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A guide to stocks and shares for beginners in 2020

Enumerating the best stocks and shares for beginners this year and beyond is no small task given that this is a topic that requires a lot of details. Focusing on what you should be looking for will help you narrow down the right stocks and shares to invest in out of the many companies that offer these assets. Knowing what to look for will also protect your capital as well as helping you find stocks and shares that suit your risk tolerance.

  • Stocks and shares for beginners
  • What to look for
  • Making money out of stocks
  • Stocks and shares simplified

Stocks and shares guide

If you’re just starting out, you might need the definition between stocks and shares explained. The terms are often used interchangeably in today’s financial markets, but it is important to reiterate what makes one different from the other to avoid any confusion later on. If you have stocks, it means you have ownership certificates of particular companies in your possession, and if you have shares, this translates to ownership of a particular company. This basically means that you can’t have stocks if you do not own shares. When you own stocks and tell someone that you own stocks, using that word in particular, you are basically saying that you have ownership certificates of one or more companies. It can mean you have stocks in Company A, B and C or even more. If you tell someone you have shares, that individual will likely ask you which company you have shares in. You will likely answer that you have shares at Company A, B or C. While there are also other definitions of these two terms, the explanation in this section gives you a general idea on how these specific words are being used today. The bottom line is, stocks and shares are inherently the same with the distinction between the two rather minor. That distinction is often overlooked and rightly so because it basically has more to do with how they are used in a sentence and has nothing to do with legal or financial accuracy.

Top 3 Stock Broker Comparison

1
of 12 Stock Broker TD Ameritrade
National fees $6,95
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 12 Stock Broker Charles Schwab
National fees $4.95
Custody fee $0
Intl. fees $4.95
Dep. Protection USD 500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 12 Stock Broker Fidelity
National fees $4,95
Custody fee $0
Intl. fees $4,95
Dep. Protection $500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Familiarity is key

Investing in stocks or buying shares is often associated with a certain degree of difficulty, especially when it comes to picking the right companies or even industries to invest in. The key to being successful in this particular market is putting money in companies with solid performance in the past few years, decades or even centuries. It’s important to pick companies with a good track record, and often, companies that fit this criterion are brands you have been using or companies that produce or own said brands. When you look at a billboard, you’ll likely see your favorite food chain or a well-known fashion house that has been around for decades. You can even buy stocks from the company that produces your coffee, milk or tea. Your options are endless, but before you put money into a company, be sure that you’ll be in it for the long haul. With that said, it’s recommended to choose the best of the best instead of putting money into new and unknown companies. As a beginner, you will still working on your trading strategies. Be mindful of the fact that you won’t be spending a lot of time on your computer researching about the best stocks to buy. This will translate to buying shares in a company with a straightforward business model and one that is recognizable. This will simplify the process of choosing which stocks to buy and how many shares to get in a particular company.

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Making money out of stocks

The previous paragraph focused on picking the right stocks, which is information that every beginner must take to heart and always remember. While this is extremely important, one detail must also be kept in mind – making money out of stocks is not about buying and selling them. In the words of Benjamin Graham, “The real money in investing will have to be made – as most of it has been in the past – not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.” Most investors refer to this strategy as buying and holding stocks or simply buying and holding. The focus on returns goes hand in hand with investing for the long term. This means that you need to hold your stocks for five years at the very least while keeping in mind the metrics mentioned above. To summarize: new investors must choose well-run companies with good track records and hold those stocks for at least five years. It is also of importance to find out whether these companies have good shareholder management practices. To illustrate this further, high-profile investors such as Charlie Munger and Warren Buffett held onto their stocks for over 25 years, sometimes even over 50 years to make money. Doing the same thing will help you amass wealth.

Remember to always diversify

Diversifying your portfolio will help protect your capital. If you are planning to invest in technology, for example, you should also invest in other industries. In fact, you can even have a mix of different stocks from tech giants, reputable mining companies, transportation companies, food, oil and the like. Experts always advise new investors to diversify – this means spreading your investments so that your exposure to problems that may come in any industry’s way is limited. Doing this will help reduce your portfolio’s volatility over time as balancing risks and rewards will protect your assets. If you invested in trains and only trains, your stocks will be affected by travel issues or any problems that may arise in the industry. However, if you invested in train companies as well as airlines, you won’t suffer the same exposure because even if your train stocks are down, your plane stocks are up. This example is rather simple, but it is the kind of balance that diversification gives you. It basically mitigates risk and can reduce the severity of losses. You can lose $100 in one of your investments but gain $200 in another. While diversification does not ensure full protection, applying it will make your portfolio less vulnerable.

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What to keep in mind

  • Pick the best in breed – Choose companies that are the best in their fields. For most industries, recognizable brands are crucial when selecting stocks. For example, instead of putting your money in an unknown soda brand, opt to buy shares from Coca-Cola and perhaps add a few shares from Pepsi or Dr. Pepper.
  • Diversify to protect and grow your assets – Always exercise balance to mitigate risks. You can do this by buying shares from McDonald’s and from Altria, Marlboro’s owner, for example. You can also add a few others, from tech companies to defense companies and even clothing manufacturers.
  • Buy, hold and think long term – Take the example of retired IRS agent Anne Scheiber. She built a portfolio worth $22m because she invested $5,000 for over 50 years. Another example is Grace Groner, a retired secretary. Groner had three $60 shares in the year 1935, which later grew to $7m.
  • Buying stocks is buying a piece of a company – A company can cut its shares of stocks into smaller pieces to make them affordable, but no matter how small this piece is, buying it still means you own a portion of that company.
  • Understand the whole picture – Go back to the basic topics about stocks and shares for beginners. Understand how everything works without making it more complicated than it should be. You should never forget how every rule above fits in the bigger picture.

Where does the money come from?

You will see broker comparison sites telling you that investing in a particular stock will give you profit, but explaining how you will get that profit is a topic that many of them skip. Your profit will primarily come from an increase in the price of your shares and getting dividends. Increase in prices happens over the long term. The business you invested in may have started expanding, and once this progresses, the shares you have will grow. If you invested $10 in a particular wine company and that business grew by 20% because of expansion, you would stand to make a sizeable amount. If you invested in a company that offers dividends, you would be receiving cash for said dividends via the mail or even a direct deposit to your account. You can set aside your dividends for additional stocks or use them however you want. With all of this in mind, it is beneficial for you to hold on to your stocks if the companies you invested in have a history of solid performance. While past performance in the stock market is never a guarantee, your chances of increasing your money is a lot higher than investing in firms that do not fit the metrics previously discussed.

 

1
of 7 Forex Broker Forex.com
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 50
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Forex Broker TD Ameritrade
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Forex Broker Interactive Brokers
Currency pairs 100 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 10.000
Go to Forex.com
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Forex Broker Oanda
Currency pairs 60 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
Go to Forex.com
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Forex Broker Ally Invest
Currency pairs Currencies
Max. Lever
Trading size Micro-Lot
Minimum deposit $
Go to Forex.com
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 ETF Broker Wealthfront
ETFs w/ discount
Custody fee 0,25%
Min. deposit $ 500
Trading from $0
Go to TD Ameritrade
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 ETF Broker Vanguard
ETFs w/ discount 1800
Custody fee $20
Min. deposit $ 1
Trading from $1
Go to TD Ameritrade
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 ETF Broker Charles Schwab
ETFs w/ discount 250
Custody fee $1
Min. deposit $ 1.000
Trading from $1
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 ETF Broker Robinhood
ETFs w/ discount 3,000
Custody fee $0
Min. deposit $ 0
Trading from $0
Go to TD Ameritrade
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 ETF Broker Betterment
ETFs w/ discount 0
Custody fee 0.25%
Min. deposit $ 0
Trading from $0
Go to TD Ameritrade
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 12 Stock Broker TD Ameritrade
National fees $6,95
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 12 Stock Broker Charles Schwab
National fees $4.95
Custody fee $0
Intl. fees $4.95
Dep. Protection USD 500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 12 Stock Broker Fidelity
National fees $4,95
Custody fee $0
Intl. fees $4,95
Dep. Protection $500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 12 Stock Broker ETRADE
National fees $6.95
Custody fee $0
Intl. fees $6.95
Dep. Protection USD 500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 12 Stock Broker Interactive brokers
National fees $0.005 per share
Custody fee 0
Intl. fees $0.005 per share
Dep. Protection up to $30 million and $1 million cash (SIPC and Lloyd’s)
Go to TD Ameritrade
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 7 Crypto Broker Coinbase
Crypto currencies 8
Max. Lever 1:1
Min. deposit $ 50
BTC spread 0,5%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Crypto Broker Forex.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 10
BTC spread 60
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Crypto Broker TD Ameritrade
Crypto currencies 1
Max. Lever 1:1
Min. deposit $ 0
BTC spread 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Crypto Broker Coinmama
Crypto currencies 6
Max. Lever 1:1
Min. deposit $ 0
BTC spread 5,9%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Crypto Broker Cex.io
Crypto currencies 8
Max. Lever 1:1
Min. deposit $ 0
BTC spread 0,2%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Stocks and shares for beginners: Brand breakdown

The following are some of the most well-known and well-performing brands.

  • Amazon – This multibillion-dollar company has high-value stocks that are predicted to go higher in years to come. Apart from online retail, the company has started expanding its services in the US as well as around the world.
  • Coca-Cola – This company has been around for a long time, and its stocks have been performing well for ages. It maintains a superior balance sheet, enjoys market leadership and global presence.
  • Disney – The entertainment giant owns the happiest place on Earth among other well-known brands such as ESPN, ABC, Marvel, Star Wars and more. Disney is not going away any time soon, so investing in it is a fine idea.
  • Apple – The tech giant offers dividends to its stockholders. It enjoys a cult following around the world and is a market leader in the smartphone and computer business.
  • IBM – Founded in 1910, IBM is still one of the most well-known brands around. The dividend yield from the company is an estimated 4.11%.
  • Verizon – With an estimated yearly revenue of $125.98bn and a dividend yield of 4.73%, the phone service provider is often included as a top pick for new investors.
  • General Electric – This company has a dividend yield of 3.9%. Despite being around for over a century, the brand is still one of the best in the business.

Conclusion:

Conclusion

So, there you have it: stocks and shares explained. Investing in any company always involves risks, but if you follow the metrics shown above, you will be able to make a bit of money from your stocks. It is important to take a look at the projections of the company before you put your money into it along with other measures to see if particular stocks fit in the criteria previously discussed. While using all these metrics is not a guarantee of success, there is one important thing to remember. If you have already invested in a number of companies with good industry track records, then all you need to do is hold those stocks long enough for them to make money. Investing in stocks, after all, is not about instant gratification. It is also a good idea to get advice from an investment professional so that you have a clearer view of what lies ahead when it comes to the stocks you are interested in. You can also supplement your knowledge by reading additional materials on trading strategies, trending stocks and the different schools of thought about stock trading.