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Best Stocks for Beginners

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

Just over a year ago, the S&P 500, the benchmark index for US companies, fell to a low of 2,237, owing primarily to Covid-19. However, it has recently soared back to levels above 4,200.

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, many new investors missed out on these big bull market runs. A lack of expertise and an active network of professional investors with whom they could exchange ideas were probably contributing factors.

The questions which were 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 surprise you, but experienced investors believe that it is ALWAYS a good moment to invest. This is because money invested in the stock market is likely to yield gains in the long run. In fact, the stock market has been steadily rising over the long term for decades.

Of course, there have been bear markets and multi-year periods of price consolidation. However, each time the market has recovered and continued to rise.

If you are considering getting involved in the markets, there has never been a better time than now. Most market experts agree that investing in the markets is the best way to build long-term wealth. 

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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. The risk of losing money is always there. 

Having said that, research shows that long-term investors who develop a well-diversified portfolio are more likely to build wealth.

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

Don’t 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.

Trading in Stable Companies

Investing in stable, well-known companies like Apple (AAPL) or Amazon (AMZN), can make sense for most people. These are highly-recognized companies that generate an enormous amount of revenue. Investing in these larger and more reliable corporations is often regarded as a safe and straightforward investment.

Their firms are established, and they offer services that many investors would use themselves. These companies’ earnings are so apparent, and the company’s and its businesses’ historically excellent management is likely to continue.

As beginner investors gain more experience and knowledge of the markets, they might start to consider going into more speculative stocks. While they may seem to offer the potential of higher returns, they also carry greater risk. 

Stocks such as Tesla (TSLA) and Netflix (NFLX) have had very strong price growth of late. The same can be said of other tech companies. This sector is widely-regarded to include 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. 

Many investors prefer to invest in penny stocks because they have a high potential for growth. At best, these stocks are very speculative, and they may not even trade on recognized exchanges.

They believe that investing in tiny caps will allow them to gain a lot of money rapidly. This is not always the case, however. The vast majority of small-cap stocks do poorly. More than 80% of them lose money.

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.

Investing in stocks traded on large exchanges, on the other hand, is far better. These stocks are far more likely to rise in value over time. 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.

Most Common Investing Mistakes

It is generally known that simply saving money is insufficient. You must invest your money in order for it to work for you. Many people opt to invest in stocks in order to increase their wealth. 

However, there are risks associated with stock trading. Many rookie blunders can be costly. Let’s examine some of the most common beginner stock trading mistakes and how to avoid them. 

  1. Not doing your homework: Inexperienced stock traders frequently make the mistake of not conducting enough research. Before purchasing any stock, it is critical to conduct research. When trading online, you will have access to a wealth of information.

    You must evaluate the company’s financial statements as well as the overall performance of the sector. You might also study the analyst reports to find out what the experts think about the stock.

    One of the worst mistakes you can make when trading stocks is not doing your research. If you don’t know what you’re buying, how can you possibly expect to turn a profit?
  2. Failure to diversify: One of the most fundamental parts of investing is diversification. Despite this, many inexperienced stock traders fail to diversify their portfolios.

    Diversification reduces risk, which is why it is critical. Investing in numerous equities minimizes the likelihood of losing all of your money if one of them fails.

    A well-diversified portfolio should have a balance of domestic, international, and large-cap equities. Additionally, having a mix of growth and value stocks might be beneficial.
  3. Letting your emotions get in the way: Many first-time stock traders make the mistake of being overly emotional about their trades. They grow overly connected to their stocks and continue to keep them even though it is evident that they will lose money.

    It’s important to remember that stocks are just pieces of paper. They are not worth your emotional investment in them. It is advisable to sell a stock if you feel yourself becoming extremely emotional about it. It is pointless to hang on to a losing trade.

For a more in-depth look at common beginner trading mistakes take a look at this video

These are just a few of the most common beginner stock trading mistakes. You will be well on your way to financial success if you can avoid these pitfalls. Remember to conduct thorough research before investing in any stock and to make sound decisions.

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 have a successful trading career, you must conduct research in the same way that you would in any other industry. It’s also a good idea to seek advice/mentorship from experienced investors with a track record of success.

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 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 playing around with the Best Stocks for Beginner Investors.

Tradeview Ltd. is not a portfolio manager or an investment advisor. This Market Report is for informational purposes only. Any statements made or opinions voiced in this Market Report do not constitute investment advice. The Tradeview Ltd. Market Report does not constitute a solicitation to buy or sell in the financial markets. Although the information contained in the Market Report comes from trusted sources, Tradeview Ltd. is not responsible for guaranteeing the accuracy, timeliness, completeness, or fitness of such sources. Tradeview Ltd. shall not be responsible for and disclaims all liability for any losses which may be suffered from access and use of the contents of the Tradeview Ltd. Market Report. Trading any financial instrument on margin, using leverage or otherwise involves considerable risk. Therefore, before deciding to participate in any style of trading, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. Consulting with your investment counselor, attorney, accountant or other professional upon whom you rely for guidance as to the appropriateness of an investment in any style of trading is recommended.

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