Sure, every financial planner knows that low-cost index funds offer a preferable way to achieve long-term wealth, while generating an expected return and managing risk.
But even young investors who contribute regularly to a 401(k) can use single stocks to learn about the markets.
“For most new investors with limited dollars, the real unlock isn’t finding the perfect stock. It’s building the habit and learning emotional discipline,” says Reggie Fairchild, a certified financial planner (CFP) and president of Flip Flops and Pearls in Mount Pleasant, South Carolina.
Fractional shares and automatic transfers make that possible, he adds. By starting small, adding consistently and managing emotions about gains or losses, new investors can hone their skills.
Gradually Accumulating Shares
“We have a client in their 20s who started about a year ago and committed to investing $50 every week,” Fairchild says. This investor set up automatic transfer to buy individual stocks, adding more money when the chance arose.
“Then came the useful part: They rode a couple of positions that were up about 50% for too long and watched those gains fade,” Fairchild says. “That prompted better questions about valuation, risk and seeing when a great company can still be a poor investment if the price is too high.”
That client’s account value is about $5,000 now, he says. Longer term, he adds, newbies, along with more seasoned investors, may find low-cost index funds provide better results.
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“But when they’re getting started, some investors find individual stocks more compelling,” he says. Here are five stocks that new investors might consider:
| Stocks | 3-Year Performance (Annualized)* |
| Amazon.com Inc. (AMZN) | 34.9% |
| Dutch Bros. Inc. (BROS) | 21.0% |
| SoFi Technologies Inc. (SOFI) | 63.9% |
| Comcast Corp. (CMCSA) | -5.1% |
| MercadoLibre Inc. (MELI) | 25.0% |
*Average annual performance over a three-year period as of Jan. 23.
Amazon.com Inc. (AMZN)
Consumers know the S&P 500 component as a place to buy stuff, or maybe to stream TV shows. But there’s much more to the company.
“Amazon is often a first stock for beginners because fractional shares make a high-priced company accessible, says Mark Damsgaard, founder of Dubai-based Global Residence Index, an investment migration firm. “Beyond e-commerce, its strength is diversification through cloud computing, logistics and subscriptions, which can help reduce volatility over time.” He adds, “For new investors, it is a good example of buying into a broad business ecosystem rather than a single product.”
Dutch Bros. Inc. (BROS)
This coffee chain went public in 2021, so still qualifies as a new stock. Its three-year revenue growth rate is 25%; earnings grew 72% in that time. Analysts expect double-digit top- and bottom-line increases in the next two quarters.
“However, the stock’s price has been pretty volatile lately, given the rising price of coffee, says Anthony Termini, senior analyst at stock analytics platform EPSMomentum in New York.
“The timing momentum may not be in the sweet spot,” he adds. “Still, for a new investor, a long-term horizon often cures poor timing, especially if the investor dollar-cost averages by making regular periodic additional investments.”
[READ: How to Pick Stocks: 5 Things All Beginner Investors Should Know]
SoFi Technologies Inc. (SOFI)
The fintech company, which offers banking, loans, credit cards, insurance and an investing platform, is also fairly new, having gone public in December 2020.
Termini notes that this stock has high earnings momentum, which could be confirmed when it reports fourth-quarter results on Jan. 30. Analysts expect earnings of 12 cents a share on revenue of $977.4 million. The company has topped earnings estimates in each of the past five quarters.
“The stock has pulled back a little after hitting a recent 52-week high,” Termini says. This is another case, he says, where a patient, long-term investor may not have perfect timing momentum, but an earnings pop could deliver a solid entry point.
Comcast Corp. (CMCSA)
S&P 500 stock Comcast is a mature, cash-generating business. With a market capitalization of more than $107 billion, it’s among the largest components of the S&P communications services sector.
While new investors are often more focused on growth than income, Comcast has been a steady dividend payer, increasing its shareholder payout for 18 years in a row. “It is useful for beginners learning about dividends, steady cash flow, and how media and broadband revenues work together,” Termini says.
Fractional shares allow investors to add stability to a portfolio without a large upfront investment, he adds.
MercadoLibre Inc. (MELI)
Earnings at the Latin American online marketplace have been up and down lately, although sales have been increasing at rates of 34% or higher in each of the past eight quarters. Analysts’ consensus rating on the stock is “buy,” with a 12-month price target of about $2,841 as of late January, according to FactSet data.
This is a case where investors with little money can take advantage of fractional shares, or simply purchase a small number of shares.
“MercadoLibre is often overlooked by beginners, but it offers international exposure through a single company,” Damsgaard says. “For small investors, it shows how one stock can provide geographic diversification.”
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5 Best Stocks for Beginners With Little Money originally appeared on usnews.com
Update 01/26/26: This story was previously published at an earlier date and has been updated with new information.
