It’s never too early to begin investing. The earlier a person begins investing, the more time their money has to compound and the greater their returns are likely to be. Every reader has likely heard a similar sentiment.
It’s difficult to paint a picture of the average stock investor. Statistics say that 39% of 18-29-year-olds own stocks.
That is the lowest percentage of any age group. Nearly six in ten of Americans 65 and older own stocks. Their portfolios have an average value of $109,000 while the average portfolio of those under 35 is worth $7,360.
Beginner investors should buy time-tested stocks. That means they should skew toward blue-chip firms and let the power of compounding do its magic. Although they have more time until they retire and thus a greater ability to absorb risk, slow and steady will win the race for them.
|QQQ||Invesco QQQ Trust Series||$261|
|JNJ||Johnson & Johnson||$171|
While competitors’ sales languish as consumer spending slows and recession fears ramp up, Apple continues to post impressive results. The world’s most valuable firm by market capitalization generated a record $90.1 billion of revenue last quarter. Apple’s iPhones accounted for $42.6 billion of that $90.1 billion of revenues, as iPhone revenue jumped nearly 10% year-over-year.
So Apple continues to be the strongest of the tech giants as others falter. AAPL stock is an excellent choice for beginner investors because of its tremendous stability in an otherwise volatile tech sector. Further, it provides a dividend of 23 cents that management continues to grow. AAPL stock currently has a dividend yield of 0.54%. That is relatively low. However, the company has increased its dividend by an annual average of 9.5% over the past five years.
And unlike Apple, Alphabet did not report strong Q3 results at all. Google’s bread and butter is advertising revenues from its search engine, YouTube ad revenue, and its cloud business.
Alphabet reported its earnings last week on Oct. 25. And its ad revenues were very problematic, rising only 2.5% YOY. Analysts, on average, expected the company to report $56.9 billion of ad revenue, so the $54.48 billion of ad sales that it actually reported was disappointing. YouTube’s ad revenues reached $7.07 billion, well below the $7.5 billion that analysts had anticipated.
None of this seems to suggest that GOOG stock is a buy. However, there is a silver lining. Google’s search ads are expected to fare better during the continued economic downturn than direct response and display ads. So the shares may not perform well in the short term, but they should outperform the stocks of other ad giants.
A beginner investor who buys GOOG now will get an inexpensive stock which is extremely likely to rebound over time and provide strong returns.
Visa (NYSE:V) stock has short-term and long-term positive catalysts that make it a smart investment for beginner investors.
In the short term, it’s clear that credit card spending remains strong. Total credit card balances hit $916 billion in September. That’s a level not seen since before the pandemic. The data point indicates that Americans are spending and borrowing despite increasing fears of recession.
Whatever the case, Visa is among the credit card companies that stand to benefit as credit card balances are currently 23% higher than their pandemic low. while its defaults remain below pre-pandemic levels.
Beginner investors should also understand that Visa is an excellent long-term choice. Its annual return over the past decade has averaged 19%.
Visa stock also a dividend which yields a modest 0.69%. However, its dividend has grown at an average annual rate of 17.4% over the past five years.
Invesco QQQ Trust Series (QQQ)
Beginner investors should buy Invesco QQQ Trust Series (NASDAQ:QQQ) stock. In fact, they would be wise to consider any number of ETFs that are tailored to their individual interests and own stocks in sectors in which they believe strongly. Generally speaking, ETFs provide trading flexibility, diversification, lower costs, and tax benefits, compared to mutual funds.
Beginner investors should consider QQQ stock because it provides the benefits listed above. Further, because QQQ tracks the performance of the Nasdaq-100 Index. the ETF also provides exposure to the tech-heavy Nasdaq.
As a result, investors will get exposure to the best tech stocks, including Apple, Google, Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Tesla (NASDAQ:TSLA). A beginner investor who owns QQQ will learn, among other things, about interest rates and their effects on the tech sector. The price of QQQ is low now but will rise in time when the Fed ultimately slows its quantitative tightening process.
So the long-term outlook of QQQ is bright.
It’s reasonable to argue that buying Costco (NASDAQ:COST) stock now isn’t a great idea. The bulk wholesaler has received a lot of attention as worries about inflation have risen in 2022.
Consumers are looking for ways to ease the burden of inflation. And bulk buying is an obvious means of doing so. So it’s no surprise that investors have flocked to COST stock, causing it to rise.
That has left many pundits arguing that Costco stock is overpriced. They have a reasonable argument because Costco’s P/E ratio of 38.7 is higher than that of 84% of defensive-retail stocks.
But there are many equally reasonable arguments against the idea that Costco is overpriced. For example, its return on assets, return on equity, and return on invested capital are all better than 90% of those of other companies in the defensive-retail sector.
That suggests Costco is fairly priced. It’s a great stock and is likely to continue rising as the economy worsens on rising 2023 recession fears.
Johnson & Johnson (JNJ)
Beginner investors should consider a strong healthcare stock like Johnson & Johnson (NYSE:JNJ). Healthcare stocks tend to do well during recessions, making JNJ a good choice now.
Further, Johnson & Johnson is currently particularly well-positioned. The company is flush with cash after raking in loads of money from the sales of its Covid-19 vaccine and other products. It has approximately $34 billion of cash on hand. That gives JNJ the ability to buy other pharma companies whose valuations have dropped sharply
But Johnson & Johnson is not jumping to make acquisitions. It remains focused on the spin off of its consumer business, Kenvue, which is slated to occur next year.
JNJ can afford to wait before making acquisitions because a recession appears more and more likely to occur next year.
JNJ stock has every chance to rise, management will keep the company stable at worst, and investors will get dividends in the meantime. So there’s a lot to like about JNJ.
MercadoLibre (NASDAQ:MELI) has been described as the Amazon of Latin America. MELI is an eCommerce platform based in Uruguay with operations that span Mexico, Central America, and all of South America.
Amazon was founded in 1994 and MercadoLibre was launched in 1999. So the two aren’t very different in age. However, MercadoLibre might be able to grow more rapidly going forward. And its shares have provided massive annual average returns of 26.14% over the past ten years. Amazon, on the other hand, has provided slightly lower average annual returns of 25.84%.
MELI stock is deeply undervalued, according to most Wall Street analysts. More than 20 analysts currently cover MercadoLibre. The vast majority of them rate the shares a “buy.” Their average price target on the shares is $870.
The company is growing at breakneck speed, as its annual average EBITDA growth over the last three years is 154%, and its revenue that has grown by an average of 64% annually in the same period.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.