Investing can be a daunting endeavor, particularly when you’re just beginning. The sea of stocks to choose from, the financial jargon, the fear of making the wrong decisions – it can feel like an overwhelming puzzle with countless pieces to fit together.
That’s why you’re on the hunt for the best beginner stocks to buy. And today, we’ll help point you in the right direction to uncovering the best stocks to invest in as a beginner trader.
But the truth is, these are the same principles we advise seasoned traders to follow as well. Because regardless of your experience in investing, there are 3 important guidelines that are the key to consistent profits and minimal losses.
Whether you’re just getting started with swing trading for beginners, investing for income in retirement, or considering trading options, every journey in investing begins with a single step – finding the best stocks.
But herein lies the paradox: What does ‘best’ even mean in the context of stock investing, especially from a beginner’s standpoint? And, are there really stocks that are better suited for beginners?
Let’s start our conversation there. Then, we’ll set you up for success as you set out on this journey to finding the best beginner stocks to buy.
Are There Really “Best Beginner Stocks to Buy”?
You came here searching for the best stocks to invest in as a beginner. But does such a thing even exist?
It’s a valid question that deserves a closer look. After all, the foundation of your investing journey is built on the stocks you choose to invest in. Let’s delve into this query and demystify the notion of the “best” beginner stocks.
The Myth of “One-Size-Fits-All” Beginner Stocks
To begin with, it’s crucial to debunk a common myth in the investing world – the concept of “one-size-fits-all” beginner stocks. While it might be tempting to believe there’s a list of magical ‘starter’ stocks that are perfect for all novice investors, this isn’t quite accurate.
Why, you ask? Simply because every investor is unique, with different financial goals, risk tolerances, and investment time horizons. The best stock for one beginner might not be the same for another.
Imagine two beginner investors: One is a recent college graduate who’s starting to build her retirement fund, while the other is a 40-year-old who’s looking to earn supplemental income in the here and now.
Although both are beginners, their investing goals and the time they have to reach those goals are vastly different. Thus, a stock that might be suitable for the young graduate might not necessarily be the best choice for the middle-aged parent looking to offset some bills with day trading or swing trading strategies.
So, we need to talk about personal investment goals and risk tolerance before going any further.
The Importance of Personal Investment Goals and Risk Tolerance
This brings us to a crucial aspect of investing – understanding your personal investment goals and risk tolerance.
Are you looking for stable long-term growth, or are you more interested in taking risks for the potential of higher short-term returns?
How much volatility can you stomach?
How long can you afford to have your money tied up in investments?
Your answers to these questions will have a significant impact on the types of stocks that would be best for you as a beginner.
If you’re seeking stability and have a low risk tolerance, you might lean towards blue-chip stocks – large, reputable companies that are known for their reliability and regular dividend payouts.
On the other hand, if you have a higher risk tolerance and are seeking potential for rapid growth, you might explore sectors like technology or biotech, where stocks can be more volatile but offer high potential returns.
In essence, there are no universal “best stocks to invest in as a beginner”. The ‘best’ stocks for any beginner will depend on their unique personal circumstances, financial goals, and risk tolerance. This might sound complex, but don’t worry – tools like VectorVest, the best stock analysis app, are designed to simplify this process.
VectorVest’s robust platform allows you to input your personal investment preferences and then uses powerful algorithms to identify the stocks that align with your goals and risk profile, taking much of the guesswork out of the process. So, let’s take a look at how you can use it to find the best beginner stocks to buy.
How to Find the Best Stocks to Invest in as a Beginner: 3 Rules to Follow as a Beginner or Veteran Trader
Whether you’re a beginner wondering how to find stocks for swing trading or you’re simply wondering where to put retirement money after retirement, there are 3 basic rules you can fall back on to help you pick the right opportunities.
And the best part is that with our stocks software, implementing these principles into your trading strategy is as simple and straightforward as it gets. The system tells you what to buy, when to buy it, and when to sell it – based on these rules.
That being said, let’s start with a quick word on setting your expectations as a beginner investor looking for the “best stocks”.
First, a Quick Word on Setting Your Expectations as a Beginner Investor
It’s essential to understand that the world of investment is a vast and complex one, and even the most experienced investors sometimes make wrong choices. In fact, one of the most significant barriers to finding successful stocks is that no stock-picking system is flawless. Yes – even the one we’ll share with you today can fall short sometimes.
This is because systems are subject to a variety of variables, from market volatility to unforeseen economic events, that can influence a stock’s performance. Even Warren Buffett, one of the most successful investors of all time, occasionally makes less-than-perfect decisions.
So how can you navigate this unpredictable landscape as a beginner investor? The key is to manage your expectations and develop an investment strategy that aligns with your financial goals and risk tolerance.
As we progress this conversation to help you figure out how to find the best beginner stocks to buy, understand that while the goal is always to earn high trading profits, you will take losses here and there. The goal is to keep those losses small and infrequent.
That being said, following the 3 rules below will go a long way in helping you earn realistic swing trading returns on a consistent basis.
Look For Stocks That Are Undervalued
Identifying undervalued stocks is a key skill in investment and one that can be developed with practice and patience. These are stocks that are priced below their true intrinsic value – essentially, you’re getting more than what you’re paying for.
Why favor undervalued stocks, though? Investing in undervalued stocks decreases the risk of losses and higher probability of achieving gains, making them an attractive option for both new and experienced investors.
The first step in uncovering undervalued stocks is understanding a company’s fundamentals. Look for companies that are profitable, ideally with double-digit earnings growth rates. Consider stocks from companies that consistently increase their earnings quarter after quarter, year after year.
You can also calculate the stock’s intrinsic value. This is based on a company’s earnings growth rate, profitability, and other financial metrics. If a stock’s intrinsic value is higher than its market price, then it may be undervalued and, hence, a candidate for selection.
But really, it can be a lot easier than this when you learn how to analyze stocks with VectorVest. Because rather than spending hours digging into financials or calculating value, you’re given insights at a glance.
The relative value (RV) rating offers a quick look at the long-term price appreciation potential for a stock. It’s a comparison between a stock’s 3-year price projection and AAA corporate bond rates and risk. Interpreting it is quick and easy, as it sits on a simple scale of 0.00-2.00 – with 1.00 being the average. Stocks with RV ratings above the average have solid upside potential, and vice versa.
But, truthfully, it gets even easier. Because VectorVest also tells you whether a stock is undervalued, overvalued, or fairly valued – at any given time. That being said, getting a good grasp of a stock’s value is just one piece of the puzzle.
Lean Toward Safer Stocks
Not all stocks are created equal, and some come with less risk than others. While it might be tempting to invest in stocks making headlines for their high volatility and potential for quick profit, these are often the ones that pose the greatest risk.
Instead, lean towards safer stocks – those with a track record of steady earnings performance. These stocks may not make the news every day, but their consistent growth can lead to reliable returns.
Price volatility and risk can come from various sources, such as political instability, natural disasters, or mere rumors. Companies with erratic earnings records tend to suffer more when the market hits a bump, while those with steady, predictable earnings can weather these storms better.
Analyzing the risk factors of a stock before investing is crucial. Holding stocks of financially stable companies means less risk and, consequently, a more secure investment. And again, you can rely on the best swing trading platform for help here – we have another intuitive rating that makes assessing risk simple and straightforward.
The relative strength (RS) rating is derived from a detailed analysis of a company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. Like the RV rating, it sits on a scale of 0.00-2.00 – allowing you to quickly determine just how safe the stock is.
Or, you can rely on the comfort index – a rating that speaks to a stock’s ability to withstand severe or lengthy price declines. It’s based solely on the stock’s price history, as history tends to repeat itself in the stock market.
Find Stocks That are Rising in Price
The third rule to consider is to favor stocks with rising prices. While it may feel counterintuitive to buy a stock as its price is increasing, this strategy can often lead to better outcomes. This is where market timing strategies come into play – helping you get in and out of a stock at the right time. But, we’ll talk more about managing your position later on.
Many investors miss out on excellent opportunities because they wait for a stock to decrease in price before buying. The issue with this approach is that high-performing stocks often don’t fall significantly once they’ve begun their upward trajectory.
Buying stocks on the way down can be a risky gamble, often based more on hope than on a strategic investment plan. Conversely, buying stocks with rising prices can offer several advantages. Firstly, a stock that is rising in price is already performing as you want it to.
Identifying when a stock has hit bottom and begun to rise can be challenging but is essential for this strategy. Remember, owning stocks with rising prices is a dependable way to secure returns on your investment. This is known as buying the dip – and it’s something that our software can help you with.
Relative timing (RT) is the third rating VectorVest’s proprietary stock rating algorithm is based on. The rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It shows you not just which way the stock’s price is trending – but how strong that trend is.
And, it’s taken day over day, week over week, quarter over quarter, and year over year to paint the full picture for you. It sits on the same simple scale as RV and RS, with 1.00 being the middle ground separating positive and negative price trends. In a sense, finding stocks that are rising in price is as simple as filtering your search by stocks with the highest RT ratings.
To summarize, always remember these three rules: Choose safe, undervalued stocks that are rising in price. With these guidelines, you’ll be well on your way to creating a solid investment strategy.
But, finding the best stocks is just step one. Finding your specific entry and exit points is where the real challenge begins…
Beyond Finding the Best Beginner Stocks to Buy, Here is Some Advice on Timing and Managing Your Position
So you’ve found your best beginner stocks to buy, and now you’re ready to take the plunge. However, identifying potential investments is just the start.
What comes next – managing your portfolio, mapping out your trades, deciding when to enter and exit, and diversifying your investments – is equally if not more critical.
Map Out Your Trade From the Start: Finding Your Entry and Exit
In the world of trading, it’s crucial to have a game plan. This game plan should include determining your entry and exit points even before you make your trade. That means knowing when to buy into a stock (your entry point) and when to sell (your exit point).
Ideally, you’d have these two points mapped out before even executing a trade. This kind of planning requires a fundamental understanding of technical analysis, including chart patterns, trends, and technical trading indicators like moving averages. Or, make portfolio management quicker and easier with VectorVest – as it tells you when to buy stocks and when to sell stocks!
A well-timed entry into a stock can make a significant difference in your potential return on investment. For instance, entering a stock after it has demonstrated a pattern of upward movement reduces the chances of buying into a brief upward blip only for the price to drop again.
Equally, knowing your exit point is essential to protect your profits and limit your losses. This is where setting a target price (for selling at a profit) and a stop-loss level (to limit potential losses) come into play.
Don’t fall into the trap of looking for the best time of day to buy stocks, or the best day of week to sell stocks. It’s all based on conditions and timing – which is why we encourage you to leverage the power of VectorVest. On that note, let’s talk about removing yourself from the actual process of managing your position…
Removing Human Error and Emotion From the Decision-Making Process With Trading Stops
Investing in stocks can be an emotional rollercoaster, with the temptation to hold on for ‘just a little longer’ in the hopes of an upswing, or panic selling at the first hint of a price drop. The key to successful investing, however, is removing emotion from the equation, and one effective tool for doing this is the use of trading stops.
A trading stop is an order to sell a security when it reaches a certain price, and it’s an excellent way to manage your risk. And, beyond helping you cut losses, it can help you capture profits when they’re there – preventing you from watching a winning opportunity turn into a loser.
If the stock price starts to drop, the stop order will trigger when it hits the price you’ve set, preventing further losses. Similarly, if the stock’s price rises, a trailing stop can lock in your profits by selling the stock when it begins to fall from its peak.
Using trading stops is a disciplined approach to trading that allows you to manage your risk and remove human emotion from your decision-making process. It enables you to stick to your investment plan and prevents you from holding onto a losing stock for too long or selling a winning stock too soon.
VectorVest’s ProfitLockerPro can help you remove human error and emotion from this process with dynamic trading stops. The system uses a proprietary algorithm that shifts your trading stops up or down based on current market conditions, so you don’t have to stress about missing extra profits or closing a position too late and taking on substantial losses.
Make Finding the Best Stocks to Invest in as a Beginner Easy With VectorVest!
Hopefully, this conversation on how to find the best stocks to invest in as a beginner has provided you with clarity on the process for consistently uncovering – and executing upon – winning opportunities.
While you came here to find the best stocks to invest in as a beginner, these principles can be applied to the trading strategies of experts, too. But before we wrap this guide up, let’s make one thing clear: with VectorVest, you never have to wonder where your next opportunity will come from.
On any given day, you can pull up the best stocks to invest in as a beginner based on your specific criteria. Our stock screeners bring these opportunities to your phone or desktop on a daily basis, and from there, it’s just a matter of finding your entry and exit.
Bringing Our Conversation on the Best Beginner Stocks to a Close
As we draw this conversation to a close, let’s remember that every journey starts with a single step. Your journey into the world of investing may seem overwhelming at first, but remember, even the most experienced investors were once beginners too.
It’s important to start with understanding the basics, leaning toward undervalued and safer stocks, and keeping an eye out for stocks with a rising price trend. From there, the focus should be on managing your positions effectively, sticking to your planned entry and exit points, minimizing the role of emotion in your decisions, and diversifying your portfolio.
If you want to explore specific trading strategies, check out our resources on dollar-cost averaging vs timing the market, time in the market vs timing the market, timing the market vs buy and hold, warrants vs options, position trading vs swing trading, trend trading vs swing trading, or anything in between.
Armed with these insights, the rules we’ve shared today, and the right tools like VectorVest, you’re well on your way to becoming a confident and successful investor. Try this system today and see firsthand how easy it can be to find the best beginner stocks to buy at any given time!