If you’re a new investor who’s decided to invest in the stock market, congratulations, you’ve made a good decision. Stocks have great potential for long-term growth. If you invest wisely — meaning you invest consistently, choose quality stocks and diversify your holdings — investing in the stock market could help secure your financial future.
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Why Buy Stocks?
A share of stock is an equity ownership stake in a company. When you buy stock, you become an owner with all the benefits and all the risks that come with ownership.
When the company does well, its stock shares tend to go up in value. If a company performs poorly, the value of its shares goes down accordingly. Investors hope the companies they invest in will perform well over long periods of time. If this happens, shareholders will have the opportunity to sell some or all of their shares for more than they paid for them. Over time, investors realize substantial gains and accumulate wealth.
Are Stocks Risky?
Investing in stocks is a proven way to create wealth over time, but new investors need to realize that investing involves risk. This fact is not meant to discourage or frighten you, but to give you all the information you need to make investing decisions that are right for you.
The fact is, stock prices go up and down, and it’s very difficult to predict short-term price moves. A company’s financial performance, the global economy and unexpected news can all affect the market and prices of individual stocks.
But don’t worry, ups and downs are perfectly normal. Just be prepared for fluctuations, and don’t invest with a short-term time horizon. You will experience bear markets and periods of decline, but, historically, the market trends upward over the long run.
Which Stocks Should I Buy?
There are thousands of stocks listed on the major U.S. stock exchanges. As a new investor with little money to put toward stocks, deciding which ones to buy can seem like a daunting task.
The smart thing to do when you’re just starting out is to invest in blue-chip companies with diversified, global business operations and holdings.
Blue chips are well-established, financially secure companies with long track records of solid performance. They are the leaders in their respective industries and are known for stability in good markets and bad.
Here’s a list of seven high-quality stocks that are excellent choices for beginning investors who don’t have a lot of money:
— Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B)
— JPMorgan Chase & Co. (JPM)
— Johnson & Johnson (JNJ)
— Walmart Inc. (WMT)
— PepsiCo Inc. (PEP)
— Microsoft Corp. (MSFT)
— American Water Works Co. Inc. (AWK)
Berkshire Hathaway Inc. (BRK.A, BRK.B)
Berkshire is a type of company known as a multinational conglomerate holding company. That means that its primary business is owning shares — usually a very large number of shares — of other companies. Berkshire owns a wide range of businesses that operate around the world across many business sectors. For instance, it holds insurance companies, public utilities, transportation companies, consumer goods companies, financials, high-tech firms and more.
This incredible diversification means the stock does not rely on just a few markets or industries. Its sterling, long-term reputation and sizable market cap of $872 billion make it a blue-chip stock all new investors should consider.
The CEO of Berkshire is legendary investor Warren Buffett. Mr. Buffett is considered by many to be the most successful investor of all time. He’s well known for being able to see value and potential in stocks that others might miss, and he’s delivered very impressive returns over six decades.
JPMorgan Chase & Co. (JPM)
JPM is more than just a large commercial bank. The company is a $560 billion diversified financial institution that operates on an international scale.
JPM is one of the largest, most respected and well-established blue-chip financial firms in the world. The company is prominent in consumer and commercial banking, investment banking and asset management. The wide range of services it offers and its diverse customer base help reduce risk and ensure a steady stream of revenue and profit from many different sources.
One big reason for JPM’s long-term success has been its CEO, Jamie Dimon. Dimon has been a visionary leader and is considered one of the most competent managers in the financial industry. Investors can expect Dimon to retire in less than 10 years, but, rest assured he’s put a solid succession plan in place and the company’s culture is strong.
In short, JPM is a blue-chip bank that has shown great stability and has excellent long-term growth potential. It’s an excellent choice for new stock investors.
Johnson & Johnson (JNJ)
Investors who are new to equity investing should consider buying some shares in JNJ.
JNJ is a $351 billion established leader in the global health care sector. The company’s main areas of operation are pharmaceuticals, medical devices and consumer health. By doing business around the world and diversifying its revenue sources over these product areas, JNJ can weather the ups and downs of the sometimes volatile health care sector.
The pharmaceutical segment might be its most important driver of revenue and profit. The company offers a wide range of drugs, treatments and medications that are used by health care professionals to treat a variety of diseases and ailments.
JNJ was able to generate $85 billion in revenue for fiscal 2023. That figure represented a 6.4% increase from the year before. On the earnings front, Wall Street is estimating that the company will earn $9.89 per share in 2024 and grow that number by 2.7% to an estimated $10.16 for 2025.
Additionally, the stock currently distributes an annualized dividend of $4.96, which works out to a respectable yield of 3.4%.
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Walmart Inc. (WMT)
WMT stock stands out as a great choice for new investors. Most Americans have heard of WMT, but what they may not know is that it’s the world’s largest retail operation when measured by overall revenue.
The core of the company’s business is its physical retail operations. According to its investor relations department, WMT has 10,607 brick-and-mortar locations that include 4,609 Walmart stores, 599 Sam’s Club warehouse stores and 5,399 other stores located internationally.
Brick and mortar, however, is only part of the WMT story. Over the last decade, the company has invested heavily in technology and logistics in an effort to compete with Amazon.com Inc. (AMZN) and other e-commerce retailers. Its efforts appear to be paying off. The company recently reported that in the quarter ending Feb. 20, around 18% of net sales were attributable to e-commerce.
The retail sector is an important part of the U.S. and global economy. WMT is a strong, stable diversified blue-chip stock well worth considering.
PepsiCo Inc. (PEP)
One of the key factors that make PEP a great choice for new stock market investors is the company’s diversification across both the beverage and snack segments of the prepared food industry. PEP’s size — it has a market cap of $227 billion — and its popular and extensive range of product offerings keep the company viable and relevant in almost all market conditions.
Few companies in the world enjoy the type of market leadership that PEP commands. The company’s brands are iconic and are instantly recognized all over the globe.
The beverages segment includes well-known brands like Pepsi, Mountain Dew, Gatorade and Tropicana. Its drink product lines offer something for almost every consumer. From sports drinks to sodas to juices to bottled water, PEP has something for everyone.
Pepsi’s snack offerings are almost equally popular. Its brand portfolio includes Lay’s, Doritos, Cheetos, Ruffles and Tostitos. The company’s snacks perfectly complement its drink offerings, enhancing revenue and earnings.
All investors, whether experienced or new to the markets, will appreciate the stock’s $5.42 annualized dividend, which currently provides a yield of 3.3%.
Microsoft Corp. (MSFT)
MSFT is a $3.3 trillion, mega-cap stock that is a great addition to any investor’s portfolio, whether they’ve been investing for many years or are brand new to stock investing.
MSFT is primarily known for its software products and its Windows operating system that powers untold millions of computers around the world, but there’s much more to this global, high-tech giant.
Besides its famous personal computing division, which includes the Windows platform, the gaming platform Xbox and other related hardware and software, MSFT operates a huge cloud computing segment. Its premier cloud-based offering is called Microsoft Azure, and it’s a leading and fast-growing enterprise platform that functions and stores data in the cloud.
MSFT has a third segment called Productivity and Business Processes. This division encompasses the popular business social network Linkedin and Microsoft Office line of productivity applications.
When new investors invest in MSFT, they’re investing in a company that’s on the forefront of technology and innovation.
American Water Works Co. Inc. (AWK)
With a market cap of about $25 billion, AWK is the largest publicly traded water services utility in the U.S. The company provides water and wastewater services in 1,700 towns and cities across 14 states and to 18 military installations.
This Camden, New Jersey, company runs 80 surface water treatment plants and more than 500 groundwater treatment plants. It owns and maintains over 53,000 miles of collection and distribution pipelines, 1,200 wells and 1,700 pumping stations. And that is just a sample of its facilities and capacity.
Water is not a discretionary consumer good: It’s a fundamental necessity. That’s why Wall Street is looking for $4.48 billion in revenue from AWK in 2024 and expects that number to grow over 6% to $4.76 billion in 2025.
On top of the growth potential, investors can bet on a forward dividend of $3.06 a share, which equates to a yield of 2.4%.
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7 Best Stocks for Beginners With Little Money originally appeared on usnews.com
