling early or buying late tend to be called dumb money.
Companies that are capable of posting huge gains can also be extremely vulnerable to big losses. So, while you might eventually start investing in other stocks, beginner investors should not buy shares that are highly susceptible to big swings in the market, which includes stocks of small companies, cyclical stocks, and short interest stocks.
Don’t Forget Private Stock
The majority of stock is public. That means you can approach a stock trader and buy stock publicly going by prices listed on the relevant stock exchange. You can usually buy the stock of a public company, because that company would have had an initial public offering. However, you can also purchase private stock. Private stock can be a brilliant investment and it helps you hedge your portfolio ever so slightly. A lot of investors like to buy into pre IPO investment opportunities. The trick is in finding a stock that’s private but with the potential to go public. When it does go public, hopefully you’d make money back on your investment due to the IPO. One example, to help you on your journey, can be seen with Instacart. They’re a grocery delivery business but aren’t yet public. However, the CEO Apoorva Mehta, in a 2019 interview mentioned they’d eventually be looking at an instacart ipo leading to excitement in the private market. Instacart is a perfect example of a private stock investment opportunity that will eventually become public. Private to public doesn’t guarantee an increase in stock price but if the sentiment and excitement is there at the ipo it’s likely the price will go up.
Private stock can make up a nice chunk of your portfolio and allows you to hedge parts of your stock against the whims of the public market. It’s good as part of a whole. Always remember to diversify.
Best Stocks For Beginners?
It can be very time-consuming to find the best stocks to invest in. Even seasoned investors need to spend time looking for the right stocks to invest in. If you are new to investing in stocks, buying shares of companies that you already know about is a good place to start.
Alibaba (NYSE:BABA): Alibaba Group is the largest player in the e-commerce industry in China. Alibaba is the largest online shopping site in Asia Pacific and is also one of the leaders in the cloud industry in the region. The company has invested heavily AI and is making good use of the generated data by Alibaba and its subsidiaries. This helped the company to make better product recommendations. It also had an advantage in terms of understanding how to optimize its offerings.
Alphabet (NASDAQ:GOOGL): Alphabet is the parent company of tech giant Google. It is considered one of the biggest and profitable companies. Google made about 99% of its revenue from online ads, of which more than 85% is from paid search ads. This stock is great for beginners to buy because many people use Google products every day.
Apple (NASDAQ:AAPL): Many investors want to own shares in Apple Inc. It is not surprising, as Apple is delivering huge rewards to its shareholders. Apple's ability to innovate and successfully execute plans even during difficult times shows that it is able to weather all storms. It proves that the company can survive even when things go badly. And that is something that beginner investors should understand very well.
Amazon (NASDAQ:AMZN): Amazon is one of the most valuable stocks that investors can buy today. It is the biggest e-commerce company in the world. Amazon Inc. has been adored in Wall Street for nearly 20 years. Amazon is a strong player in the e-commerce industry and the cloud industry, while also having a significant share in other emerging markets such as video streaming. The only thing that people might not like about Amazon stock is that the price may be a bit too high for some investors. Luckily, most stock exchanges now allow investors to buy fractional shares to better manage their money.
Disney (NYSE:DIS): Walt Disney Inc., the world's leading company in the entertainment industry, is one of the top stocks to watch in the stock market. Disney is known for its various properties like theme parks, television networks, and movie theaters. The company has multiple assets that allow it to make money for investors. Disney+ may very well be one of the biggest threats to major streaming service providers. Disney+ is a relatively new streaming service, but it has already attracted over 60 million subscribers globally.
Facebook (NASDAQ:FB): Facebook is one of the top tech companies that investors should watch in order to potentially reap huge gains. Facebook owns 3 of the top 6 social media platforms. These include WhatsApp, Instagram, and Facebook. Facebook is the company that is driving its main revenue stream from digital advertising. eMarketer estimates that ad sales will reach over $513 billion by the year 2023.
Microsoft (NASDAQ:MSFT): Microsoft is still one of the most valuable companies in the world. It is one of the most exciting stocks to invest in. Microsoft has been making money for years with its software, games, and products such as the popular Surface devices. Furthermore, Microsoft's Azure cloud computing platform is the one that many companies use to run their cloud operations.
Tesla (NASDAQ:TSLA): Tesla is the company that introduced electric cars to the masses. Tesla Inc. is best known for making electric cars, but the company also makes charging stations and self-driving cars. Tesla has also been receiving a lot of attention for its solar roofs and home battery systems. The huge surge in TSLA stock prices and the subsequent stock split have caused a lot of attention. Tesla is the largest automaker in the world by market capitalization.
Netflix (NASDAQ:NFLX): Netflix is often considered to be the best streaming stock to buy, as it provides top quality content that no other streaming company can match. Netflix has been able to capture most of the growing home entertainment market because of its strong digital data and resource advantages. Netflix has gained huge data advantages over its competitors, which enables them to create better content that will appeal to a larger audience. Its free cash flow and its strong growth in global markets are likely to help it to profit massively from the massive opportunities that are ahead.
To be a successful investor, you should begin investing in stocks that you understand. When you buy stocks that you are not familiar with, there is a high risk of losing money. Beginners should avoid investing in stocks that are highly volatile and prone to major losses. It is always better to buy stocks that you know about and understand well.