The best stocks to trade as a beginner

From Disney to Apple, we present our point of view for the best stocks for beginners investors to buy.

Just over a year ago, the S&P 500, which is the benchmark index for US stocks. Reached a low point of 2,237 mainly due to Covid-19 but roared back to levels above 4,200 recently.

In other words, the share price of the 500 largest US companies increased more than 80% in the last 12 months. All this despite the Coronavirus still not being under effective control. 

Many equity fund managers and retail investors have been able to reap profits from this impressive run in the stock market. However, for beginners who are only now deciding to go into the stock market. The questions which are probably foremost in their minds are:

  • Has the stock market peaked?
  • Should I wait or should I proceed with investing just in case the stock market continues to shoot up?

The answer may be surprising, but according to experienced investors, it is ALWAYS a good time to invest.

This is because, in the long run, money invested in the stock market is likely to result in profits. In fact, the stock market has been going up consistently in the long run for decades

Although there may have been bear markets and periods of price consolidation which have lasted several years but each and every time the market has recovered and gone on to go higher. 

Important Factors to keep in Mind for Beginner Investors

Have a long term view: Even if the prices come down over an extended period of time, history has shown that the market will recover eventually.

Invest consistently 

An important aspect for considering the best stocks for beginners is to Leverage the power of compounding. Long-term, regular investments into the stock market, irrespective of its level will result in compounding returns. 

However, investing in the stock market can still be daunting for beginner investors, especially when losses are incurred at the very beginning of their investing venture. There is always the risk of losing money. However, if beginner investors invest consistently and persist in the long-term, they will most likely make a profit.

Related: Everything You Need to Know Before Trading Stocks on MT5

That means: Initially do not try to time the market 

The reason why investors looking for the best stocks for beginners should not try to time the market is that it is very difficult to predict. Even the most experienced and knowledgeable investors have to work hard to predict the stock market in the short term with accuracy and consistency.

Even then they will not always be right.  Investors have to accept the fact that it takes time and practice to develop the skills needed.

From identifying securities that may perform well over the long run to reacting positively to a short-term catalyst.  Anyone that says they know exactly how the stock market will perform tomorrow or the next day. Is leading you astray.

Although it is difficult to predict the stock market at first. It is useful to try to understand the nature of stocks and have an understanding of why stock prices would go up or down.

A big determinant of stock prices is the expected future earnings of the company. Therefore, an investment into the stock of a company is an investment into the future prospects of that company. 

Beginner investors should do research on and make a list of companies with business models they are able to understand. And have a good earnings track record and future potential.

For example:

This is not advice to buy or sell an investment, Apple (AAPL) or Amazon (AMZN) would likely be included in the list because both of these stocks are relatively straightforward investments.

Their businesses are mature and these companies provide the services which many investors would use themselves. The earnings of these companies are therefore visible and the historically competent management of the company and its businesses is probably going to continue.

As beginner investors gain more experience and knowledge of the markets, they might start to consider going into more speculative stocks which have higher potential returns but of course carry higher risk.

Stocks such as Tesla (TSLA) and Netflix (NFLX) have had very strong price growth of late, as have some other tech companies as these are considered to be stocks of companies that are very likely to experience high growth in the future.

Penny Stocks – a Word of Caution

In the quest for potential value and the best stocks for beginners, they inevitably stumble upon penny stocks. Penny stocks typically refer to stocks of small companies that trade for $5 or less. Some investors like to invest in penny stocks as they offer tremendous potential for growth, these stocks normally are highly speculative at best and may not even trade on recognized exchanges.

While these penny stocks may look cheap at 10 to 20 cents a share or less. A small company with a shaky track record can disappear overnight. Effectively wiping out all of the gains achieved in your portfolio as a whole.

Although 5,000 shares at $0.20 each can be bought with just  $1,000. It doesn’t mean this is better value than purchasing 15 to 20 shares of a stock priced at $60. What matters when it comes to making money in the stock market is not how many shares you own. It’s how much each share increases in value over time.

Best Tips for Beginner Investors

The best tip you can get as a beginner investor is to do your due diligence regarding Best Stocks for Beginner Investors. If you want to get into the investment business. Just like with any business, do your research, and seek advice from experts.

Open an account with an investment broker that gives you personalized service and is truly invested in helping you succeed.

There are plenty of options out there to open an account and start investing. However, as a beginner. It might be a good idea to open a demo account and get some practice and experience.

You can get into a social trading so that you can learn from experienced investors as you see their real moves and tactics.  TradeGATEHub sponsored by Tradeview Markets is a great starting point for news and information on the trading world.

Remember, the best way to learn to trade is by opening up a demo account and play around with the Best Stocks for Beginner Investors.

Jin Yau

Country Manager