Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
Login Archives Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • AI Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    • Postcards
    ×
  • Subscribe
Enter stock ticker or keyword
×
Join 100,000+ Like-Minded Investors Today
Twitter
Tags: Trading Strategies

Investing for Beginners: A Guide for the New Investor

By Money Morning News Team, Money Morning • September 6, 2016

Start the conversation

Leave a Reply Click here to cancel reply.

You must be logged in to post a comment.

investing for beginnersFor those new to stock investing, it's a great idea to read about the best steps to take. Investing for beginners can be simple when you're prepared.

That's why we created this guide to investing. We will tell you how stock market appreciation can affect your overall wealth, the risk-reward parameters to consider in investing for beginners, and how to allocate your portfolio. We will also give some tips about specific stocks to buy.

Let's get started.

Investing for Beginners: A Brief Overview

Over the decades, the U.S. stock market has returned the highest percentage on money invested in it than any other asset class. The investments on average have had higher returns than bonds, real estate, precious metals, or commodities.

The important thing to remember is that these returns take place over the long term. If you're interested in knowing about investing for beginners, one of the core concepts is that stock markets fluctuate. You can expect stocks will go down as well as up.

A 20% drop in the broad market averages such as the Dow Jones Industrial Average (DJIA) or S&P 500 over a roughly two-month time frame is considered a bear market. A steadily rising market in the same time frame is considered a bull market.

Don't Miss: Simple Tips to Put Investing in Your Favor - and Out of Wall Street's!

The market will always be either bull or bear, and not one forever. But new investors need to know that, over the past 100 years, the DJIA has returned 22,000%. In other words, $100 invested in 1916 would now be worth $22,000 for the descendants of the original investor.

There have certainly been bear markets during that period. But the rise of bull markets has counterbalanced and exceeded bear markets over the long term.

Investing for Beginners:  Risk-Reward Parameters

Because stocks fluctuate, another core concept of investing for beginners is to plan a portfolio to maximize reward and minimize risk. When choosing stocks for a portfolio, the best strategy is to choose stocks that offer maximum reward with the least risk (i.e., least chance of a prolonged downward trend).

How to find stocks that maximize reward and minimize risk?

There are three methods.

First, look for stocks that produce goods and services that people steadily need or want. Money Morning top pick Becton, Dickinson, and Co. (NYSE: BDX), for example, sells medical supplies and patient safety products. Many of its supplies are designed for single use. That means that users of the products need a constant supply. Demand is steady year after year with these type of stocks.

In addition, the state of the economy, geopolitical situations, and politics have minimal impact on products people need or want.

Second, look for stocks whose products or services benefit from trends. Money Morning   Chief Investment Strategist Keith Fitz-Gerald has identified Six Unstoppable Trends that will keep on happening regardless of world events. They are medicine, technology, demographics, scarcity/allocation, energy, and war/terrorism/ugliness.

Stocks well positioned to benefit from these trends are poised to reap the rewards.

Money Morning  top tech pick Facebook Inc. (Nasdaq: FB), for example, earns its status as a Money Morning  favorite partly by its heavy investment in a coming tech trend, virtual reality (VR). In a few years, FB founder and CEO Mark Zuckerberg has said he thinks VR will be used in education (to facilitate communication between students and teachers), medicine (to facilitate communicate between healthcare providers and patients), and entertainment (you may be able to see sports as if you were courtside or have VR singers seem as if they are in your living room).

The tech trend of VR is one of the reasons that Money Morning expects FB's share price to rise to $250 per share by 2020. From current levels, that's nearly a 100% return.
Don't Miss: Why Facebook Stock Is a Must-Buy to Potentially Double Your Money

The third investing for beginners tip is to look for stocks that combine stock price appreciation potential with excellent dividend yields. Interest rates are currently at historical lows, so good yields can counterbalance low bond yields. Money Morning  recommends stocks that are "dividend aristocrats." Those are stocks that not only have excellent yields, but also have a long and stable history of paying dividends - and of hiking the dividend payout regularly.

Dividend aristocrat PepsiCo Inc. (NYSE: PEP), for example, has paid a dividend to investors for 44 straight years. The current yield is 2.80%. Plus, PEP makes products people want: its flagship beverage, of course, but also such brands as Quaker Oats and Lay's Potato Chips.

Investing for Beginners:  Engage in Prudent Portfolio Allocation

Investing for beginners also includes allocating stocks in your portfolio so you don't too heavily rely on one type of stock.

We use the Money Map Method. It includes a 50-40-10 Strategy, referring to risk-adjusted tiers to allocate your portfolio.

The larger percentages are tied to more stability, and some growth. The smaller can be higher risk, but also high reward.

Keith Fitz-Gerald goes into these breakdowns in detail here.

Investing for Beginners: Learn How to Purchase

Another key tenet of investing for beginners is to hold stocks for the long term. They can be periodically reviewed, of course, but no investor - beginner or not - should try to time the market. Traders do that, and it takes years' worth of experience to do so successfully.

The best strategy is to dollar-cost average and buy a certain defined amount of stock at periodic intervals. That way, those investing for beginners are assured they will not be chronically buying at peaks and will reap the benefits of any pullbacks, as more stock can be purchased with the defined amount when the stock declines.

Now - for more on how to get started investing, check out How to Get Started Investing with $1,000 and How to Make Any Year Your Wealthiest Yet, Through Investing
Follow  Money Morning on Facebook and Twitter.

Here Are 10 “One-Click” Ways to Earn 10% or Better on Your Money Every Quarter

Appreciation is great, but it’s possible to get even more out of the shares you own. A lot more: you can easily beat inflation and collect regular income to spare. There are no complicated trades to put on, no high-level options clearances necessary. In fact, you can do this with a couple of mouse clicks – passive income redefined. Click here for the report…

Claim My Free Report

Subscribe
Login
Notify of
guest

guest

0 Comments
Inline Feedbacks
View all comments


Latest News

September 15, 2023 • By Shah Gilani

We're Headed for a Second Banking Crisis - Here's What to Do

September 14, 2023 • By Tom Gentile

Tulips Are the Secret to Trading the Next 300% Rally in AI

September 14, 2023 • By Chris Johnson

Tulips Are Telling Me How To Trade the Next 300% rally in AI
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Penny Hawk Midday Momentum
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Quantum Data Profits Flashpoint Trader Darknet Alpha Accelerators Brutus Alerts Resource Traders Alliance L.A.U.N.C.H. Investor Rob Roy Trader Long-Term Equity Profits

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz