You have a brokerage account set up. You’ve deposited money and the cash is just begging to be used. What are the best stocks for beginners to start buying?
First, let me say that we cannot tell you what to buy. This article will mention some stocks, but they are not recommendations. Take these as suggestions for further investigation.
Do your own due diligence and be comfortable with your own reasons for buying any stock.
And when you do find companies you like, think about how much you want to invest. Maybe don’t go all in right away. Buying shares at regular intervals, or at levels you are comfortable with could position you to best take advantage of this market crash.
With all of that said, let’s look at stocks that are easier to understand, and may be less stressful for beginners to hold.
Let’s dive in…
Index ETFs for beginners
Warren Buffett says that it’s hard to go wrong investing regularly in S&P 500 index funds.
If you aren’t sure what index funds are, we explain them more in detail here.
The most popular index fund is the $SPY, the original S&P 500 ETF (Exchange Traded Fund). It’s grown 66% in the last 5 years, and that’s after a massive downturn in the last few months.
$SPY 5 year chart
The $SPY is only traded in USD. If you’re looking for an S&P 500 ETF in CAD, start by investigating the Vanguard ETF, $VFV.
Current price (06/09/2022) for $VFV is $90.76 and it’s grown 58.37% over the last 5 years. Not quite as good as its American counterpart, but still a respectable return.
There hundreds of other indexes and ETFs that you can investigate though. The S&P 500 just collects the 500 biggest companies on the market and tracks them.
If you want to get into other sectors specifically, like biotech, commodities, real estate, or whatever you’re interested in, there’s an ETF for it somewhere.
FAANG+M stocks for beginners
Facebook, Apple, Amazon, Netflix, Google and Microsoft are the FAANG+M stocks. These companies have the biggest market caps (or they used to) and are extremely popular.
When one of these companies moves hard and fast in any direction, they pull the market with them.
They are not as reserved or “safe” as index funds or bank stocks. But these companies are so pervasive in our everyday lives that it would take a lot to kill them.
Here is a chart of the FAANG+M 5 year stock performance. We’ve left $SPY in there as well for reference.
FAANG+M 5 Year performance
| Stock | Current Price (06/09/2022) | 5 Year Performance |
| $AAPL | $142.64 | 296.17% |
| $MSFT | $264.79 | 284.14% |
| $GOOG | $2296.71 | 152.92% |
| $AMZN | $116.15 | 139.98% |
| $NFLX | $192.77 | 29.02% |
| $META (Facebook) | $184.00 | 21.87% |
A couple of important notes:
- $AMZN just went through a stock split. It used to cost $2400 per share before their 20/1 split. $GOOG also has a 20/1 stock split coming up on July 18th.
- $NFLX took a big hit on their last earnings report, losing around 50% of its value and nearly wiping out all of its 5 year gains. Some wonder if it holds the same influence in the market now like it used to.
- Investing heavily in FAANG+M leaves you extremely vulnerable to the tech sector. Buying companies outside of tech will help you diversify your portfolio, protecting your money if tech companies collapse.
Canadian bank stocks for beginners
If you’re looking for slow and steady, Canadian banks are considered some of the most reliable stocks to own.
The big five are: Bank of Montreal ($BMO), Toronto Dominion ($TD), Royal Bank of Canada ($RY), Canadian Imperial Bank of Commerce ($CM), and Scotiabank ($BNS).
As you can see in the chart below, they haven’t performed quite as well as the $SPY. Banks aren’t known for their price growth, though. Many investors buy bank stocks for their dividends and steady performance over time.
For beginners, they might be attractive if you’re looking for less stress than even the $SPY.
Canadian Bank Stocks 5 Year Performance
| Stock | Current Price (06/09/2022) | 5 Year Performance |
| BMO | $134.63 | 44.83% |
| TD | $93.27 | 43.38% |
| RY | $130.93 | 39.96% |
| CM | $68.53 | 28.66% |
| BNS | $83.32 | 6.93% |
What do I do with this information
If you like these stock ideas, research them further. Do your own due diligence before buying anything.
Maybe you like the idea of ETF investing, but you want to find some funds that are dedicated to paying consistent dividends.
Maybe you like the FAANG+M stocks and want to learn why they’re so popular.
Maybe you find the Canadian banks to a less stressful investment than the FAANG+M or indexes.
Hopefully these ideas spark further curiosity in you.
And if you’re really curious about how to augment your returns, you could read through our Options for beginners series. Maybe options are more your speed.
That’s all for now.
Happy trading,
Your fellow Stock Hackers,
🍒Cherry & Erwin
