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An IRA, whether a Roth or a traditional one, can be a great asset to an investor. However, if you change jobs, you may need to move that IRA to another account. If a person has a rollover IRA, they can move their older IRA to the new IRA. This TradingSim article will help readers learn how to roll over an IRA. This article will also help find the best stocks in an IRA.

What is a rollover IRA?

A rollover IRA is an IRA that can accept funds from an older IRA. Most rollovers happen when a person changes jobs, especially a self-employed person with a SEP. If they want to transfer their IRA, they can roll over their funds to another account.

How can you rollover an IRA?

There are many ways to rollover an IRA. Certified financial planner Marguerita Cheng from Blue Ocean Global Wealth says that while an IRA rollover seems easy, it involves more details.

“People think it’s straightforward. They retired, or they left their job, so they think they should do a rollover,” said certified financial planner Cheng.

However, Cheng warns that IRA holders can make mistakes with the rollovers.

“But there are mistakes that can happen,” said Cheng.

Cheng says account holders shouldn’t ask for a direct check payout from their previous IRA accounts. If an account holder receives a direct payout, the IRS taxes the funds at 20%. Cheng advocates that an account holder should specify that an old IRA should go to a new one.

“Make sure you’re specifying that you want to do a direct rollover,” said Cheng.

IRA to HSA rollovers are possible

A possible way to rollover IRA’s is to convert them to an HSA (health savings account. An HSA is a type of savings account that lets a person set aside money for health expenses.

Roy Ramthun is president of HSA Consulting Services. He says it’s important to make arrangements to rollover an IRA account to a HSA ( health savings account).

“I think it is better to make new contributions so you can take the tax deduction rather than using the IRA to HSA rollover, but if money is tight or you have large expenses, the rollover is a good way to take care of that situation,” said Ramthun.

Rita Assaf is a vice president of retail health savings accounts for Fidelity Investments. She said that HSA contributions can help people who want to convert their IRA’s.

“If you cannot afford to make new HSA contributions and need money for qualified expenses right away, then this funding method could help. This is especially helpful in the first year of owning an HSA and you need to access funds for a qualified medical expense early in the year before you’ve accumulated much in your HSA,” said Assaf.

Young people are at an advantage with IRA rollovers

Steven Hamilton is an enrolled agent who owns Hamilton Tax and Accounting in Grayslake, Illinois. He said that young people have an advantage in rolling over their IRA’s.

“Personally my favorite is to do the rollover at a very young age when they may not be able to make the contribution otherwise,” says Steven Hamilton, “This allows the funds to grow in the most advantaged way possible.”

In this COVID-19 economy with great uncertainty despite the stock market performing well, Raythun made an observation. He noted that a rollover from an IRA to an HSA could be helpful for unemployed account holders.

“This might be most helpful for someone who recently lost their job and is now on unemployment or facing COBRA premiums or large out-of-pocket expenses,” says Ramthun. “If cash is hard to come by, transferring money from an IRA to an HSA might be just the ticket.”

How to Roll Over a 401k to an IRA

Dominique Henderson, certified financial planner (CFP) and founder of DJH Capital Management said that 401k holders have options when they convert a 401k to an IRA. In the 401k plans, they are employer-provided plans. In contrast, IRA’s are individual retirement accounts.

“Often you have between six and 24 fund choices in a 401(k),” said Henderson. “With an IRA, you can choose individual stocks as well as funds—and even use alternative investments.”

Henderson advises IRA account holders to be aware of the tax consequences of a rollover.

“If you’ve received a tax benefit for your 401(k) contributions, you need to make up for that when you roll into a Roth, which is funded with after-tax money. You might owe a hefty tax bill today, so make sure you’re prepared,” said Henderson.

In addition to other financial advisors, Henderson also advises account holders to talk to tax professionals if they’re unsure of what action to take with a rollover.

“Talk to a tax professional if you’re rolling into an account with different treatment,” said Henderson.

Saving money with IRA rollovers is crucial

Henderson said that if an account holder doesn’t have a professional money advisor, they can put the IRA funds in low-cost index funds.

“If an investor doesn’t want to have those funds professionally managed, I would encourage [them] to use low-cost index funds, or maybe even a target-date fund. It’s going to reduce the probability of a negative outcome.”

“By law, you must have at least 30 days to decide what to do with your 401(k) when you switch jobs.”

More advice about 401k to Roth IRA conversion

Michael Cohen is a retirement specialist with Certainty Retirement Advisors in Belvidere. He noted that no taxes will be owed on a conversion if the amount withdrawn from one account is identical to the funds in the new account.

“A person does not begin to pay tax on that withdrawal until they actually take constructive receipt of the money, meaning that they keep the funds in their bank account for 60 days or more, or that they spend the money,” he said.

Roth IRAs can help self-employed day traders — 401k rollovers can be different from IRA rollovers

He added that an account holder must choose their own retirement account.

“If you feel like you want to keep taking risk with that money at age 62, then you can roll that 401(k) into an IRA with any brokerage firm,” he said. “Keep in mind that there will be no tax consequence to you for converting the 401(k) into an IRA, but that money will all be treated as ordinary income — 100% taxable — as you begin to spend that money in retirement.”

More advice on rolling over 401k to IRA

Mark Dunsmoor is the senior vice president of Regency Business Development. He has advice for clients who want to rollover a 401k to an IRA.

“If you wish to open a rollover account, you must be certain to open the account and then arrange for 401 (k) funds to be transferred directly to it,” said Dunsmoor. “If you take possession of this money first, it will be considered income and you will be liable for paying income taxes on it.”

In addition, Dunmoor wrote about the great affect IRA accounts have on retirement.

“IRA accounts have had a significant impact on retirement savings since its inception nearly 45 years ago,” said Dunsmoor. “An Investment Company Institute survey in 2015 revealed that Americans had 7.6 trillion dollars in IRA’s. You know that number has only grown since then.”

Timing is key for an IRA rollover

Henderson agrees with Cheng that IRA account holders should avoid direct payouts from accounts.

“In many cases, you’ll end up with a check that you need to pass on to your new account provider,” said Henderson. “Open your new IRA before starting the rollover so you can tell the old provider how to make out the check.”

SEP IRA — IRA rollovers can help account holders

The goal, Henderson says, is to avoid keeping the money in your personal bank account. In addition, Henderson also tells IRA account holders that they should act quickly to avoid taxes on direct payouts.

“You only have 60 days to complete the transaction to avoid it being a taxable event. It’s best to have everything set up before getting that check,” said Henderson.

Account holders should exercise caution

Assaf said IRA account holders should make an IRA transfer with a trustee-to-trustee transfer.

“The key is that the transfer should be made directly through a trustee-to-trustee transfer,” said Assaf. “You shouldn’t withdraw the money from your IRA first as that could lead to a taxable event and penalties.”

Assaf agrees with Ramthun that account holders should meet with HSA specialists to handle IRA rollovers.

“You should call our HSA specialists to handle the transaction to ensure the IRA withdrawal isn’t treated as a taxable event. He recommends that account holders “make sure that the money rolled over into the HSA is treated as an HSA contribution,” says Assaf.

Assaf also advises account holders to treat their IRA like an HSA contribution.

“The key is to ensure the money rolled from the IRA is treated as an HSA contribution,” she says. “Some HSA administrators may send the trustee-to-trustee check to you. And in this instance, you will want to make sure that when you send the check to your HSA administrator to include either a letter of instruction or deposit slip. She said it should be
“indicating that the check should be treated as an HSA contribution.”

Should an account holder rollover an IRA in an economic downturn?

While an account holder wants to rollover an IRA, some financial advisers advise against a withdrawal in this economic downturn. Sophia Bera is a certified financial planner. She’s the founder and CEO of Austin, Texas-based Gen Y Planning. In this volatile economy, she said there is a dilemma for account holders.

“Sometimes there isn’t a really clear option,” said Berra.

“That’s why this is challenging,” added Berra.

In addition to that advice, Bera says that account holders should focus on more immediate needs.

“Focus on more immediate cash flow needs and let your 401(k) plan sit for now,” advises Bera. As a member of the CNBC Financial Advisor Council, she advises IRA account holders.

“You might have more options a few months from now,” said Berra.

Berra also agrees with Henderson that index funds could be best for some account holders.

“You can choose a bunch of index funds or lower-cost funds,” said Bera.

Ivory Johnson is a CFP and founder of Washington, D.C.-based Delancy Wealth Management. He advises account holders to rollover their accounts to an IRA instead of a new employer’s 401k.

“When you have economic growth declining and no inflation — or deflation — there are certain sectors, like consumer staples, utilities that usually do well,” said Johnson.

“You may not be able to pinpoint that inside a 401(k),” added Johnson.

Find a reputable IRA manager for rollovers

Johnson advocates that account holders should consult a tax professional before an IRA rollover.

“Interview several,” Johnson said. He also recommends that in addition to their credentials, an account holder should trust their advisor.

“You have to trust the person and you have to know that they are competent,” he said.

Financial advisor Sam Davis is a partner with TBH Global Asset Management. He said that a rollover from a company’s retirement plan to an IRA can be beneficial to account holders.

“Rolling over one’s funds from a company retirement plan to an IRA certainly opens up the world of investment options,” said Davis.

“If one prefers an advisor to manage those funds, research their track record, compensation model, client references, and investment philosophy,” Davis recommends. “If an investor doesn’t want to have those funds professionally managed, I would encourage [them] to use low-cost index funds, or maybe even a target-date fund. It’s going to reduce the probability of a negative outcome.”

Financial Expert can help people decide how to make IRA rollover

With IRA rollovers, Davis agrees with Hamilton that young people have an advantage with IRA rollovers.

“If one is young and working with a small balance, rolling the old retirement funds into the new employer’s plan can make a lot of sense,” says Davis. “This often reduces fees, ensures the person is prudentially invested, and consolidates accounts versus having small accounts scattered at various firms.

Some advisors want 401k rollovers into IRA’s

Berra wants account holders to rollover old 401k accounts into a new IRA.

“The market is down, so it might be a good time to put that money in now to have that growth on that money,” said Berra.

In addition, Berra said that the funds can be spread out.

“I’m a fan of having a little bit of money in different taxable buckets,” added Berra.

Melissa Brennan is a financial planner with ARS Private Wealth in Houston. In contrast to other financial advisors, she wants account holders to hold back on rollover their IRA’s.

“Someone might lose their job and want to roll over their 401(k) to an IRA. She said that “they underestimate how long they’re going to be unemployed” and may need those funds for emergencies.

What do financial advisors say about rollover IRA’s?

Dan Moisand is a financial advisor with Moisand Fitzgerald Tomayo. He gave detailed IRA rollover advice to a person asking for IRA rollover advice.

First, he spoke about the details of a rollover.

“A “rollover” IRA attaches to a traditional IRA. Most people do not split the contribution because they prefer the tax treatment of one over the other. But you can split the $7,000 between a traditional IRA and a Roth in any proportion you like as long as your income fits the eligibility criteria,” said Moisand.

Next, Moisand spoke about the tax implications of an IRA rollover.

“There is no tax deduction for a Roth contribution, but earnings can be tax free when distributed. If your Modified Adjusted Gross Income (MAGI) for 2019 is under $122,000 (single filer) or $193,000 (joint filers), you can choose to put all $7,000 ($6,000 regular contribution limit + $1,000 catch-up contribution. That’s for being over age 50) into a Roth IRA. Above those income limits a partial contribution is permitted. If your MAGI is above $137,000 as a single or $203,000 as a couple, no Roth contribution is allowed,” said Moisand.

In addition to that information, he added more insight.

“There is no maximum MAGI limit for contributing to a traditional IRA. But earnings are taxed as ordinary income when distributed. However, there are income limits that affect whether you can deduct the contribution to the traditional IRA. That can change “if you or your spouse participate in a qualified plan like a 401(k)”. If neither of you are a participant, whatever you contribute to the IRA is fully deductible,” said Moisand.

“These days, for most taxpayers, the designation of an IRA as a rollover IRA is not important but here are two situations in which the designation matters.”

What are some IRA rollover rules?

In addition to that advice, the expert also made more comments.

“First, some employer-sponsored qualified plans like 401(k)s will only accept incoming rollovers of money that was in another qualified plan or a rollover IRA containing only money from a qualified plan. If a roll-in to a new qualified plan is not in your future, contributing to the rollover IRA should not be an issue but if you want to preserve the rollover status, just open a second IRA and contribute to that,” said Moisand.

In additon to that advice, Moissand offered more guidance.

“Second, in some states IRAs provide less creditor protection than applies to qualified retirement plans like 401(K)s. Keeping funds rolled out from a qualified plan in a rollover IRA segregated from other IRA assets can preserve the more extensive creditor protection of the qualified plan,” concluded Moisand.

What is the timeline for an IRA withdrawal?

While an account holder has some time, they have to act quickly for an IRA withdrawal. FINRA, the government overseer of broker-dealers, said account holders have a limited time.

“By law, you must have at least 30 days to decide what to do with your 401(k) when you switch jobs,” said FINRA.

In addition to FINRA, financial expert Lynn Brenner offered advice to a client.

“So what is a 60-day rollover? It’s what happens when you take an IRA distribution on which you don’t owe taxes because within 60 days you deposit the entire amount back into an IRA. The 60 days is a grace period in which you can replace an IRA distribution that you took by mistake or that you used as an emergency loan to yourself,” said Brenner.

In her advice column, Brenner also noted that the time restraints of IRA rollovers.

“You can only do one 60-day IRA rollover every 12 months, regardless of how many IRA accounts of how many IRA accounts you have. If you do more than one, any additional rollovers are treated as taxable income,” said Brenner.

In addition to that advice, Brenner offered more guidance.

“And if you redeposit an over-the-annual-limit rollover in an IRA, it’s treated as an excess contribution. She noted that the contribution is subject to a 6% annual penalty until you withdraw it,” added Brenner.

Should a person rollover an IRA during the economic downturn?

In this time of economic uncertainty, some financial advisors say that rolling over a 401k into an IRA could be beneficial for people who find themselves unemployed. Bobby Glotfelty is a senior licensed financial professional with Series 7, 24, and 65 licenses at Betterment. He noted that there has been an increase in 401k rollovers.

“We have seen a relatively large uptick of people rolling over 401(k)s into their IRAs,” said Glofelty. “A lot of these cases are people who are no longer employed or are still looking for employment.”

Glofelty noted that moving from a 401k to an IRA gives account holders more options.

“By moving into an IRA, you generally have more investment options than you would with a 401(k). Often, 401(k)s restrict you on what you can invest in,” said Glotfelty. With more investment options, like index funds and ETFs, you can invest more specifically to your goals.”

“By switching to an IRA, a lot of times you’ll find lower fees,” said Glotfelty. “It’s easier to figure out the fees you actually pay within an IRA.”

Glofelty also said that a rollover to a new employer’s plan doesn’t have to be so difficult.

“You can always roll your IRA assets back into your new employer’s 401(k),” Glotfelty says.

Gloefelty also says that 401k rollovers can help retirement account holders.

“In almost all cases, rolling retirement funds over to an IRA makes sense,” said Glotfelty.

Fidelity changes IRA rollover rules

Fidelity is a IRA provider that offers changes to its IRA rules to ease rollover rules. Dave Gray, head of workplace retirement offerings and platforms, spoke about the changes.

“Our goal is to be a market leader,” he says. “Most 401(k) recordkeepers are still urging participants to roll over once they leave.”

He said Fidelity won’t force Fidelity customers to turn old 401k’s over to IRA’s.

“It’s their choice,” said Gray.

Are IRA rollovers necessary?

Scott Smith is an analyst with Boston-based Cerulli Associates. Smith said that IRA rollovers have evolved and may not even be always necessary.

“Fidelity wants to be best in class,” Smith says. “Retirement recordkeeping is a big business. They won’t shun rollovers. But they want to let clients know [when] the best outcome is to stay in the plan… they’re still getting all of the advice.”

“Employers’ attitudes are changing and they are now more comfortable allowing people to keep their assets in the 401(k) plan even after they’ve left the firm.”

Randy Long is principal at SageView Advisory Group LLP in Irvine, Calif. He said that some account holders may want to keep their current retirement accounts.

Some financial experts advocate not making IRA withdrawals

“We’re seeing more and more participants, even after retirement, who leave their money in the plan,” said Long. “We still consult them. But they’re getting institutional pricing on those funds. If they roll them to an IRA, they don’t get the same institutional pricing.”

Gray notes that some account holders think 401k accounts are cheaper to keep in the long run.

“Some of the conventional thinking that 401(k) plans are cheaper than brokerage accounts continues to evolve,” Gray says.

Demographic changes causes Fidelity rollover changes

Mike Alfred is co-founder and CEO of Digital Assets Data Inc. He said the IRA rollover change at Fidelity is probably because of demographic changes.

“This feels like a natural evolution driven by demographics. The average 401(k) participant is getting older and approaching retirement,” Alfred says

Smith says that financial advisors have a leveling of fees that have to conform to compliance.

“I think firms have worked to level revenue regardless if it’s an IRA , or if participants stay in the plan. That way, they can minimize the potential for conflict of interest,” Smith says.

Gray says that retirees can have rollovers to IRA’s instead of depending on 401ks.

“Not all plans are designed to permit partial withdrawals or systematic retirement income withdrawal payments from their retirement plan,” said Gray.

Fidelity offers more flexibility for IRA rollovers

Gray said Fidelity’s retirement accounts can help account holders.

“Our solution now allows plan sponsors to offer a wide-range of withdrawal types and flexibility for participants who choose to leave their savings in the plan after retirement: a digital end-user experience, a customizable cash flow withdrawal strategy and a suite of dedicated retirement income funds, all of which seamlessly integrate into a company’s workplace savings platform,” said Gray.

Fidelity added in a statement that the plan will help retirees.

“The underlying exposures include a diversified mix of core and extended asset classes for a product specifically designed for customers in retirement seeking current income which differentiate this retirement income product from a standard all passive target-date product,” according to a statement.

Smith said that a retirement plan depends on a person’s individual needs.

“There are people who want more customized investments than they’d find in the 401(k) plan, which is designed for the masses,” he adds.”If you’re higher-net-worth, you need an IRA rollover with more [options].

Advice for retirees on IRA rollovers

Carolyn McClanahan is a certified financial planner at Life Planning Partners in Jacksonville, Florida. She had advice for a retiree couple on their IRA rollover questions.

“Since you’re both in your 60s, if you want to move your 401(k) money to a Roth IRA so that you can take out that money penalty-free, you don’t have to make a move at all. The 10% early withdrawal penalty applies to 401(k) account owners who are under age 59 ½, so you would not be penalized for taking money out. However, you will have to pay taxes as you withdraw the 401(k) money. With a Roth IRA, you can make tax-free withdrawals,” said McClanahan.

“One option is to withdraw your 401(k) over time to reduce the tax hit, McClanahan said. Another option is to do a 401(k) rollover into a traditional IRA. “Often, workplace 401(k)s charge fees to make withdrawals, plus you often have to go through an administrator to get distributions. IRAs at self-directed brokerages don’t have these types of issues,” continued McClanahan.

McClanahan also spoke of a third option for the retirees’ accounts.

“The third option is rolling all of the 401(k) money into a Roth IRA. Just keep in mind, you’ll “have to pay taxes on the entire conversion in one year, which can be pretty hefty,” McClanahan said.

No matter what IRA holders do with their accounts, here are five stocks that are the best to have in IRA’s.

1. Amazon the top pick for IRAs

Amazon( NYSE:AMZN) had an incredible Q3 2020 with net sales increasing 37% to $96.1 billion in the third quarter.

“Two years ago, we increased Amazon’s minimum wage to $15 for all full-time, part-time, temporary, and seasonal employees across the U.S. and challenged other large employers to do the same. Best Buy and Target have stepped up, and we hope other large employers will also make the jump to $15. Now would be a great time,” said Jeff Bezos, Amazon founder and CEO.

Amazon stock is a top choice for IRA rollover stock

“Offering jobs with industry-leading pay and great healthcare, including to entry-level and front-line employees, is even more meaningful in a time like this, and we’re proud to have created over 400,000 jobs this year alone. We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season. Big thank you to our employees and selling partners around the world who’ve been busy getting ready to deliver for customers this holiday,” added Bezos.

Amazon has been a COVID-proof stock and is a great addition to IRA holders’ accounts.

2. Proctor and Gamble

Proctor & Gamble (NYSE:PG) stock has soared during the pandemic. The maker of Clorox wipes had great growth. Jon R. Moeller is the Vice Chairman, Chief Operating Officer and Chief Financial Officer. She spoke about the Q3 2020 results.

“Fiscal year-to-date 6% organic sales growth; 16% core earnings-per-share growth; over 100% adjusted free cash flow productivity building share. Just two days ago, we announced a 6% increase in our dividend, reflecting both of these results and the confidence we have in our future. This was the 64th consecutive annual increase and the 130th consecutive year in which P&G has paid a dividend. So that’s January through March and fiscal year to date, very strong results in very difficult conditions,” said Moeller.

Proctor and Gamble is a top stock for IRA accounts.

3. Apple

In addition to Proctor and Gamble, Apple( NASDAQ:AAPL) stock is a strong one for IRA holders.

Apple stock a good option for IRA rollovers

CEO Tim Cook spoke about the company’s Q4 2020 revenue of $64.7 billion.

“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services,” said Tim Cook, the company’s CEO. “Despite the ongoing impacts of COVID-19, [the company] is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive. From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver.”

CFO Luca Maestri added more information about Apple’s strong Q4 2020 revenue.

“Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment,” said Luca Maestri, Apple’s CFO. “Our sales results and the unmatched loyalty of our customers drove our active installed base of devices to an all-time high in all of our major product categories. We also returned nearly $22 billion to shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time”.

Apple is a top holding in an IRA holder’s account.

4. Google

Google parent Alphabet (NASDAQ:GOOG) had positive Q3 2020 earnings with $38.1 billion. Alphabet’s CFO, Ruth Porat, spoke about the results.

Google stock is a strong stock to add to IRA rollovers

“Total revenues of $46.2 billion in the third quarter reflect broad based growth led by an increase in advertiser spend in Search and YouTube as well as continued strength in Google Cloud and Play,” Ruth Porat, Alphabet’s chief financial officer, said in a release.

Google is a solid holding in an IRA rollover.

5. Tesla

While Tesla (NASDAQ:TSLA) is a controversial company, Tesla has proven to be a lucrative holding for IRA’s. Tesla CEO and Space X founder Elon Musk spoke about the electric company’s Q3 2020 results.

Tesla stock can be an interesting addition to an IRA rollover

“So Q3 was our best quarter in history. We achieved record production and deliveries, record revenue, record net income, both GAAP and non-GAAP, and record free cash flow of $1.4 billion,” said Musk.

Tesla’s chief financial officer, Zachary Kirkhorn, also spoke about the positive results.

“Overall, our financial health continues to rapidly improve with Q3 being another great quarter on nearly all dimensions, as Elon has mentioned. On net income, we achieved our fifth sequential quarter of profitability, our best net income, and nearly double-digit operating margins,” said Kirkhorn.

No matter how an account holder rolls over an account, all the above stocks are good holdings for an account.

IRA rollovers can help save money

IRA rollovers can be an effective way to save money during job changes. With TradingSim articles, an account holder can find the best options to handle their money for the future.

Having a Roth IRA can be beneficial to account holders. However, if an account holder wants to make a withdrawal after they start investing, there are certain rules they have to follow. This TradingSim article will help people determine how they can make IRA withdrawals, even if they have a backdoor IRA. This article will also help Roth IRA owners whether they’re employed with a company or have a small business. This article will also highlight 10 stocks that Roth investors can add to invest with their accounts.

What are the rules for a Roth IRA withdrawal?

With the COVID-19 crisis, many people are having financial difficulties. Many people want to withdraw from their accounts to pay bills or take care of other expenses. When an account holder wants to make a withdrawal from their Roth IRA, they can easily make that choice. Financial expert Andy Robinson noted that account holders can make Roth IRA withdrawals.

“Your money isn’t untouchable. When you contribute to an IRA, your money isn’t locked away in some unattainable place. It’s not as easy to access as your checking account, but it is accessible,” wrote Robinson.

Robinson also noted that there are times that people can make withdrawals.

“I know that experts [say] “Don’t touch your retirement savings,” but there are a lot of exceptions where you can actually use that money if you run into real problems. It’s not locked up forever. Yes, you will have to pay some penalties on it, depending on how you’re using it, but if you need that money, it’s there, and it could be a safety net,” wrote Robinson.

What are the penalties of early Roth withdrawal?

If a person wants to make a Roth withdrawal, there is one benefit. Robinson noted that there are no penalties for early withdrawals.

“It’s also worth noting that if you use a Roth IRA, you can withdraw any contributions from it at any time, penalty-free,” wrote Robinson.

Some financial advisors say not to make Roth withdrawals

While some financial experts say it’s OK to make Roth withdrawals, others disagree. Riley Poppy is a financial planner and owner of Ignite Financial Planning in Seattle. He says that before making Roth withdrawals, account holders should try other options.

“Evaluate a personal loan, depending on what type of interest rate you might build a qualify for,” said Poppy.

Poppy also says that people should also try liquidating other accounts first.

“If you have investment accounts, you should think about liquidating taxable accounts first. traditional IRAs and 401(k)s second, and Roth IRAs last,” said Poppy.

“Consider taking money first from pre-tax accounts or traditional retirement accounts before Roth IRA accounts,” added Poppy..

He said that there’s more flexibility to withdrawals from other accounts.

“You have a little bit more flexibility since you can take out different shares. and you can really control the tax consequences a little bit better,” said Poppy.

Consulting a financial advisor is key to Roth

While Poppy doesn’t recommend Roth IRA withdrawals to his clients, he does see the advantages of Roth IRA withdrawals.

“If taking from a Roth IRA, it can be beneficial since you can access your basis or contribution tax-free without penalties,” said Poppy.

Poppy notes that whatever decision account holders make, they should consult a financial advisor.

“Input from a good CPA and a good financial planner is really helpful. [They can help] you model it out in terms of what the impact long-term will be,” said Poppy.

Poppy said that account holders should consider if they replace the funds they’re withdrawing from Roth IRA’s.

“The key thing to remember is that you are reducing your future retirement income. Do you have a plan to replenish that?” said Poppy.

Can a Roth IRA withdrawal buy a home?

If a person needs extra money, they can use Roth IRA withdrawals to buy a home.

Eric Roberge is the CEO and lead advisor of Beyond Your Hammock, a a fee-only financial planning firm. He noted that Roth withdrawals can be used to purchase a home.

“If you no longer need your Roth IRA money for retirement, then you may be able to tap the account to generate the cash needed for the purchase,” Roberge says.

Jeffrey Levine is a certified public accountant (CPA) and the director of advanced planning with Buckingham Strategic Wealth. He said that if a person can take Roth withdrawals to buy a home with certain requirements.

“As long as your Roth IRA has been established for at least five years, you can use that money penalty-free for a home down payment. as long as it qualifies as a first-time home purchase,” said Levine.

“The nice thing about Roth IRA withdrawal is that the contributions you originally make can be withdrawn for anything. at any time without penalty. It’s when you get into the earnings that you run into trouble, ” said Cohen.

While a person can use the funds to buy a home, Cohen notes that “even if you keep contributing to another retirement account, taking money out of a Roth to buy a home incurs opportunity cost”.

Eric Roberge is the CEO and lead advisor of Beyond Your Hammock, a fee-only financial planning firm. He notes that a Roth withdrawal can be detrimental to account holders.

“If you’re using the Roth because that’s the only source of funding you have to make the purchase, that might be a red flag. If you’re stretching yourself financially to buy a house, then buying might not be the best idea,” said Roberge.

Roberge adds that a Roth withdrawal shouldn’t dip into an account holder’s savings.

What is the difference between traditional and Roth IRA withdrawals?

While both traditional and Roth IRA’s are both retirement accounts, there are differences between the withdrawals. In a traditional IRA, there are no penalties to withdrawals unless a person makes the withdrawal before they’re 59 1/2. Mike Piershale is president of Piershale Financial Group. He said that while there are penalties for traditional IRA withdrawal, there are exceptions.

“On a traditional IRA, generally you can’t withdraw until 59 ½, although there are all sorts of exceptions,” said Piershale.

Some of the exceptions include medical expenses and disabilities.

While he doesn’t advocate early withdrawal of Roths, he said waiting too long for a withdrawal is a mistake, too.

“When you retire, often people have what I call this ‘window of opportunity,’ where they have low-income years,” said Piershale.

Piershale said the first years of retirement are a good time to convert funds from a traditional IRA to a Roth. He said that an account holder shouldn’t convert too much or else they will get bumped up to a higher tax bracket.

“Convert just enough to keep you in the same tax bracket,” said Piershale.

With a traditional IRA, an account holder has to make required minimum withdrawals (RMD’s) at 70 1/2. Leslie Thompson is a certified financial planner at Spectrum Management Group. She said that account holders should consider their individual accounts before making withdrawals.

“You have to look at accounts collectively and individually. Each account can have its own distribution amount. [The RMD] is where a lot of mistakes happen,” said Thompson.

Don Chamberlin is the president and CEO of The Chamberlin Group. He advises account holders to make withdrawals when they’re in a low-income tax bracket.

“Because you’re taking money out early, your RMD at age 70 ½ will be less. The lower RMD could then result in lower taxes. That’s a strategy we use quite often because many people have a good portion of their assets in qualified retirement plans,” said Chamberlin.

If older account holders make early withdrawals, Thompson said it may affect Medicare payments.

“It has implications for what you pay for Part B premiums,” said Thompson. “Higher-income people pay more,” added Thompson.

Roth IRA withdrawals have more options for account holders

While traditional IRA holders face penalties, Roth IRA holders don’t face as many penalties. If an account holder had an account longer than five years, have a medical emergency, or are a first-time homebuyer.

CARES Act helps make Roth IRA withdrawals easier

The passage of the CARES (Coronavirus Aid Relief and Economic Security) Act in March enabled account holders to make premature Roth IRA withdrawals. Dara Luber is the senior manager of retirement product at TD Ameritrade. She noted that with the bill’s passage, there are no required minimum withdrawals in 2020.

“One of the biggest provisions of the CARES Act is that there are no required minimum distributions (RMDs) for 2020. If you don’t need to take the money, you won’t have to,” said Luber.

Luber notes that there are penalty-free withdrawals if a person has been affected by coronavirus.

“Normally, you’d need to be at least 59 1/2 to take penalty-free withdrawals from your accounts,” said Luber. “However, under these rules, if you, your spouse, or a member of your family has been impacted by coronavirus, you may be able to take out money without paying that 10% penalty as long as you do it by December 31, 2020.”

Roth IRA withdrawal can benefit account holders

Mat Sorenson is the CEO & Attorney at Directed IRA & Directed Trust Company. He explained the new Roth IRA withdrawal rules.

“The new law increases the dollar amount you can loan yourself from your own 401(k) from $50,000 to $100,000 and also creates a penalty-free early distribution rule whereby IRA or 401(k) account owners under age 59-and-a-half can take a penalty-free retirement account distribution of up to $100,000,” wrote Sorenson.

Financial expert Michelle Singletary noted that people can repay the loan withdrawals within three years.

“You can repay all or a portion of the distribution within three years, and the repayments will not be counted toward the annual contribution limits”, said Singletary.

In the bill, seniors over 72 are also exempt from required minimum distributions.

“Additionally, the waiver covers the first RMD, which individuals may have delayed from 2019 until April 1, according to a summary of the Act’s provisions by Fidelity Investments,” noted Singletary.

Relaxed limits on Roth withdrawals are key in COVID-19 era

Financial expert Bill Biscoff noted that there are also no limits on how the COVID-19 related IRA withdrawal is used as well.

“In effect, the [CARES ACT] allows you to borrow up to $100,000 from your IRA(s) and repay the amount(s) any time up to three years later with no federal income tax consequences. And there are no limitations on what you can use [coronavirus-related distribution] funds for during the three-year period,” said Bischoff.

The “CARES Act” relaxes the rules on tapping retirement accounts, but only up to a $100,000 cap. If you take more than that, you’ll be subject to the old familiar tax and penalty rules.

If you have a Roth IRA, you have already paid income tax on that money, so any withdrawal won’t be subject to taxes now. In other words: get “post-tax” money before you tap into any “pre-tax” money.

Financial expert Suze Orman says Roth IRA withdrawals may not be wise

While many people may want to make Roth IRA withdrawals for extra money, financial analyst Suze Orman advises against that decision.

“If you take the money out, you’re racking in a 20-some percent loss right now, and you’re going to pay income taxes on that money, which will be another 20% or so,” said Orman.

Saving money with Roth IRA withdrawals is crucial

Orman advises Roth IRA holders not to take the Roth funds out before the stock market rebounds.

“If you take that money out and spend it, if you’re not frugal, if you’re just still living your lifestyle on some level, you will miss the best opportunity and the best time to have your money in the market that there’s ever been in about 10 years,” added Orman.

Top 10 Stocks for Roth IRA investors

1. Apple

While Orman argues that the stock market will rebound, here are 10 stocks that can be a good investment for Roth IRA’s. Apple (NASDAQ:AAPL) stock should rise after the launch of its latest iPhone.

Analyst Jim Suva, senior tech analyst at Citi, is bullish on Apple stock.

“If we look at year to date, the stock has done extremely well. In fact, it has outperformed the Nasdaq, the S&P 500, the broader markets, it has rallied. … Simply put, Apple during this pandemic is generating a tremendous amount of cash flow. They’re inventing, they’re coming out with new products and … they’re hiring. A lot of industries are laying off people and doing furloughs and reductions of … hours of workers, we’re actually seeing that Apple is hiring,” said Suva.

“That means they’re coming out of the pandemic stronger and importantly, the products that you’re showing that Apple announced are going to be ready and on the shelves and available in large quantities for the holiday shopping season and that’s very important,” added Suva.

Joanna Stern is the personal technology columnist at The Wall Street Journal. She notes that the latest iPhone will help Apple reach more consumers and raise its stock.

Apple’s new products will help stock rise

“What is the benefit for normal consumers? Where are they going to feel the faster speeds? And regardless of if everything works perfectly, right, we’ve got good hardware, good network and you can get 5G all the time, what do you use the faster speeds for on your phone? Where is the answer to that question is the big thing. [CEO Tim] Cook did point out downloads,” said Stern.

“Certainly downloading video, downloading music, that’s going to be faster. They also did a lot of gaming demos where you can see things instantly rendering and talking about how this would be faster than your home Wi-Fi. That’s another good thing for some consumers, certainly, but the killer app, which is what this is all about, we don’t know yet and this is why Apple is betting and that’s why … the carriers need Apple to bet because it’s all about the new era,” added Stern.

Krish Sankar is the senior research analyst at Cowen. He said 5G could give Apple stock a boost.

“I would say in terms of the overall event a lot of the specs are largely in line with what the supply chain had been telegraphing for a long time. I thought the price point was very attractive although there was some speculation of the pricing late last week, so largely overall I’d say in-line event. … We did a survey where we found a lot of respondents will be willing to upgrade their smartphones because of 5G. We just think that actually this 5G could be a longer, stronger cycle,” said Sankar.

Apple is a great stock to add to Roth IRA investments.

2. Amazon

In addition to Apple, Amazon has boomed in the wake of COVID-19. Mizuho analyst James Lee said Amazon is a buy because of consistent sales.

“From our proprietary checks using Searchmetrics, U.S. search traffic maintained a consistent growth rate compared to 2Q20 at 14% [year-over-year],” Lee wrote in a note to clients. “With conversion rates rising during the pandemic, we believe that 3Q20 is tracking ahead of consensus revenue growth of 32% YoY, or 8 points of deceleration compared to 2Q20, partially due to the rescheduling of Prime Day this year, ” said Lee.

Lee said the rise in online shopping will help Amazon this holiday season as well.

“By pulling some demand forward, the company is able to smooth out the peak in demand somewhat as it spreads it across a longer period, and exert less pressure on its fulfillment network, while still recognizing all the revenues in the fourth quarter. This is all the more important that with Covid-19 and the need for social distancing, consumers are likely to avoid the rush on physical stores, which typically starts around Black Friday weekend, and instead turn to online to satisfy their shopping needs,” said Lee.

Amazon is a key stock to add to a Roth IRA investment.

3. Netflix

Another stock that’s benefitted from COVID-19 is Netflix (NASDAQ:NFLX). As more people quarantined, they watched the streaming service more than ever.

Steve Chiavarone is a portfolio manager, equity strategist, and vice president at Federated Hermes. He noted that Netflix is performing well because movie theatres are suffering as the coronavirus keeps people home.

“Cinemas are just a really tough space,” said Chiavarone.

NFLX - Flat for the day — Netflix is a top buy to supplement Roth IRA withdrawal

Chiavarone notes that Netflix stock is a growth stock that has staying power.

“The trend towards streaming is certainly in place,” he said. “We’ve seen a lot of the studios change their agreements where you’re now going to have a shorter period of exclusivity in the cinemas before getting programs onto streaming channels. I think in general the space is well-positioned. I think Netflix is the leader in that space and I think the secular trend is at their back,” said Chiavarone.

Jeffrey Wlodarczak is a financial analyst that is also bullish on Netflix stock.

“NFLX offers consumers an increasingly compelling unique entertainment experience on virtually any device, w/o commercials at a still relatively low cost. The company appears to operate in a virtuous cycle, as the larger their subscriber base grows (and their average revenue per user increases) the more they can spend on original content, which increases the potential target market for their service (and reduces existing subscriber churn) + enhances their ability to take future price increases (they are due for an increase as early as Jan 2021) and dramatically increases barriers to entry”, said Wlodarczak.

If an account holder wants to supplement their Roth IRA withdrawal, they can choose Netflix stock.

4. Zoom

Another stock that is a top pick for Roth IRA’s is Zoom (NASDAQ:ZM). The videoconferencing company is a ubiquitous presence since people have to work and attend school from home. BTIG analyst Matthew VanVliet says Zoom is a buy.

Zoom stock is a top stock to supplement Roth IRAs

“Overall the growth of the company has been unprecedented but as it expands well beyond a video-conferencing tool into a core human interaction platform forever augmenting how multi-modal interactions evolve into the future, the growth trajectory appears to only slow slightly,” said VanVliet.

“While much of the legacy environment is simply treading water, Zoom is pushing the envelope on product innovation and what the future of work / re-opening will actually look like rather than trying to form-fit existing tech to previous issues, which we believe will help Zoom emerge as the leading video platform that is pervasive across the entire IT landscape,” said VanVliet.

Zoom will grow as a Roth IRA withdrawal supplement

BofA Securities analyst Nikolay Beliov wrote in a note to clients that he believes that Zoom will continue to grow with new products.

“We believe Zoom’s increasing relevance and continued good execution translate into both near-term and long-term upside ,” wrote Beliov in a note to clients.

“Furthermore, new product releases and enhanced capabilities signal Zoom’s ambition to become a more holistic collaboration and workflow platform, vs a video and [unified communications as a service] solution,” added Beliov.

D.A. Davidson’s Rishi Jaluria also wrote to clients that Zoom stock is a good addition to Roth IRAs to supplement withdrawals.

“Our main takeaway was although [Zoom] has had strong traction in COVID-19, it is still underpenetrated and faces a massive market opportunity with runway for sustained growth post-COVID-19,” wrote Jaluria.

Zoom is a strong stock to supplement Roth IRA withdrawals.

5. Google

Google parent Alphabet (NASDAQ:GOOG) is performing well during the COVID-19 crisis. Ensemble Capital rates Google stock as a buy.

“After rallying by over 20% in July and August, Google’s share price pulled back sharply in September during the market wide correction. We believe that Google’s shares remain undervalued and that while the pandemic has hurt business performance in 2020, that the core value of Google Search, YouTube and their other properties such Google Maps has not been permanently impaired in any way and in fact the post-COVID world likely depends even more heavily on Google’s digital tools,” said Ensemble Capital.

Google stock is a robust stock for Roth IRA holders who want to invest in tech.

6. Microsoft

Another tech stock that is doing well during COVID-19 is Microsoft (NASDAQ:MSFT). Microsoft had performed well because of its cloud technology. Jefferies analyst Brent Thill said that Microsoft is going to continue to rise because of its digital innovation.

“We were overwhelmed by the number of announcements and innovation at Microsoft’s digital event Ignite with some of the most noteworthy product announcements around Teams, communication, and security,” wrote Thill in a note to clients. Thill said he expects Microsoft will hit a price target of 240.

Mizuho Securities analyst Gregg Moskowitz said Microsoft is a strong stock and a good Roth IRA investment in the future.

“We view Microsoft as a diversified business with excellent visibility and these product enhancements should help sustain near double-digit revenue growth for the foreseeable future,” said Moskowitz.

Microsoft stock top for Roth IRA withdrawal supplement

Moskowitz also wrote that cloud technology will help the stock grow.

“Looking forward, we continue to believe Microsoft is positioning for even greater success in cloud,” said Moskowitz.

William Blair analyst Jason Ader also thinks that Microsoft is a buy.

“Microsoft sits in the enviable position of being able to capitalize on salient secular trends such as digital transformation, cloud migration, and DevOps,” said Ader.

Microsoft is a strong stock for Roth IRA withdrawal supplements.

7. Gilead

Gilead(NYSE: GLD) is a pharma stock that is helping people through this coronavirus crisis. Gilead’s COVID-19 treatment remedesivir has been touted as a top treatment that President Trump used during his bout with coronavirus. While remdesivir has not been proven to reduce mortality, it has been proven to reduce hospital visits for coronavirus patients. Raymond James analyst Steven Seedhouse noted that Gilead has some potential for growth.

Gilead stock a key stock for Roth IRA withdrawal supplement

“The updated data continue to suggest RDV provides only incremental benefit to some hospitalized patients but no clear mortality benefit. Recall the original corresponding NEJM publication for this trial pointed to a potential (but not yet stat sig) mortality benefit at day 14 that appeared driven really only by patients with baseline ordinal score of 5 (hospitalized, requiring any supplemental oxygen),” said Seedhouse.

With Gilead’s promising remedesivir treatment, the stock could be beneficial to Roth IRA holders.

8. Pfizer

In addition to Gilead, Pfizer (NYSE: GLD) is another pharma stock that is outperforming during the coronavirus pandemic. With a COVID-19 vaccine imminent, RBC Capital analyst Randall Stanicky rates Pfizer stock as a buy.

“We are encouraged by the data to date and believe Pfizer remains on track to have a clear sense of the vaccine’s profile by the end of October, with potential FDA approval shortly thereafter,” said Stanicky.

David Risinger, equity analyst at Morgan Stanley, also rates Pfizer stock as a good addition to Roth IRAs.

“With the announced deals to divest its Consumer and Upjohn businesses, PFE will be left with a cleaner platform in 2021 and beyond with best-in-class revenue and EPS growth through 2025. Importantly, that growth is not predicated on major pipeline contribution or acquisitions, providing solid visibility,” said Risinger.

“We project solid growth prospects, and the company’s COVID vaccine candidate offers optionality. Pfizer’s financials and dividend are set to adjust in 4Q20 when it completes the Viatris transaction. Pipeline execution will be key to investor perception, given late-decade patent expiration exposure,” added Risinger.

Analysts says Pfizer is a buy for Roth IRA’S

Risinger also predicts Pfizer has strong growth potential.

“Pfizer projects 2025 sales of $55.7 billion, which reflects 6%+ 5-yr CAGR (compound annual growth rate)’20-’25. Pfizer has strong growth potential in both existing and pipeline products – it forecasts $8 billion in incremental sales from each in 2025.

“Non-risk adjusted pipeline revenue is projected to be $15 billion+ by 2025, including $6 billion from Vaccines, $3 billion from Inflammation & Immunology, $3 billion from Rare Disease, and $3 billion from Oncology; risk-adjusted revenue is $8 billion. Prevnar 20V is not included as part of 2025 vaccine pipeline sales because it will cannibalize the existing 13V,” added Risinger.

Pfizer is a strong stock for Roth IRA’s.

9. IBM

IBM(NYSE:IBM) is a reliable dividend stock for Roth IRA’s. The company’s management spoke about its strong cloud tech division with Red Hat.

“Red Hat delivered strong results in the period with normalized revenue growth of 18%”, said IBM.

IBM stock good to prevent Roth IRA withdrawal

IBM noted that the growth was “driven by the synergistic effect of IBM and Red Hat” and that expansion helped IBM grow.

“Last August, we talked about how Red Hat would benefit from IBM’s incumbency in large accounts and leverage our global reach to expand into new markets,” said IBM.

“We’re seeing that where IBM and Red Hat come together, clients are making larger scale architectural commitments and longer-term and more strategic purchases. This quarter we had a significant increase in the number of Red Hat large deals”, added IBM management.

The company also “expanded Red Hat’s presence in underpenetrated focus markets.”

IBM CFO James Kavanaugh also spoke about the company’s strong balance sheet.

“Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity,” said Kavanaugh.

Kavanaugh also touted its strong dividend yield.

“The company also returned $1.5 billion to shareholders in dividends and stock buybacks. “We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy,” said Kavanaugh.

For a strong dividend stock to prevent Roth IRA withdrawals, account holders can pick IBM.

10. NVDA

Nvidia(NASDAQ:NVDA) is a tech company that is performing well with its computing graphics.

Logan Purk is the senior equity analyst at Edward Jones in St. Louis. He details that the recent acquisition of British software company ARM gives NVDA “an all-in-one turnkey solution for AI deployments within data centers and smart electronics, further solidifying Nvidia’s lead within this fast-growing market.”

Purk also notes that its programming system makes the stock a cutting-edge buy.

“Nvidia’s proprietary programming architecture, called CUDA, makes its products easier to use, program and deploy, compared with other products,” said Purk.

“Given the company’s position in growth markets and our optimistic growth outlook, we believe shares are attractively valued for long-term investors,” said Purk.

“We rate Nvidia shares as a ‘buy’,” Purk says.

“In our view, Nvidia maintains an attractive position within its gaming markets, with nearly 70% market share. The company continues to expand its presence in the fast-growing data center and automotive markets, particularly with AI, which should lead growth over the long term,” added Purk.

Norm Conley is CEO and chief investment officer at JAG Capital Management in St. Louis. He said that Nvidia’s growth makes the stock a buy.

“NVDA’s valuation is demanding, but we think it’s reflective of the company’s leadership position in fast-growing end markets,” said Conley.

Conley sees little downside to Nvidia’s growth.

“From a fundamental perspective, we see little to pick on outside of the company’s exposure to an overall sluggish PC market and challenging automotive market given the current macro backdrop,” explained Conley.

Danielle Shay is the director of options at Simpler Trading in Austin, Texas. She also rates Nvidia a buy because of its recent acquisitions.

“Nvidia’s acuisition of (Arm’s) technology is very significant. It’s a space that AMD is not in currently. Because of the ARM acquisition, Nvidia will be able to breach more into the AI space and growth potential,” Shay explains.

Nvidia is a strong tech stock to add to Roth IRA’s.

Roth IRA withdrawals can be beneficial with proper planning

If an account holder need to make a Roth IRA withdrawal, there are many options that can be made. However, prudent planning is necessary to avlid mistakes and still keep the accounts healthy. With TradingSim’s blogs and charts, account holders can find the best stocks in which to invest their IRA’s. TradingSim can also help Roth IRA holders find the best information if they hve to make Roth IRA withdrawals.

When investors are choosing between stocks vs. ETF’s, QQQ(NASDAQ:QQQ) can be an excellent ETF(exchange-traded fund) choice for new investors. In this TradingSim article, I’ll explain why QQQ stock can be a great addition to investors’ portfolios. This article will also explain what top 10 holdings in QQQ are the best for investors who want to start early investing.

What is QQQ stock?

The Invesco QQQ is a popular ETF that tracks the NASDAQ 100, which is full of tech growth stocks. If investors want to own many tech stocks at once, they can choose QQQ stock that holds many tech stocks. The QQQ stock has $120 billion in assets.

What is TQQQ stock?

In addition to QQQ stock, investors can buy TQQQ stock (NASDAQ:TQQQ). The leveraged ETF uses debt and derivatives to increase the returns of the NASDAQ 100. When investors use leverage to track the TQQQ, they can use borrowed capital to buy assets to make the price movement impact grow.

For example, the TQQQ tracks the NASDAQ 100. If the NASDAQ 100 moves up 1%, a regular ETF moves up 1%. However, with a leveraged ETF like TQQQ, a trader can have a 2 or 3% gain if the NASDAQ 100 rises.

Financial expert David Kreinces from ETF Portfolio Management notes the strong performance history of the TQQQ stock.

“The historical performance data strongly favors the Nasdaq-100 3x (TQQQ) for core equity exposure. The unleveraged Nasdaq-100 (QQQ) appears to be the “next-generation S&P 500” and adding moderate leverage can be priceless at times. “In fact, TQQQ returned 80x your money over the past 10-years, while the S&P 500 delivered just under 3x, or 285% in total return,” wrote Kriences.

Kriences advocates that investors who want to choose high-risk ETF’s can pick TQQQ.

“Past performance can never guarantee future results, but a continuation of the TQQQ growth rate above would turn $500 into $2 million within 19 years. Even if the TQQQ rate of return falls by half, to 28% annualized, a $500 investment could still reach $2 million in 34 years. Given this extraordinary long-term growth potential, we named TQQQ the ‘American Dream ETF, ” wrote Kreinces.

ProShares advise caution about TQQQ

While Kreinces says investors should buy TQQQ, buying leveraged ETF’s can be risky for investors. Even the TQQQ issuer ProShares warns traders that keeping the TQQQ stock too long can increase risk.

“Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks,” noted ProShares.

While investing in TQQQ can have a huge payoff, traders should still exercise caution when buying the ETF with leverage.

Why should investors buy QQQ stock to track the NASDAQ 100?

If investors are interested in QQQ stock, they’re making a good choice since it follows the NASDAQ 100. The NASDAQ 100 has some advantages over the Dow Jones. While the Dow Jones only has 30 stocks, the NASDAQ 100 has three times as many stocks in its index. As the Dow Jones changes the stocks in its index, the NASDAQ 100 doesn’t have human input into which stocks are in that index.

In addition to being more rules-based, the NASDAQ 100 is outperforming the Dow Jones. While the Dow Jones had a volatile year, the NASDAQ 100 soared. As Sarah Ponzcek noted in Bloomberg, large-cap tech stocks are a strong buy.

“Last year, when the economy and earnings were booming, the Nasdaq 100 Index put together its best rally in a decade, rising 38%. In 2020, amid a raging recession and plunge in profits, it’s doing a little less well: up 37%,” wrote Ponzcek.

“Megacap tech firms have emerged as unshakable market leaders. Adored for their sturdy balance sheets and business models that not only hold up in a lock-downs but excel, the Nasdaq 100’s performance is making history by the day,” added Ponzcek.

Here are 10 of QQQ’s top tech holdings that are part of the ETF.

1. Amazon

Amazon (NASDAQ:AMZN) is a QQQ holding that had an incredible last quarter. The e-commerce behemoth reaped $89 billion in profits during the nationwide quarantine. As people stayed home, they ordered from the company’s website in record numbers. Because of the massive increase in Amazon’s revenue, CEO Jeff Bezos’ net worth ballooned to $200 billion. During the Q2 2020 earnings report, Bezos spoke about the results and how the company was contributing to keep workers safe during the COVID-19 pandemic.

“As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners,” said Bezos.

Bezos tried to quell the controversy about Amazon having temporary, part-time workers by speaking about the full-time employees the company added.

“We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions,” said Bezos.

In addition, Bezos touted how much money Amazon pumped in to the economy.

“Third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS [Amazon Web Services],” said Bezos.

Amazon wants to increase empire with wearables

With its dominance in e-commerce, Amazon wants to get into the $50 billion fitness tracker market. Amazon is launching its Halo device to sell to consumers. Halo’s vice-president, Melissa Cha, spoke about the research that went into developing the Halo wearable.

“We did a global search to find the best experts. We found cardiologists, fitness experts, and people who had spent their careers researching sleep and wellness,” said Cha.

Analysts say Amazon is a top QQQ holding

Because of its meteoric growth, Daniel Salmon, an analyst at BMO Capital Markets rates Amazon a buy. He said that Amazon’s “long-term opportunity is stronger than ever, and we also continue to see outperformance over the next 12 months.”

In addition to BMO Capital, Wedbush is bullish on the e-commerce stock. Wedbush analyst Michael Pachter wrote in a note to clients the consumer demand led to a short-term strain on Amazon’s supply.

“Consumers are clearly spending more of their time and money shopping online in order to avoid crowds, driving the supply shortages and delivery delays on non-essential items that Amazon has disclosed in [April],” wrote Pachter.

Canaccord’s Maria Ripps said the continued increase in online shopping should help Amazon’s stock in the long term.

“Over the long-term, we[Canaccord] anticipate that the COVID-19 pandemic will accelerate existing eCommerce trends, benefitting platforms such as Amazon,” said Ripps.

Ripps also sees growth from its Amazon Web Services.

“For AWS, we [Conaccord] see revenue growing 36% year-over-year (vs. 34% in Q4) as demand for cloud computing also spiked in Q1 due to COVID-19, leading to pricing power that should drive AWS operating margin back to 27% (vs. ~26% in full year 2019),” said Ripps.

Amazon is a high-performing part of QQQ’s stock holdings.

2. Google

Google parent Alphabet (NASDAQ:GOOG) is another profitable QQQ holding. Google’s Q2 2020 earnings slightly dipped from last year with $38 billion in revenue. However, Google is still performing well overall. CEO Sundar Pichai spoke about how more people used Google services more during the quarantine.

“We’re working to help people, businesses and communities in these uncertain times. As people increasingly turn to online services, our platforms — from Cloud to Google Play to YouTube — are helping our partners provide important services and support their businesses,” said Pichai.

Ruth Porat, Google’s chief financial officer, also spoke about Google’s success with cloud technology.

“In the second quarter our total revenues were $38.3B, driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues. We continue to navigate through a difficult global economic environment,” said Porat.

Google a buy to some analysts

Financial expert Maria Ripps thinks that despite a decline in ad revenue, Ripps says the stock is a buy.

“Somewhat offsetting these advertising trends, we also see COVID-19 likely driving heightened demand for cloud computing as some online businesses see a surge in demand from increased time spent at home while others are forced to migrate systems and employees to remote operations,” said Ripps.

Google is a strong holding in QQQ’s ETF.

3. Apple

In addition to Google, Apple (NASDAQ:AAPL) is a QQQ top holding. The tech giant’s Q3 2020 earnings report surpassed expectations with $59.7 billion in revenue.

CEO Tim Cook spoke about the company’s results.

“Our June quarter performance was strong evidence of Apple’s ability to innovate and execute during challenging times. The record business results drove our active installed base of devices to an all-time high in all of our geographic segments and all major product categories. We grew EPS by 18% and generated operating cash flow of $16.3 billion during the quarter, a June quarter record for both metrics,” said Cook.

Cook also spoke about Apple’s efforts to contribute its profits to social change measures.

“This is a challenging moment for our communities, and, from Apple’s new $100 million Racial Equity and Justice Initiative to a new commitment to be carbon neutral by 2030, we’re living the principle that what we make and do should create opportunity and leave the world better than we found it,” said Cook.

Apple stock split may help QQQ stock grow

Apple recently announced a four-for-one stock split to make the stock more affordable to investors.

“The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020, will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020,” said Apple in a statement.

Morgan Stanley’s Katy Hubert spoke about the Apple stock split.

“In the 3 and 6 months following past stock split, Apple shares have also outperformed the S&P 500, albeit by a lesser degree – by a median of 700bps and 610bps, respectively (1). The most significant post-split outperformance came in C2H14 after the 7-for-1 stock split (2), although this period also coincided with strong outperformance of the iPhone 6,” said Hubert.

Hubert also noted that the stock split may not be as influential on Apple stock as a future iPhone. However, she sees that the stock split will help the company’s stock.

“Nevertheless, we don’t believe the stock-split will be a “sell the news” type of event among institutional investors given the increasing expectations for the fall iPhone launch, and therefore the increase in retail demand following Monday’s stock split is more likely to be a positive catalyst for Apple shares, in our view,” said Hubert.

“Following Apple’s 4-for-1 stock split, we’d expect near-term retail demand for Apple shares to increase, especially given the current market environment (retail traders have accounted for up to 25% of stock market activity during the pandemic vs. 10% in 2019, although we’d note that retail investors have already been able to buy fractional shares, so the overall retail impact may not be as overwhelming as some perceive,” added Hubert.

Apple’s stock soared 30% after the stock split announcement. In QQQ stock, Apple is a valuable holding.

4. Tesla a key QQQ stock holding

Tesla (NASDAQ:TSLA) is a valuable holding in QQQ stock. The company has become the most valuable car corporation worth $209 billion.

Tesla has strong Q2 2020 earnings report

In its latest revenue report, CEO Elon Musk spoke about the company’s $6 billion in revenue.

“First of all, I’d like to thank the Tesla team for exceptional execution in the second quarter despite tremendous difficulties. They’ve done an incredible job, and it’s an honor to work with such a great team. I mean, there were so many challenges, too numerous to name, but they got it done and just what a great group to work with,” said Musk.

“Like I said, it’s just an honor to work with such a great team. And as a result, we were able to achieve our fourth consecutive profitable quarter. And although the automotive industry was down about 30% year over year in the first half of the year, we managed to grow deliveries in the first half of the year. So despite that massive industry decline, we actually went up, ” added Musk.

Musk also touted Tesla’s positive cash flow.

“On cash flows, our cash balance increased to our highest level yet of $8.6 billion, which included free cash flows of over $400 million. This is a strong result on its own despite an increase in capital expenses associated with Shanghai and Berlin, as well as movements in working capital,” said Musk.

Tesla stock split boosts shares

Similar to Apple, Tesla is also enacting a five-for-one stock split to make shares easier for investors to buy. Since the stock announcement, Tesla stock skyrocketed 76%.

Some analysts say stock splits help QQQ stock

Wedbush’s Dan Ives believes the split will help Tesla as a QQQ holding.

“We believe the stock split decision was a smart move by Tesla and its board, given the parabolic move in shares over the past six months, with another stock split by Apple and likely other larger tech stalwarts will follow this same path over the coming months, in our opinion,” Ives wrote in a note to clients.

He added that Tesla and Apple shares should continue to rise after the stock splits.

“I think this was a smart move by the companies and the board[s] and ultimately I think there’s going to be more stalwarts that follow. And I think right now, they’re just in a position of strength if you see what’s happening in terms of the market, of course on the EV[electric vehicle] side with Tesla and then Apple going into a supercycle. And this was the smart move at the right time in terms of the stock split and I view it as putting more sort of gasoline in the tank in terms of these stocks moving higher.”

JJ Kinahan is the chief market strategist at TD Ameritrade. He believes that the stock splits will lead to more demand for Tesla and Apple stock.

“I do think it will add to some increased demand. It’s become a lot more affordable for people overall,” said Kinahan.

Some experts think stock split will hurt QQQ stock

While some analysts are bullish on the stock splits, some are wary of the stock splits. Sarat Sethi, the managing partner at Douglas C. Lane, thinks that the stock split will hurt the long-term investors in QQQ stock.

“I think the idea that you can have more pieces of a pie for the same pie is concerning, especially for long-term investors and I think the ability for some of the retail investors to get in there and trade. So, that’s kind of making me a little wary when you look at how fast some of these stocks are moving when they’re announcing splits and some of the stocks that are just moving in these huge ranges even though the broader market’s not moving”, said Sethi.

Leon Cooperman is the Omega Family Office chairman and CEO. He doesn’t think that the stock split will help QQQ stock.

“Everybody understands that splits don’t create value. My dad once told me if he gave me five singles for a $5 bill, I’m no better off. … Apple’s up 30% with the S&P up 6% and everybody’s talking about the split. The splits don’t create any value,” said Cooperman.

Roger McNamee, co-founder of Elevation Partners, is also bearish on tech stocks in the QQQ ETF.

“I look at the market. I look at the stock split. And you never know when the momentum’s going to end, and I’m not trying to make a call on that issue. I’m just saying that, for me, this is enough. It’s been a great ride. And it’s not just Apple that I’ve been selling. I’m looking broadly through my tech portfolio — and I own a bunch of names — and I have been reducing positions across the board simply because I want to reduce the level of risk I’m taking in the market,” said McNamee.

5. Facebook

Facebook a profitable holding in QQQ stock

QQQ holdingFacebook (NASDAQ:FB) is a profitable QQQ holding. The social media giant had a healthy Q2 2020 earnings report. Chief financial officer Dave Wehner spoke about the company’s results.

“Q2 total revenue was $18.7 billion, up 11% or 12% on a constant-currency basis,” said Wehner.

Wehner noted that Facebook’s ad revenue increased as well.

Facebook stock a profitable QQQ stock holding

“Had foreign exchange rates remained constant with Q2 of last year, total revenue would have been $297 million higher. Q2 ad revenue was $18.3 billion, up 10% or 12% on a constant-currency basis,” said Wehner.

Maria Ripps said Facebook could benefit from people meeting more online and from “virtually all social interactions have been moved online during the pandemic.”

6. Netflix

Netflix (NASDAQ:NFLX) is a top holding in QQQ. The streaming company had an impressive Q2 2020, with $6.15 billion in revenue. During the quarantine, many people stayed home and watched the thousands of shows available on the streaming service, like Tiger King, Self-Made, and Love is Blind. After the last earnings report, chief financial officer Spence Neumann spoke about the positive results.

“We just added 10 million members, which is the largest growth we’ve ever had in a second quarter. And if you look at the — so we kind of look at the totality across the Q2 and Q3 period”, said Neumann.

Financial experts bullish on Netflix stock

Because of Netflix’s strong subscriber growth, Jefferies analyst Alex Giaimo said Netflix is a key QQQ holding.

“While the soft third-quarter outlook may put the stock in the penalty box near-term, there is no change to our positive long-term thesis. We view Netflix as a consistent high double-digit growth story with sizable margin expansion over time,” said Giaimo.

In addition to Jefferies, Jeff Sica is a financial advisor that is bullish on Netflix stock. He thanks Netflix has an advantage because of its dominance in online content. The streaming service is often the first choice for producers of programming that reaches a wide audience.

“The real story with Netflix is that many producers always want Netflix to be their first choice of distribution. This is why they will continue to have the advantage in content,” said Sica.

Netflix is a tech stock that helps make QQQ stock a top pick for investors.

7. Zoom

Videoconferencing website Zoom (NASDAQ:ZM) had a spectacular Q2 with revenue of $663 million. That number surpassed the expected $500 million Wall Street expected. During the worldwide quarantine, millions of people used Zoom to work and communicate with each other. Zoom’s chief financial officer Kelly Steckleberg spoke about the results.

“Q2 was a remarkable quarter for Zoom as we continued to rapidly grow and invest in our business to meet the demands of our customers and communities. Let me start by reviewing our financial results for Q2, then discuss our outlook for Q3 and the increased view of our full-year FY ’21. Total revenue grew 355% year over year to $664 million in Q2,” said Steckleberg.

Analysts rate Zoom a buy for investors

Zoom’s stock is part of a reason that QQQ stock is a top pick for investors. Walravens is bullish on the QQQ stock holding.

“I have been doing this for 20 years, and I have never seen a story like this one. And it shows you the power of a really well-run company with a good mission that has exactly the service everyone needs in a crisis,” said Walravens.

Morgan Stanley also rates Zoom a buy. Before the company’s earnings report, the firm expected Zoom to surpass Wall Street expectations.

“Morgan Stanley analysts said ahead of the report that buy-side analysts expected Zoom to beat its own forecast by about 30%”, said the firm.

8. Nvidia

As a tech holding in QQQ stock, Nvidia (NASDAQ:NVDA) is a stock that is performing well in the ETF. The chipmaker had an impressive Q2 2020 earnings report. Founder Jensen Huang spoke about the company’s record $3.8 million revenue.

“Adoption of NVIDIA computing is accelerating, driving record revenue and exceptional growth. Growth in GeForce gaming accelerated as gamers increasingly immerse themselves in realistic virtual worlds created by NVIDIA RTX ray tracing and AI,” said Huang.

The company noted that despite COVID-19, its next-generation gaming cards will help Nvidia’s profits. During the pandemic, the gaming industry has soared as many people stay home. Nvidia provides many of the gaming cards for popular games like Fortnite.

“Despite the pandemic’s impact on our professional visualization and automotive platforms, we are well-positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution around the world,” said Huang.

Analysts bullish on Nvidia stock

Wells Fargo analyst Aaron Rakers noted that the Ampere graphics processing units will have a price increase. That upgrade can lead to Nvidia stock growth.

“The new Ampere lineup carries the same price points as the prior Turing GeForce line-up w/ GeForce RTX 3080 priced at $699. This compares to some reports pointing to a potential like-to-like increase; note that prior gen Turing (2018) and Pascal (2016) had $100 and $50 price increases, respectively,” said Rakers.

Mizuho analyst Vijay Rakesh also thinks the graphics processing units will help boost Nvidia stock.

“We believe the combination of a strong 3D rendering GPU platform boosted by RTX and AI drive a step up in its value proposition for developers and gamers and create a deeper moat versus the competition for NVDA,” said Rakesh.

Cowen also says Nvidia key part of QQQ stock

Cowen analyst Matthew Ramsay also thinks Nvidia’s chips for gaming devices make the stock a buy.

“We believe Nvidia is pricing the cards aggressively to ensure it maintains its dominant gaming ecosystem leadership and wallet-share given upcoming new GPU launches from Advanced Micro Devices Inc.’s Big Navi line, and new Sony/Xbox game consoles,” said Ramsey.

“Coupled with strong underlying gaming demand driven by COVID-19, we do expect the 3080 to represent a compelling upgrade for consumers, and expect that product cycle to drive gaming growth for the next several quarters,” added Ramsey.

9. Microsoft

Microsoft (NASDAQ:MSFT) is a top tech holding that is in QQQ stock. The tech giant had a profitable Q2 2020. With many people home quarantined, many people used Microsoft’s cloud technology. Chief financial officer Amy Hood touted the results.

“This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Gross margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency, and earnings per share was $1.51, increasing 37% and 41% in constant currency”, said Hood.

“Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings,” said Hood.

Microsoft also spoke about the company’s cloud growth with its Azure division.

“On a significant base, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments,” said Hood.

Experts bullish on Microsoft stock

Because of Microsoft’s Q2 2020 impressive earnings report, Amana Mutual Funds says the stock will continue to grow.

“Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor. Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive,” said Amana.

Microsoft’s Azure cloud technology has also made the company’s stock a buy to other financial analysts.

Wedbush’s Dan Ives said that Microsoft “has seen robust cloud deal activity around Azure in the field during the June quarter with modest cloud upside expected, as this current work from home environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board.”

As more customers use Microsoft Teams and other products to work from home and communicate, Microsoft is a solid part of QQQ stock.

10. Adobe

In addition to Microsoft, Adobe (NASDAQ:ADBE) is a tech holding that’s boosting QQQ stock. Adobe had a strong Q2 2020, with more customers using the company’s Photoshop and Document Cloud e-signing technology. The software company’s CEO Shantanu Narayen touted the company’s robust results.

“Adobe drove strong Q2 performance across Adobe Creative Cloud, Adobe Document Cloud, and Adobe Experience Cloud. We delivered $3.13 billion in revenue in Q2, representing 14% year-over-year growth. GAAP earnings per share for the quarter was $2.27, and non-GAAP earnings per share was $2.45,” said Narayen.

“We continued to drive strong adoption for Adobe Sign, our cloud-based electronic signature solution, with usage increasing 175% since the start of our fiscal year. Mobile usage exploded with Acrobat Reader installations increasing 43% year-over-year and Adobe Scan installations, up 66% year-over-year,” added Narayen.

Experts say Adobe is vital part of QQQ stock

With Adobe’s strong last earnings report, Amana Mutual Funds say investors should add QQQ stock to their portfolio.

“Digital media leader Adobe has also appeared as a top contributor over multiple years. Its appreciation wasn’t as great but it’s a large position, leading to the strong contribution,” said Amana Mutual Funds.

Qualivian Investment Partners is also bullish on Adobe as part of QQQ stock. Despite Adobe’s diminished sales in its Digital Experience division, but still is a top holding in the QQQ ETF.

“ADBE Reported strong Q2 results in the Digital Media and Document Cloud segments. The third segment, Digital Experience, was negatively impacted by COVID which led to a decline in advertising and delays in booking and consulting services for enterprises. COVID also negatively impacted the small and medium-size business segment. The business model and market position of Adobe remains strong and we have confidence in it as a long-term holding,” said Qualivian Investment Partners.

Adobe’s 14% growth from a year ago shows that many people are dependent on tech to navigate working from home during the COVID-19 pandemic.

QQQ stock a good addition to investors’ portfolios

With the most profitable tech holdings in the world, QQQ stock would be a strong choice for any trader or investor. QQQ is an ETF that is a one-stop shop for the best tech stocks on the NASDAQ. With TradingSim’s charts and blogs, traders can monitor QQQ and practice trading before diving into one of the most prominent ETFs in the stock market.

Being a new investor can be daunting. However, if if you invest on your own, with an early investment, you can build a healthy portfolio. This TradingSim article will help guide investors that want to pick stocks on their own. This article will also have the top five stocks that investors can pick when they invest on their own.

Why are people hesitant to invest on their own?

In this volatile bear market and “corona-conomy”, you may be hesitant to invest on your own. If experienced financial planners can lose money on Wall Street, then many inexperienced investors may feel intimidated.

However, now may be the best time to invest on your own. With many stock prices falling, there is an opportunity to buy stocks at more affordable prices. You don’t have to be an experienced day trader to invest on your own. It can be beneficial to invest on your own.

Why should you invest on your own?

When people invest on their own, they can start with a small amount like $50. You can also put in larger amounts like $1,000. Financial planner Jeff Rose notes that investing on your own can pay off if you act early.

“Opportunity cost is that unseen payoff you miss out on because you’re busy doing something else,” said Rose.

401ks a great way to invest on your own

401k - Nest Egg

If you have a 401k retirement account, you’re already investing on your own. The retirement accounts put your money into are invested in stocks and ETFs that develop more income. The 401ks are tax-free as long as you don’t make early withdrawals.

Financial expert Jeff Rose also spoke about the importance of investing in 401k retirement accounts.

“You can think of it as the answer to the question, how much more would I be ahead if I chose a different path? In my own young life, the biggest opportunity cost — or financial mistake — was not opening a Roth IRA when I was 18 or 19 years old,” said Rose.

401ks are a great way to start investing on your own with an arranged list of stocks, ETFs, and mutual funds.

Direct stock plans are another option to invest in on your own

In addition to 401ks, direct stock plans are an option to invest on your own. Direct stock purchase plans allow investors to purchase stock directly from a company. Many major companies like Exxon Mobil offer direct stock plans.

ExxonMobil stock is good stock if you want to invest on your own

Investors can buy stocks once or on an automatic recurring basis through a transfer agent. The transfer agent buy or sell shares on a set basis on behalf of the company. The agent also tracks the records and transactions for the investor.

When investors invest a fixed amount every quarter or so, they are dollar-cost average investing stocks. When dollar-cost averaging, investors buy more shares when the price of a stock is low. Conversely, they buy fewer shares when a stock’s price rises.

Direct stock purchase plan fees vary according to the company. There may be initial setup account fees and automatic investment fees as well. In addition to those fees, you also have to pay fees when you sell stock shares as well. When investing on your own, you can directly buy shares of companies through stock purchase plans.

Dividend reinvestment plans another investment option

If you want to trade on your own, dividend reinvestment plans (DRIPs) are another investment option. When you invest in stocks that pay dividends through retirement plans, you can take the money from that payment and reinvest in the stock market. Once you sign an agreement with a company, you can reinvest the dividends to earn more money.

DRIPs can lead to compounding returns if you take dividends to reinvest them. If you keep reinvesting your dividends, you can increase your profits over the long-term instead of taking cash in the short-term. Some benefits are commission-free transactions and discounted stock share prices.

For example, if you buy Ford(NYSE:F) stock at $5 a share, you can get a dividend of $0.50. In this example, Ford’s stock will rise 10% and the dividend will rise $0.05% every year.

If you invest $20,000 when the stock price is $20, you can end up with 1,000 shares. At the end of the first year of investment, your dividend payout would be $500. If you reinvest that sum, after three years, you can increase your investment from $20,000 to $28,471.

Robo-advisors can help if you’re investing on your own

If you don’t want to use financial advisors but still want help picking stocks, you can still use robo-advisors to help with these plans. Robo-advisors are digital programs like Betterment and Wealthfront that help investors pick stocks. After you answer a questionnaire, the automated investment manager chooses stocks and ETFs that match your financial goals. They can also rebalance your portfolio

Investing on your own can be more affordable with robo-advisors. While human financial advisors can charge a 1% expense fee for trades, robo-advisors can charge less. Robo-advisor fees can be just 0.25%.

Robo-advisors can lower tax liabilities for investing on your own. Robo-advisors can help investors write off tax losses as well. Through tax-loss harvesting, you can sell a losing investment, general capital losses, and claim those losses to get a tax credit.

Rees Mason is a Merrill Lynch wealth advisor. She noted that robo-advisors can be combined with financial analysts’ advice to invest.

“The younger generation demands a higher level of value and want to understand exactly what they’re paying for. I don’t worry about robo-advisors because technology is used in tandem with human advice. Technology can make us more efficient and it’s great for people when they’re first getting started,” said Mason.

When investing on your own, robo-advisors can be a good guide.

What are the advantages of investing on your own?

While investing in a 401k is helpful, the stocks aren’t always your choice. If you invest on your own, you can have more control over your stock picks. You can also choose stocks that you are following closely. For example, if you’re a follower of Apple’s products, investing in Apple stock can be a good choice for investing on your own.

Apple stock can be a good stock for investing on your own

Investing on your own can help you save money. Stockbrokers and brokerage firms are very expensive. If you invest on your own, you can save thousands of dollars a year in brokerage fees.

In addition to saving you money, investing on your own gives you more hands-on financial knowledge. By studying a company’s quarterly revenue reports, balance sheets, and financial analysis blogs like TradingSim, you can get more information on how stocks are performing before you invest.

What are some disadvantages of investing on your own?

While investing on your own, there are downsides to investing on your own as well. Monitoring the stock market takes up hours of time and you may not have that much time to watch Wall Street.

In addition to not having time for active investing, investing on your own can lead to more emotional investing as well. Because you’re more heavily invested and not passively invested, you’re more likely to trade stocks more recklessly. Panic buying and selling based on Wall Street volatility can hurt your portfolio.

Financial planners can add objective advice if you need extra help and guidance. However, investing on your own can be beneficial if you have enough discipline and time.

What are your financial goals before investing on your own?

When you’re investing on your own, you have to consider your financial goals. If you want to purchase a home, you will have to be disciplined and invest a greater sum of money. However, if you want to just make short-term gains, you can invest a smaller amount of money.

Considering your financial goals are also pivotal if you want to make the most of your money. If you want to have money for retirement in the future or have a shorter-term goal, investing on your own is crucial if you want to meet your financial goals.

Tips to remember when you invest on your own

When you invest on your own, there are many precautions to take. Here are just a few things that you need to remember when you trade stocks by yourself.

Conduct a lot of research on stocks before you trade. When you start trading stocks, you must conduct a lot of research. By studying financial blogs, like TradingSim, investors can learn more about what stocks they want to trade.
Practice trading stocks before actual investment. Before investing on your own, you can practice trading stocks on TradingSim. With stock trading simulation, you can practice investing stocks before you put your real money on the line.
Focus on a few stocks you know. Once you research stocks and practice trading stocks on TradingSim, you can dive in and invest on your own in a few trusted stocks. You can start with low-risk value stocks like Coca-Cola (NYSE:KO) to start.
Know your financial limits. When you’re investing on your own, have a limit to how much you invest. If you have a set limit on how much you trade, it will help prevent you from suffering too many losses. In addition to losses, it’s important to have a set target for gains as well. Once you meet a certain target of gains for the trading day, you should stop at that amount once you reach that goal.
Create a trading journal. When you start investing on your own, you should keep track of your trades. Keep track of which trades were successful and which ones weren’t. You can use the information to adjust your trading strategy.
Seek advice from other traders and financial expert advice. Even if you don’t use professional traders, you should still keep in contact with other traders and other financial experts. Trading groups online can help you get more support as you trade. Reading the expertise of other financial analysts can also help you while you’re investing on your own.

Robinhood makes investing on your own easier

The Robinhood app has made it even easier to invest on your own. Noah Whinston, a Robinhood trader, said that the app makes trading more interesting.

“Robinhood feels very gamified. The act of trading stocks was boring for a really long time, and even today, if you do it through Charles Schwab, it would seem boring. Robinhood makes it feel frictionless and fun and easy, and it can be very, very addicting,” said Whinston.

Investing on your own can be advantageous if you have available funds to risk. The trading app has democratized trading and made it much easier to start trading stocks.

Tesla stock is a top stock for investing on your own

Dave Portnoy popularizes investing on your own

Barstool Sports founder Dave Portnoy has made day trading more popular with his flamboyant social media posts. He touts his success as a trader. Portnoy also says he’s a better investor than legendary investor Warren Buffett.

“I’m not saying I had a better career. … He’s one of the best ever to do it,” he said. “I’m the new breed. I’m the new generation. There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact,” said Portnoy.

Many traders say that with trading apps, they can find success. While investing on your own, you should proceed with caution.

Invest on your own with caution on Robinhood

While Portnoy and other traders say that investing on their own is a fun game, there are downsides to investing on the Robinhood app as well. Tyler Grant, a Robinhood user, says Portnoy has helped some new traders get into investments.

“His legacy is going to be the fact that he got people who realized they can get in the game and get in the game really cheaply,” said Grant.

However, Portnoy recently lost $220,000 on the E-Trade trading app. His rant about the loss on social media got him banned from the site.

“I’m down $220k now! Now I think I have to bankrupt E-Trade. I think I have a vendetta against E-Trade,” said Portnoy.

Robinhood not only option for investing on your own

Eric Balchunas, a financial expert, noted that low-cost index funds are a good option for investing on your own.

“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds,” said Balchunas. “More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads.

Barclays analyst Ryan Preclaw said Robinhood’s returns aren’t as perfect as they seem.

“More Robinhood customers moving into a stock has corresponded to lower returns, rather than higher. “And while it’s true that many high-return stocks have had a substantial increase in retail ownership, low-return stocks have also had a big increase.”

Financial expert advises people investing on their own

While Portnoy and other day traders are touting their gains in the stock market, financial experts advise caution. Lauren Simmons, a former stock trader at the New York Stock Exchange, says investors should make sure they meet certain criteria before they invest on their own.

“It’s not just about investing in the market, but what is your wealth confidence overall? Do you have money in retirement? Do you have an emergency fund?” asked Simmons.

She also advises independent traders to ask more questions about their financial stability before they invest.

“Do you have savings? Credit card debt? Student loan debt? If you have any of the above, conversations about the stock market shouldn’t be coming out of your mouth. We are reaching historic highs again, and we are in a global pandemic,” said Simmons.

Low-risk trades in stocks are best options for investing on your own

Even though many day traders are discounting the expertise of expert investors like Warren Buffett, that may not be a wise choice. Eric Balchunas, a financial analyst with Bloomberg News, noted that low-risk investments may be best if you’re investing on your own.

“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds. More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads,” said Balchunas.

Balchunas also wants traders to understand that they will learn about how to trade stocks from trial and error.

“And it’s very likely Robinhood’s day traders will arrive at the same conclusion at some point. Whether it ends in laughter or tears, it will be an education they can use for the rest of their lives,” said Balchunas.

When you’re investing on your own, conducting research, assessing your financial needs, and choosing low-risk options may be your best choice.

Top 5 stocks that you can choose on your own

These five stocks are a top choice if you want to invest on your own.

1.Microsoft

Microsoft(NASDAQ:MSFT) is a value stock that is a relatively stable choice for investing on your own. The established tech stock that has performed well during the COVID-19 crisis. Because of Microsoft’s cloud services, the corporation had a better-than-expected Q3 2020. Microsoft CEO Satya Nadalla spoke about the positive results.

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security – we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything,” said Nadella.

“Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” added Nadella.

Microsoft is a top stock for investing on your own

Amy Hood is chief financial officer at Microsoft. In a statement, she spoke about the positive revenue report.

“In this dynamic environment, our sales teams and partners executed a solid third quarter, with Commercial Cloud revenue-generating $13.3 billion, up 39% year over year,” said Hood.

“We remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth,” added Hood.

Microsoft Q4 earnings show continued strength

In its most recent Q4 2020 earnings report, Microsoft continued to have strong revenue. Nadella spoke about Microsoft’s Q4 2020 positive results.

“We delivered record results this fiscal year, powered by our commercial cloud which surpassed $50 billion in revenue for the first time, up 36% year over year. The last five months have made it very clear that digital tech intensity is key to business resilience,” said Nadella.

Financial analysts recommend Microsoft stock if you to invest on your own

If you’re investing on your own and want an expert analysis to help make a decision, many are bullish on Microsoft stock. Dan Ives from Wedbush praised Nadella’s decision to close Microsoft stores to focus on its cloud technology.

“This is a tough, but smart strategic decision for (CEO Satya) Nadella & Co. to make at this point. The physical stores generated negligible retail revenue for MSFT(Microsoft) and ultimately everything was moving more and more towards the digital channels over the last few years,” said Ives.

Microsoft stock is a top stock for people who invest on their own

“That said, in this COVID-19 environment this was the right time for Redmond to rip the band-aid off and close the stores strategically speaking,” added Ives.

If you’re investing on your own, it’s key to pick an established stock that advances with new tech. When investing on your own, traders can buy Microsoft stock.

2. Google

Google(NASDAQ: GOOG) parent Alphabet is another stock that is a solid choice if you’re investing on your own. The search engine giant has a well-performing stock. Google’s Q1 2020 revenue totaled $41 million. Google CEO Sundar Pichai noted that the tech giant’s stock is performing well because of its wide usage during the COVID-19 pandemic. In a statement, Pichai touted its growth in a statement.

Google is a top stock if you invest on your own

“Given the depth of the challenges so many are facing, it’s a huge privilege to be able to help at this time. People are relying on Google’s services more than ever, and we’ve marshaled our resources and product development in this urgent moment,” said Pichai.

Google’s ownership of YouTube also makes the stock a top stock if you want to invest on your own. Pichai noted that the video-sharing site added to Google’s profits.

“We are now adding roughly 3 million new users each day and have seen a 30-fold increase in usage since January. There are now over 100 million daily Meet meeting participants,” said Pichai.

Google a buy for financial experts for people investing on their own

With Google’s strong Q1 performance, many financial analysts see Google stock as a buy if you want to invest on your own.

Canaccord Genuity analyst Maria Ripps noted that Google stock is a buy because of its cloud computing growth.

“We see Google likely benefiting as the pandemic could be a tailwind for ad budgets shifting online, momentum in Google Cloud supporting consolidated growth, and Other Bets providing optionality for patient investors,” said Ripps.

In her note to clients, she also noted that Google is a buy because of its strong balance sheet.

“This, coupled with prudent expense management, a strong balance sheet, and share repurchases, gives us comfort around Alphabet’s ability to successfully withstand this near-term disruption,” wrote Ripps.

If you want to invest on your own, Google is a strong stock with impressive returns.

3. Apple

Apple (NASDAQ:AAPL) stock is another good choice if you want to invest on your own. The tech giant had a successful Q2 2020 with revenue of $58.3 billion. That’s a 1% increase from a year ago.

Apple’s CFO, Luca Maestri, noted that Apple’s robust device sales helped drive the company’s profits.

“Our active installed base of devices reached an all-time high in all of our geographic segments and all major product categories. We also generated operating cash flow of $13.3 billion during the quarter, up $2.2 billion over a year ago,” said Maestri.

Apple also had strong guidance for its future earnings.

“We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy,” said Maestri.

Apple is a buy for financial analysts

Because of Apple’s strong Wearable device sales and positive guidance for Q3 2020, many financial experts day the stock is good pick if you’re investing on your own.

Apple stock a top stock if you’re investing on your own

Morgan Stanley lead analyst Katy Huberty thinks that Apple stock is a buy if you want to invest on your own. She wrote in a note to clients that Apple has diverse revenue streams beyond iPhones that will help drive the corporation’s growth.

“Investors are coming to realize that Apple may not be as dependent on significant iPhone cycles to sustain growth as they once thought, and that the ecosystem Apple has created is differentiated and worthy of a platform valuation multiple,” wrote Huberty.

Amana Mutual Funds agrees that Apple stock will continue to climb. The fund company notes even though iPhone sales are down, Apple’s successful Services division makes the stock a buy.

“Despite slowing iPhone sales, Apple’s services businesses have developed into meaningful contributors to revenue, with highly attractive margins,” wrote Amana Mutual Funds in a note to clients.

If you want to invest on your own, Apple is a stable stock that will offer steady returns.

4. Pfizer

Pharmaceutical stocks are great options if you want to invest on your own. The corporation’s stock surged after announcing a $2 billion deal with the government to produce a COVID-19 vaccine. Pfizer will deliver 100 million doses of the vaccine for free to patients if the vaccine is approved. Health and Human Services Secretary Alex Azar spoke about the Operation Warp Speed program.

“Through Operation Warp Speed, we are assembling a portfolio of vaccines to increase the odds that the American people will have at least one safe, effective vaccine as soon as the end of this year,” said Azar in a statement.

“Depending on success in clinical trials, today’s agreement will enable the delivery of approximately 100 million doses of vaccines being developed by Pfizer and BioNTech,” added Azar.

Pfizer has strong Q1 2020 earnings report

In addition to this deal, Pfizer profits increased in its last earnings report. Despite the coronavirus crisis, the corporation saw growth in its biopharmaceutical division.

“Our strong performance in the first quarter highlights the resiliency of our business even during the most challenging times. The Biopharma business grew 12% operationally, driven by strong performances from many key brands,” said Pfizer in a statement.

Pfizer had an optimistic outlook for the remainder of 2020. Chief financial officer Frank D’Amelio spoke about the guidance for the rest of the year.

“Despite the impact of COVID-19, 2020 is still expected to be a transformational year for Pfizer. Following the pending close of the Upjohn-Mylan transaction, New Pfizer will be positioned to deliver revenue and adjusted diluted EPS (earnings per share) growth that is expected to be among the industry leaders,” said D’Amelio.

“New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” added D’Amelio.

Pfizer a top stock if you’re investing on your own

Mizuho Securities analyst Vamil Divan rated Pfizer stock as a top choice if you want to invest on your own. Divan noted in a letter to clients that investors were hopeful about the potential Pfizer COVID-19 vaccine.

“We had several discussions with investors today on the back of the initial data, with much of the discussion focused on the commercial potential for a successful SARS-CoV-2 vaccine, ” wrote Divan.

“The company has mentioned that it will look to price a potential vaccine in line with other commercially-available vaccines, suggesting to us a potential blockbuster commercial opportunity, depending on the vaccine’s clinical profile and the ultimate competitive landscape,” added Divan.

If you want to invest on your own, Pfizer is a top choice for traders.

5. Netflix

When people were quarantined, Netflix views-and shares- rose. The streaming giant’s stock would be a good choice if you want to invest on your own. In its Q2 2020 earnings report, Netflix reported an increase in revenue to $6.15 billion. The company’s chief financial officer, Spence Neumann, spoke about the growth in Netflix subscribers during the worldwide shutdown.

“We have to look at it in the context of what just happened in Q2. And we just added 10 million members, which is the largest growth we’ve ever had in a second quarter,” said Neumann.

Neumann also noted that the growth in subscriber numbers comes from international members.

Netflix stock a good choice if you want to invest on your own

“So it’s very broad-based, and you can see that these members are coming in from everywhere in the world, a few million each in APAC[ Asian and Pacific American countries] and EMEA[ Europe, the Middle East, and Africa] and U.K. and then a couple of million in Lat Am[Latin America]”.

Financial analysts says Netflix a good choice if you invest on your own

With a mostly positive revenue report, Morgan Stanley’s Benjamin Swinburne says that Netflix should do well once it increases its production overseas for the company’s programming.

“Finally, with the majority of Netflix’s production occurring outside the U.S. combined with massive efforts to re-imagine production in a post-COVID world and selectively acquiring third party content, 2021 original deliveries should be higher than 2020 for the year and in each individual quarter,” wrote Swinburne in a note to clients.

Swinburne also wrote in a note to clients that the second half of 2020 will be good for Netflix with its high-profile available content.

“The first half of 2021 might face tough comparisons, but the second half should bring a stronger content slate than what will be seen this year, ” added Swinburne.

In addition to Morgan Stanley, Jefferies analyst Alex Giaimo also recommends Netflix stock if you want to invest on your own. In a note to clients, he touts the company’s subscriber growth.

“While the stock ran a bit faster than near-term fundamentals could support, let’s not lose sight of the fact that Netflix just added ~26 million subscribers in six months,” wrote Giaimo.

Giaimo also notes that Netflix’s subscriber growth may slow down when live sports returns. However, the company’s positive cash flow makes the the stock a good pick for investors.

“Subscriber growth will slow significantly in 2H20[the second half of 2020], but cash in the door now is better than cash in the door three months from now,” wrote Giaimo.

Because of Netflix’s increased viewership and cash flow, the streaming company’s stock is a top choice for investing on your own.

Investing on your own can be done with research and patience

If you’re investing on your own, you can overcome your fears and doubts to perform well in the stock market. You can simulate trades on TradingSim to perfect your strategy or read TradingSim blogs to get investing insight. With patience, research, and maybe even help from other investors, you can find the best stocks for you.

There are many advantages to start investing early in life. If an investor builds their portfolios in their 20’s or even 30’s, they can start wealth creation sooner. This TradingSim article will explain to investors the top 7 reasons to build a portfolio even if they’re new to investing in stocks.

Why do people put off investing?

The recent bear market has scared people from investing in the stock market. The recent headlines about the economic downturn could make people hesitant to invest. However, investing can be the best way to build wealth during a turbulent time in the stock market. Kelly Welch, wealth advisor at Girard, advises people to start investing early regardless of the current economic uncertainty.

“Timewise, you may wait for the market to settle down, but no one knows when or if this will happen with any certainty. But if you sit on the sidelines, you’re not in the game,” said Welch.

Here are seven reasons that starting investing early can be beneficial for wealth creation.

1. Starting investing early gives people time to build wealth

When people start investing early, they have extra time to wait out the volatility of the stock market. Financial expert Suze Orman says that new traders should invest in the VTI (Vanguard Total Stock Market) ETF. When investing in stocks vs. ETFs, ETFs, or exchange-traded funds can be a safer option for new investors.

“When the time is right, I would be dollar-cost averaging every single month with a specific sum of money into the ETF with the symbol VTI. And do it at a discount brokerage firm where there are no commissions whatsoever,” said Orman.

Staring investing early in ETFs can help build wealth

She recommends dollar-cost averaging for investing early. In dollar-cost averaging, investors put a set amount of money into a stock for a long period of time. Starting investing early with a set amount of money each month can help build wealth sooner.

Orman also recommends saving money when investors are younger. She contends that if investors start investing early, they won’t have to play invest more money when they’re older.

“I would much rather see you invest a specific amount of money when you are young, a lesser amount of money, than waiting and have to invest five or six times [as much] when you are older,” said Orman.

Orman also said that it doesn’t matter how much an investor puts in the stock market as long as they start early.

“The key isn’t the amount, the key is the time,” said Orman.

Compound interest helps increase profits

In investing, compound interest is a key reason to start investing early. By investing early, an investor can increase profits over the long run.

Albert Einstein noted that “ Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t … pays it.” Compound interest is the interest added to an investment’s initial capital and interest that accrued over prior periods.

Here are two examples of how investing early can pay off and increase compound interest.

Malcolm starts investing in a retirement account at 28 with a 7% annual rate of return. He invests $5,000 a year until he retires at 58. After 30 years, he has $150,000 in his account.

Janelle starts investing early at 18 in the same retirement account with the same 7% rate of return. She invests the $5,000 a year also until she retires at 58. After 40 years, she’s accumulated $200,000.

Because Janelle started investing early and kept faithfully setting money aside, she gained more income in retirement than Malcolm. While investments are volatile, a slow and steady investment can help to increase income regardless of what happens in the stock market.

Starting to invest early can help young people meet financial goals

If investors start in their 20s, they can take a small amount of money and make it grow. Anthony Pellegrino, founder of Goldstone Financial Group, notes that starting to invest early can even lead to an early retirement.

“The consequence of waiting to invest is significant”If you start investing when you’re 22 and average an 8% rate of return, you can save as little as 12% of your salary, including an employer match, and be ready to retire by the time you’re 62,” said Pellegrino.

When investors start investing early in their 20’s, they can reach financial goals other than retirement. Even if an investor wants to buy a home, investment income at an early age can help a trader reach that goal quickly. Daniel Hill, president of Hill Wealth Strategies, said putting money aside early can help investors achieve their goals.

“Typical thinking at this age is to wait, simply because they have time. While having time is true, I discourage my 20-something clients from waiting because the sooner they begin saving, the sooner they can obtain their financial goals,” said Hill.

“Shorter-term goals, like building a safety net or setting aside a down payment for your first home, should be invested more conservatively,” added Hill.

2. Investing early leads to automatic savings

Dollar-cost averaging and starting investing early can start with retirement accounts like 401ks. Robert Farrington, founder of College Investor, noted that automatic saving through is a great way to start investing early.

“The easiest way to get started investing is to do it automatically, just like a 401k. If you want to contribute the max to your Roth IRA each year, set up direct deposit from your paycheck to automatically deposit $192.30 (if paid bi-weekly) into your IRA account. Most brokers offer this option, but you can simply ask for the broker’s routing number and then your account number,” said Farrington.

Regular 401K contributions help build wealth

Graham Williams is the co-founder of Optimist Retirement Group and a financial expert. He advocates matching a 401k contribution from an employer to gain the most income from investments.

“Maximize your tax-deferred, employer-matched investment options first before investing in other options. The combination of dollar-cost averaging, tax savings and a potential employer match creates the ultimate compound interest machine,” said Williams.

If investors want to start investing early in a passive way, contributing to a 401k or other kind of retirement account is key.

Starting to invest early can involve picking value stocks like IBM

Divam Mehta is a certified financial planner with Mehta Financial Group. He advocates that investors start investing early, no matter how little the amount.

The idea is to just get started,” Mehta says. “Allocate a fixed amount that will automatically be invested into an investment account from a checking account. Make it part of the monthly budget.”

3. It’s never been easier to start investing early

With trading apps like Robinhood, it’s never been easier to invest. If new investors are unsure of where to begin, they can start with value stocks with reliable returns. Robinhood co-CEO Baiju Bhatt notes that the app has made it convenient to start investing early.

“It’s really more convenient for people to have one app on their phone that is the go-to for that activity. We see an opportunity as we add more services and features to Robinhood to really be on that one app for all customers’ finances,” said Bhatt.

With investing apps, Bhatt feels early investors can feel that they are more in control of their finances.

“We’ve seen a major paradigm shift for broader financial services. People that previously didn’t feel like the markets were for them are for the first time feeling a sense of inclusivity,” said Bhatt.

With the stock market crash of March, many traders felt it was a good time to buy the dip and purchase stocks at rock-bottom prices. There was also an increase in early investing because of the government stimulus checks that were issued this past spring.

Tim Welsh, founder and CEO of wealth management consulting firm Nexus Strategy, also notes that the increased government income helped new investors. He also noted that Robinhood and other trading apps lowered the barrier of entry to making investments.

“The access to trading, there are no barriers to entry anymore, its on your phone, you can buy whatever you want, fractional shares are available so if you can’t pony up $1,400 to buy one share of Google you can still own the FANG stocks,” said Welsh.

Financial experts notes growth of trading apps in starting investing early

Citi chief U.S. equity strategist Tobias Levkovich wrote in a note to clients that there was an increase in “new investors who sense a generational-buying moment but do not have much background in the equity space.”

Levkovich also wrote about traders started investing early in tech stocks like Apple (NASDAQ: AAPL).

Apple stock is a key tech stock for traders who start investing early

“We have heard anecdotally about younger individuals with less market experience viewing the March plunge as a unique time to start portfolios and often crowding into the tech arena, purchasing the stocks whose services or products they know and use,” wrote Levkovich.

Acorns lets people use spare change to start investing early

In addition to stock trading apps like Robinhood, Acorn is another app that lets people start investing early. In contrast to Robinhood offering stocks to trade in a volatile stock market, Acorns takes a more subtle approach. For people who want to start investing early, they can take as much little as a dollar a month to micro-invest in ETFs. New investors can even take spare change from purchases to invest in the stock market.

Noah Kerner, CEO of Acorns, noted that it’s important for young people to start investing early and to learn from the current economic downturn.

“Take in what’s happening right now, and don’t forget it. When the dot-com bubble happened … and when the Great Recession happened in 2008, everybody felt it. And everybody said the same things: ‘This is unprecedented. I’m never going to forget this moment. ‘And then time passes and people forget,” said Kerner.

Kerner also wants new investors to buy stocks while they’re at affordable prices.

“When there’s a sale in fashion, people go and buy things. When the market is on sale for 30% to 35%, that’s when you get in,” said Kerner.

Kerner also advises people who start investing early to set aside money consistently.

“Invest regularly. No matter what, even if it’s a very small amount, try to keep going. That’s why we focus on spare change. Just try to do a little bit so that you can keep the momentum going and you can keep benefiting from compounding,” said Kerner.

Stash another app that enables early investing

Stash is another app that lets people micro-invest to start investing early. A Stash spokesperson spoke about the company’s mission to help people who are starting investing early.

“The intention was, and continues to be, focused on customer growth, brand awareness, and to help reach more Americans who need our help in creating a better life, no matter their network or net worth,” said the Stash spokesperson.

Brandon Krieg, Stash’s co-founder and CEO said in a statement that Stash wants to help people who want to start investing early.

“We are very fortunate to bring together world-class investors, to help accelerate Stash’s goal of bringing digital banking, investing plus financial education and advice to the millions of middle-class Americans working hard every day to make ends meet,” said Krieg.

“This massive group has attempted to make financial progress within a system that simply does not serve their best interests or meet their needs. It’s time for them to reconsider the current financial servicing industry as the ‘status-quo’ and take control of their financial life with the customer-obsessed solutions we provide at Stash,” added Krieg.

Stash’s success leads to partnerships with large-scale investors

Because Stash has increased its customer base, it’s partnered with Lending Tree to help people start investing early. Lending Tree CEO Doug Lebda, Founder and CEO of LendingTree, touted its partnership with Stash.

“Stash’s mission to help Americans achieve financial progress is complementary to ours in every way, and we’ve been impressed with Stash’s speed of execution and commitment to positive customer outcomes,” said Lebda.

“The focus on meaningful financial progress is so relevant, especially in today’s economic environment which has only been amplified by the current pandemic. Giving customers a way to make real strides in achieving financial security is incredibly powerful to our combined missions.”

Robinhood, Acorn, and Stash are just some of the apps that make it easier for people to start investing early.

4. Starting to invest early can lead to better risk management

If investors start investing early, they can handle the risks of investing better. While younger investors shouldn’t buy stocks without thorough research, stocks that are popular growth stocks with potential can be lucrative.

Since young investors are buying stocks on Robinhood, CNBC’s Jim Cramer approves of some of the risks that they are taking. He especially thinks it makes sense to start investing early in stocks like Tesla (NASDAQ:TSLA) if people are financially able to pick the stock.

Tesla is a top stock for Robinhood traders who start investing early

“If you’re a younger investor, it makes a ton of sense to bet on the only car company that’s so popular it doesn’t need to advertise,” said Cramer.

Starting investing early can pay off if they buy cheap or relevant stocks

Cramer also approves of early investors buying stocks when their prices tumble, like American Airlines (NYSE:AA). Buying stocks when they are cheap can pay off if the stocks eventually rebound.

“This is another one where I get the temptation. The stock’s down close to 70% from its highs. It’s a big bounce-back candidate if the government bails out the industry — and we always bail out the air industry,” said Cramer.

In the wake of COVID-19, many young investors also poured money into pharmaceutical stocks. One investor, Rodney Henderson, invested in medical stocks because of the potential of drugs to treat the coronavirus.

“While the coronavirus was happening, I think the biggest uptrend in stocks that was going on was in pharma. A lot of companies that are going to improve our lives after the coronavirus,” said Henderson.

Drugs like Moderna could potentially be a treatment for COVID-19. Because of the experimental vaccine’s potential, Jefferies analyst Michael Yee said the stock is a buy for new investors.

He said the valuation of Moderna could be “$35B[billion] on MRNA[Moderna] if it does have a novel mRNA platform that generated a COVID vaccine in less than a year would be worthy of praise, in our view”.

“We believe the[Wall] Street will be surprised to the upside if the Covid-19 vaccine works, gets approved by early 2021, and there are multi-billion dollars of purchase orders from USA and around the world,” added Yee.

When starting investing early, investors can pick stocks with more volatility. They can take more risks because they will have more time to recover any losses.

5. Starting to invest with established stocks can lead to more income

If starting to invest early, trusted tech stocks are a strong option. Lindsey Bell, chief investment strategist at Ally Invest, advises people who start investing early to pick stocks that they’re familiar with, like Google (NASDAQ:GOOG).

Google is a well-known stock for people who start to invest early

“If you’ve never invested in the market before, you should ease into it. You’ll need to get used to it before you feel comfortable with the up and down swings the market can make. Invest in something you understand,” said Bell.

Citi’s main U.S. equity strategist Tobias Levkovich noted that many young investors are buying tech stocks that they know. They have been purchasing the stocks since the quarantine.

Financial experts advise people to do research before starting investing early

Many financial analysts advise people to conduct research on companies before starting to invest early. John Paul Engel is president of Knowledge Business Consulting. He wants investors to invest in companies that have strong profits and balance sheets.

“Look for a company out of favor that has significant assets, not on its balance sheet. For example, a company with a lot of patents, or a company with a lot of real estate,” said Engle.

“Also before everything else I always consider the management of a company. If the team has a history of success chances are good they will be successful in the future,” added Engle.

Diversified portfolio pivotal to start investing early

In addition to investing in stocks, financial experts advocate having a diversified portfolio. When starting to invest early, people should choose a wide variety of stocks to build their portfolios. Rob Cavallero, chief product officer at RobustWealth, said young investors should invest in a variety of stocks.

“One big mistake to avoid as a 20-something investor is holding concentrated positions in trendy investments. During the dot-com bubble, investors chased expensive internet stocks, and a lot of people got hurt. Stick with a diversified portfolio of low-cost funds invested in conventional asset classes, at least initially,” said Cavallero.

Amin Dabit is a certified financial planner. He advocates people who start investing early have a mixture of stocks and bonds in different industries. Dabit says a diversified portfolio will help shield new investors from large losses.

“During a bull market, it can be easy to forget that the market delights in surprises. The best safeguard against market cycles, while still benefiting from the upside, is through committing to a well-diversified portfolio and long-term focus,” said Dabit.

What should new investors have in a diversified portfolio?

While there is no set age, there should usually be an allotment of assets investors should add based on age. For younger people ready to start investing, there is a certain percentage favored by Dan Egan, a financial advisor. Egan is Betterment’s director of behavioral finance and he recommends they predominately invest in stocks and some bonds.

“For long term goals, those with time horizons over 20 years or more, we recommend setting your portfolio to 90% stocks and 10% bonds,” said Egan.

Lacey Cobb, director of portfolio management at Personal Capital, wants people to start investing early with a large portfolio of a wide variety of stocks.

“A good rule of thumb is to own at least 30 stocks. We also generally suggest people avoid allocating more than 4% of their portfolio to any single stock,” sais Cobb.

Example of Walt Disney Stock with earnings of $1.62 — Disney stock is a top established stock to start investing early

Egan also advises investors to diversify their portfolios with international stocks to possibly increase returns.

“It’s important to include international stocks in order to benefit from growth overseas, especially when it happens while the U.S. stagnates,” said Egan.

“While the U.S. stock market currently makes up approximately 50% of total market capitalization, international stocks and bonds are playing an increasingly large role in portfolio investing as more and more economies grow to maturity around the globe,” added Egan.

BetaShares CEO Alex Vynokur said that if new investors want to take risks, they can focus on stocks in two specific industries.

“If you want growth, up to half of your equities portfolio should be invested in growth opportunities, and this means technology, where opportunities can be found in a combination of global technology leaders. I also think a growth portfolio can include investments in other sectors, such as healthcare,” said Vynokur.

By starting investing early in established value stocks and a diversified portfolio, investors can have a good start to their portfolios.

6. Starting to invest early leads to patience and profits

When starting to invest early, new investors can learn that patience can pay off. Andy Garrison, senior wealth advisor with Mariner Wealth Advisors says it’s crucial to invest now so people can have less financial stress late on in life.

“Don’t waste time trying to pick the next Apple; just get money invested. The big picture is if you start investing now, you may be able to work a lot less over your life because you’re letting your money do the heavy lifting over time,” said Garrison.

“Treat your investment account like an angsty teenager that needs some time and space to grow. It might act up from time to time, but in the end, it’ll all work out,” added Garrison.

Investing early means that you don’t have to time the market

When investing early, many people want to try to outsmart the market to try to make a bigger profit. However, it’s unwise to try to time the market and guess what will happen next to get short-term gains.

Tyler Gray is a financial advisor at SageOak Financial. He advises against trying to outsmart the markets and to choose stocks based on long-term returns.

Starting to invest early shouldn’t involve timing the market

“Don’t try to time the market — you will not succeed. It is impossible to understand, take into account and predict all of the forces that affect short-term market movements. Instead, stick with winning long-term investments that you carefully and methodically research,” said Gray.

Princeton University professor Burt Malkiel noted it’s impossible to predict what will happen in the stock market.

“Nobody, and I mean nobody, can consistently predict the short-term moves in the stock markets,’ said Malkiel.

Malkiel advises people who start investing early stay in the market for the long-term.

“There’s a lot of people who get it right sometimes. But nobody gets it right consistently. Don’t try to time the market. You will get it wrong. Ride things out. Be well diversified,” added Malkiel.

Millennials saving more as they start investing early

While many think people who start investing early are irresponsible, many millennials are investing and saving more money worldwide. In Australia, BetaShares CEO Alex Vynokur notes that more young people are investing early and saving more money as a result.

“But what we found particularly interesting is seeing a younger demographic buying throughout the crisis – both as the market is falling and also on the way up,” said Vynokur.

“Many are investing either once a week or once a month and it’s been interesting to see how this demographic, which is generally Millennials, are displaying a lot more discipline than people traditionally have given them credit for,” added Vynokur.

Financial experts advise long-term strategy to start investing early

Tim Welsh, president of Nexus Strategy, advocates that investors buy stocks and hold them. He thinks that selling stocks in a panic is not best for people who start investing early. Welsh advocates people who start investing early to have patience with their investments.

“There’s buy and hold for a reason and anyone who’s inexperienced and is just clicking around and buying and selling based on the movements in the markets on a daily basis really have no chance to be successful,” said Welsh.

Philippines-based COL Financial services CEO Dino Bate advises young investors to stay the course when they start investing early.

“Investing in the stock market is really for the long term — it’s not a get-rich-quick scheme where you make money overnight. It’s buying good quality companies that will grow your money as they grow their businesses,” said Bate.

When people start investing early, they can learn to have more discipline and patience to withstand economic volatility and increase their wealth over the long run.

7. Starting to invest early can lead to early retirement

Investing early can have another benefit in a shorter time-an early retirement. With estimates saying that people need $1 million to retire, investing early can help people have more financial freedom.

For some young people, the FIRE( financial independence, retire early) movement is an enticement to start investing early. Many people have found success by making wise investments to retire early.

While the FIRE movement may not a realistic goal of every investor, if investors put extra money into their portfolios sooner, retiring comfortably could be a result.

Starting investing early can help start FIRE

Jackie Cummings Koski is a single mother who retired a millionaire after maxing out her retirement account contributions. While saving or investing half of her income to retire isn’t for everyone, Koski said investing early helped her achieve financial freedom.

“You’re not going to be saving or investing unless in your mind you believe it will make a difference. It may take a while to really get your head around things like me, but it happens, and when it does, it is very, very powerful,” said Koski.

If investors start investing early in stocks like Microsoft, they can possibly retire earlier

Chris Mamula is a FIRE advocate who says that investing as much as they can if they want to retire early.

“50-50, stock-to-bond portfolio probably won’t work because you have such a long timeframe and need to account for inflation,” said Mamula.

Money expert J.P. Livingston also stresses that starting to invest early is crucial. She also advocates contributing the maximum amount to workers’ 401k’s to build wealth in addition to cutting spending.

“At some point, your money pile grows to a size where focusing on growing your nest egg will have a much more material impact to your net wealth than further reductions on your spending,” said Livingston.

She also said that when investing early, it’s important to pick investments that can gain income in a tax-exempt 401k.

“Ideally, the investments that must actually realize gains and income (for example, selling options, getting dividends that aren’t tax-exempt) should go in the tax-advantaged accounts,” said Livingston.

Investing early can lead to financial security in crises

When people start investing early, they’re able to weather any economic emergency. FIRE advocate Steve Adcock and his wife Courtney investing as much of their income as they could. Because of the increased early investments, the Adcocks were able to have enough saved during the recent recession.

“Since we’ve quit our jobs so early in life, we felt like having the extra cash outside of investments was a great way to reduce risk during recessions and other market collapses,” said Adcock.

“In fact, we lived off of that emergency fund during the COVID-19 market crash in March and April so we didn’t need to sell even a single share of stock to maintain our standard of living,” added Adcock.

If early investment is a goal, then starting investing early is a must for people who invest in stocks.

Low-cost index funds can help people who start investing early

Many FIRE advocates investing in index funds as a way to passively grow income. When people start investing early and want to retire early, low-cost index funds are a key low-risk investment. Low-cost index funds are mutual funds that usually track the S&P 500. Noted investor Warren Buffett also recommends low-cost index funds for early investors.

“Consistently buy an S&P 500 low-cost index fund. I think it’s the thing that makes the most sense practically all of the time,” said Buffett.

Derek Horstmeyer is an associate professor at George Mason University School of Business. He said that if people start investing early in low-cost index funds, they can be an efficient way to earn more money.

“Index funds are still the best bet in this terrible roller-coaster environment. The single greatest factor in long-run returns for a fund are the fees paid,” said Horstmeyer.

“With index funds now with expense ratios down at close to zero, this is still far better than any actively managed fund. Further, active management notoriously does poorly in volatile periods since they are bad market timers – this is another reason to stick with indexers,” added Horstmeyer.

Starting investing early is key to financial freedom

While starting investing early in this current economy seems risky, it’s actually a safe way to handle money. By putting aside money in stocks, index funds, or 401ks, investors can build a portfolio that can help them have a safe financial haven. With just a small amount to invest, people can start a path to building wealth.

With TradingSim’s blog and access to practice simulated trading strategies, new investors can make the best stock choices for them. When people start investing early with the best information available to them from TradingSim, new investors can begin on their path to financial independence.

Investing for beginners can seem like a daunting task. However, with the proper analysis, new investors can make the best choices to build their portfolios. This TradingSim article will walk beginning investors through how to start building and rebalancing their portfolios. Portfolios are a collection of stocks and other assets. This article will also help investors pick the best stocks for an investment strategy.

Why should people start investing?

There are many reasons why people should start investing and building a portfolio by investing in stocks. Stocks are a piece of a company that helps people feel ownership of a corporation. If stocks are performing well, an investor’s wealth will increase as well.

Many people start short-term investing for a quick profit, like day trading stocks. Some want to invest for long-term goals, like buying a house or for eventual retirement. Regardless of the reason, beginning investors should set some money aside in an investment account to build wealth creation and save for their futures from the returns. Returns are the profits from stocks.

What financial terms should investors know?

Some popular terms are used on Wall Street. Here are some of the most common ones.

New York Stock Exchange (NYSE) is the main stock exchange in the U.S. Many stocks are traded on this platform from 9:30 AM EST to 4:00 PM EST. Many stocks trade under ticker symbols like GM. GM’s symbol is yes, GM. So, if an investor is looking for GM stock on a ticker, the symbol would look like this:(NYSE:GM).
Nasdaq(NASDAQ). Nasdaq is the second-biggest stock exchange in the world. Many large tech companies are traded on this exchange, including Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG).
Value stocks are stable, low-cost stocks that sell below their worth.
Growth stocks are stocks that usually outperform the general stock market. They are often more volatile, but have higher returns, or profits, for investors.
A bull market is when the market is rising by more than 20%. If a financial analyst is bullish on a stock, that means they think the stock is worth buying and its stock price will increase. If a stock’s price increases, that makes it more valuable and gives more returns to investors.
A bear market is when the stock market falls by more than 20%. When a financial analyst is bearish on a stock, that means that they think the stock should be sold and its stock price will fall. When a stock price declines, the profitability decreases and gives fewer returns to new investors.

What platform should beginning investors choose?

Millennial investors who are comfortable with risk should find independent trading apps like Robinhood easier for them to use. However, more risk-averse beginning investors may want more financial education along with their investments. In that case, they may want to use more traditional brokerage firms like TD Ameritrade. Those firms often have zero-commission costs for U.S. stocks. However, there are fees to trade foreign stocks.

Robo-advisors can also be used in investing for beginners. For novice investors who want a hands-off approach, robo-advisors like Ellevest offer investment services through algorithms. They take investors’ financial goals and builds a portfolio based on the information. The robo-advisors’ fees are usually 0.25% of an investor’s portfolio.

How much money is needed for investing for beginners?

While there used to be a certain amount needed to invest with brokers, online trading apps have greatly reduced that number. Some investing apps like Robinhood have zero commission fees. However, they charge a $5 fee for an upgraded membership to have access to invest on margin. Investing on margin means borrowing from a trading platform to invest in stocks. Sounds crazy, but whoever would have thought 20 years ago we would need membership software companies like Wellyx to manage gym members.

Shark Tank star Kevin O’Leary notes that investing can be enhanced by setting aside money from income. He suggests beginning investors start putting money into the markets instead of buying unnecessary items. He suggests setting aside $100 a week for investment.

“What I’ve learned to do, and what has really helped me in maintaining growth in my own personal investing is, anytime I pick up something I’m going to buy, I say to myself, ‘Do I really need this?’ Because if I don’t buy it, the money is going to be invested and make money every year for me while I’m sleeping,” said O’Leary.

New investors should always have an emergency fund set aside. When investors have emergency funds for stocks, there isn’t as much of a rush to buy or sell stocks based on rash decisions.

Should investing for beginners follow the stock market?

In a bear market, stock prices plunge by 20%. In a bear market, stocks rise by 20%. While some investing for beginners may involve emotions at first, research is key. Because the stock market has so many ups and downs, new investors should not panic sell their stocks in this current recession.

Despite the COVID-19-caused recession, financial expert Suze Orman says that now may be the best time to invest. She said that the cyclical nature of the stock market means that investors should stay the course.

“You will never, ever, know the bottom. You will never, ever, know the top. Fortunes are going to be made out of this time. So just stay calm. I can guarantee you that if you stay in and you just stick with it, three years from now you will be very, very happy that you did,” said Orman.

While monitoring the stock market is crucial, new investors shouldn’t just buy or sell stocks based only on the way the stock market is moving.

What taxes do investors pay for stocks?

Taxes are due when investors sell their stocks for a profit. Those taxes are capital gains taxes. There are two types of capital gains taxes. Short-term capital gains are taxed at a higher rate than long-term capital gains.

Capital losses are the opposite of capital gains. When investors sell an asset for less than they paid for, they have to pay taxes on those losses. However, reporting the capital losses can help with lowering a tax bill. If an investor sells one stock at a profit, the losses can be subtracted from the gains to lower the tax liability.

What options are best for investing for beginners?

There are many options that new investors can choose other than stocks. Below are some of the most popular ways that they can get started with building their portfolios.

Coca-Cola stock is a top stock for investing for beginners

Bonds often a safer investment for new traders

In addition to stocks, beginning investors can buy bonds through trading apps or brokerage firms. Investors can also purchase bonds through the U.S. Treasury’s website.

When the Treasury issues government bonds, When investors choose bonds, they are giving a loan to the government. The government promises to pay an investor back with interest when the bond matures. There are Treasury bonds that investors can hold for two, five, 10, even 30 years.

If an investor wants to know which bond to buy and when to sell, they should identify their financial goals. Robert Johnson, professor of finance at Creighton University, notes that new investors should only buy two-year bonds if they have short-term goals.

“It’s driven largely by one’s time horizon. For example, if one is accumulating a down payment for a home and plans on accessing the funds in say, two years, one should not invest in a 10-year bond. If you mismatch the maturity and the time horizon, you run the risk of losing money even though Treasury securities are risk- free,” said Johnson.

Corporate and municipal bonds another way to invest

Municipal bonds are another option for investing for beginners. Municipal bonds are government debt securities that are bought by investors. The bonds are loans to the government that are used to fund local roads, bridges, and libraries.

In addition to municipal bonds, new investors can buy corporate bonds. Corporations issue bonds to increase capital to fund expansion. With corporate bonds, there are often higher yields than with bonds or CDs.

However, beginning investors have to watch to ensure that corporate bonds have high credit ratings. If corporate bonds are rated AA or AAA, then they are the safest options for beginning investors.

In addition to stocks, bonds are a safe way to increase wealth. Bonds are much more low-risk than stocks, but the payout isn’t as high as it is with stocks.

Stocks and bonds can lead to diversified portfolio

When investing for beginners, they can buy a mixture of stocks and bonds. The blend of assets can lead to a portfolio that is evenly balanced. If an investment portfolio has too many stocks, investors can lose a lot of money if the stock market tumbles.

The “100 rule” usually informs investors on how much to invest in stocks and bonds. If an investor is 30 years old, subtract 30 from 100. In that instance, a new investor allocate 70% to stocks and 30% to buying bonds. With that balance of stocks and bonds, a beginning investor can build their portfolios.

CD’s another low-risk way to invest

Certificates of deposit (CD’s) are another low-risk way to invest for beginners. These certificates are usually issued by banks and offer higher interest rates than regular savings accounts. Similar to bonds, CD’s are fixed instruments that must be held for a certain amount of time.

For example, a one-year CD at Chase Bank can be purchased at 1.25% interest. If a beginning investor waits a year and redeem the CD, an investor will receive the investment with interest. When an investor makes an early withdrawal, there are usually penalties to pay.

ETFs another option for investing for beginners

Exchange-traded funds (ETFs) are another investment option for starting investors. The funds are a collection of assets, usually stocks in one specific industry. When trying to decide whether to choose stocks vs. ETFs, diversification is best. Choosing both stocks and ETFs can lead to a more balanced and possibly more profitable portfolio.

401 K’s are common entryway for investing for beginners

For many beginning investors, their employer-based 401K’s are their first introduction to the stock market. With 401K’s, a percentage of an employee’s paycheck is invested in an employer-provided retirement plan. The employee’s contributions are usually invested in mutual funds. Mutual funds are companies that pool money together to buy shares of a collection of stocks and bonds.

Many 401K’s are great ways for investors to save for retirement by delving into the stock market. They are tax-free except if employees make withdrawals from the funds. Beginning investors should ideally invest 10% of their income into 401Ks to increase wealth creation and have more income when they retire.

What criteria should be included for stocks for new investors?

New investors shouldn’t just blindly choose stocks. They should look for certain factors to determine that the stocks they buy are the best to help build income.

High dividends. Dividends are quarterly payments that companies pay to stockholders every quarter. These payments are usually proof that the stock is a reliable one that offers extra income to investors.
Track record of profitability. When investing for beginners, they should pick stocks that have strong profits for many quarters. Checking a company’s earnings report every four months to determine a corporation’s profitability.
Diversity in business. The best stocks for new investors should not just focus on one industry. For example, an investor only has hotel stocks. If the hotel industry falls, then an investor’s portfolio suffers as well. It’s important to pick stocks that have diverse interests that are better able to survive the unpredictability of the stock market. Stocks like Uber(NASDAQ:Uber) that have diverse interests as ride-sharing and food delivery service Uber Eats are better choices for investing for beginners.

If an investor just wants to stick to stocks, here are 10 of the best options for investing for beginners.

1. Berkshire Hathaway is top stock for investing for beginners

Berkshire Hathaway(NYSE:BRK-A) is a dependable stock that can pay off for a new investor. The firm is led by legendary investor Warren Buffett. Berkshire Hathaway has made investments in reliable and profitable stocks.

Berkshire is a company with diverse holdings that are some of the most prominent companies in the world. Coca-Cola, Apple, and American Express are just some of Berkshire’s investments. Buffett himself touted his company’s stock.

“I happen to believe that Berkshire is as about as sound as any single investment can be in terms of earning reasonable returns over time,” said Buffett.

Berkshire itself is a low-cost stock with high value. Many see Buffett’s investments as a sign of how important a company is. Berkshire’s latest investment in the Dominion Energy natural gas company adds to the company’s impressive portfolio.

“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” said Buffett.

Berkshire Hathaway stock the best stock for investing for beginners

Darren Pollock, a portfolio manager at Cheviot Value Management, invests in Berkshire because he that the investment shows that the company is willing to make investments to build up its weak parts of its portfolio.

“I’m inspired to see that, given that he’s bearish, he’s still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire’s hurdle points,” said Pollack.

Berkshire Hathaway is a buy for financial experts

Berkshire is a buy because of its large cash reserve. Billionaire investor Bill Ackman purchased many shares of Berkshire stock because of its healthy cash reserves. A good cash reserve means that a corporation is profitable and withstand an economic downturn.

“Berkshire’s discounted valuation, large excess cash balances, and substantial margin opportunities at several key operating subsidiaries provided an attractive investment opportunity,” said Ackman.

Ackman also believes that Berkshire can overcome the COVID-19-caused recession.

“We[investors] believe that Berkshire will not be materially negatively impacted as a result of the [coronavirus] crisis. Rather, we believe that Berkshire will emerge from this crisis as a more valuable enterprise as the market decline will enable it to invest a substantial portion of its cash,” said Ackman.

Berkshire Hathaway’s strong record of choosing top holdings to invest in and large cash flow make the company’s stock a great choice for beginning investors.

2. AT&T

AT&T(NYSE:T) is another good stock for investing for beginners. The telecommunications company has been around for over a century. AT&T has evolved to become a communications giant that pays high dividends to investors.

AT&T has high dividend payout to investors

AT&T’s dividend yield each quarter is 6.8%, which makes it a Dividend Aristocrat. That means that the stock is one of THE highest-paying stocks that pay dividends. The dividend yield means that the stock will give reliable extra income to new investors.

AT&T a top stock for investing for beginners

AT&T’s 5G adoption makes it a top stock for new investors

In addtion to its reliable dividend payments, AT&T stock is a good buy for investing for beginners because of its early adoption of new technology. Chris Sambar is executive vice-president of AT&T’s Technology Operations. He noted that the recent quarantine led to the company’s strengthening its 5G network.

“While many of us have been working from home for the past three months, AT&T’s network team continued to build and test our network so that we could emerge from this season with stronger, broader 5G coverage for our customers across the country,” said Sambar.

“Whether it’s getting you back to work, back to school, or back to play, we’ve got you covered with the fastest wireless speeds in the nation,” added Sambar.

With its high-paying dividend and expansion of 5G technology, AT&T stock is a top choice for investing for beginners.

3. Google

Google’s(NASDAQ:GOOG)’s parent Alphabet is another top stock for investing for beginners. The company’s revenue increased 13% during the COVID-19 crisis. Google is the most dominant search engine and its diverse interests in self-driving cars and media ventures like YouTube make the stock one to choose for new investors.

Google is a buy for a top stock for investing for beginners

Many financial experts pick Google as a stock to invest in because of its diversified interests. Giverny Capital Hedge Fund rates Google as a buy, meaning that it encourages investors to purchase Google stock.

“Our largest holding at inception is Alphabet, representing 7.7% of the portfolio. The Google search engine advertising business strikes us as possibly the best business model on the planet. Management has used Google’s enormous profit engine to reinvest in the research and development of artificial intelligence, autonomous driving, cloud computing and other platforms for the future,” said Giverny Capital.

Google stock is key stock for investing for beginners

Morgan Stanley analyst Brian Nowak also is a good stock to add to investors’ portfolios.

“We[Morgan Stanley] are particularly positive on its emerging e-commerce products (shopping listings, virtual show rooms, deep linking, etc), focus on [small and medium-sized businesses], and efforts to drive digital transformation in the healthcare and education industries,” said Nowak.

Google’s investment in varied businesses and stable ad revenue make the stock a good choice for investing for beginners.

4. Apple

Apple (NASDAQ:AAPL) is one of the most valuable companies in the world with its ubiquitous devices. The tech company’s stock is a good investment for beginning investors because of its innovation.

Bank of America analyst Wamsi Mohan thinks Apple stock is worth buying because the company is making its own chips for its computers. Because Apple is making its own chips for its computers in-house, it saves money and increases the corporations’ profitability.

“Perhaps the biggest takeaway from today’s event was the reassurance that Apple is still driving innovation and new ways to use technology hardware and software,” wrote Mohan in a note to clients.

Apple stock a good stock for investing for beginners

Mohan also thinks Apple is a good buy for investing for beginners because of the increased uses for its devices. He praises Apple’s “AirPods incorporating surround sound and spatial audio, the Watch supporting more health workouts, tracking user dance movements and tracking sleep.”

A Deutsche Bank analyst also thinks Apple is a strong buy for investing for beginners.

“Overall, we feel comfortable that AAPL(Apple) should continue to offer upside for investors,” noted the analyst.

Apple is at the forefront of technology because of its ability to innovate. Beginning investors should add Apple stock if they want to invest in a stock that’s always on the cutting edge.

5. Amazon is key stock for investing for beginners

While Amazon(NASDAQ:AMZN) is a pricey stock, the investment is well worth it for investing for beginners. The e-commerce giant has grown during the nationwide quarantine. Because of its diverse interests in e-commerce, cloud technology, and its Alexa devices, Mark Tepper of Strategic Wealth Partners rates Amazon stock as a buy.

“It’s the best diversified post-COVID play. They’re literally in every single business that’s going to thrive on a going-forward basis. You’ve got e-commerce, cloud, digital advertising, personal assistance,” said Tepper.

Tepper also believes that Amazon’s stock price should stay at its current hefty price because of the Federal Reserve giving money to many troubled banks and businesses.

“Normally, during periods of heavy investment for Amazon like they’re seeing right now, the multiple comes down, but apparently that doesn’t matter anymore when the Fed’s dishing out trillions of dollars like it’s going out of style. So, I think the best pick right here would still be Amazon,” added Tepper.

Amazon stock is a good choice for investing for beginners if they’re able to purchase one high-priced stock for long-term returns.

6. Microsoft

Microsoft stock (NASDAQ:MSFT) is a tech stock that would be good for beginning investors. The corporation has performed well with its Azure cloud technology. Amana Mutual Funds Trust rates Microsoft stock as a buy because of its diverse interests in cloud technology and popular Xbox gaming devices.

“Microsoft led the major technology stocks, enjoying multiple advantages. Strong growth from its Azure Cloud Services business will almost certainly continue as stay-at-home accelerates the transition to buy online. Nor would we rule out a bump in Xbox sales!” said Amana Mutual Funds.

Microsoft stock is robust for investing for beginners

Sextant Capital Corporation also notes that many more retailers will use Microsoft’s Azure Cloud Services as they sell more merchandise online. The upcoming announcement of new Xbox games later this summer may also drive sales of Microsoft hardware and will also help make Microsoft an attractive stock for new investors.

“If the pandemic leads retailers to ramp up their online competency, they will likely require cloud services and will be equally likely to not want to give that business to Amazon. Microsoft’s Azure Cloud Services will happily accommodate. Remote work may be driving software demand higher and it seems likely that hardware demand (read Xbox) increased during the quarter,” said Sextant.

In investing for beginners, Microsoft is a fairly reliable stock.

7. Visa

Visa (NYSE:V) is a relatively stable stock with a high dividend of 0.62% every quarter. The credit card company is part of the movement to a cashless society. Visa could be a good stock for investing for beginners because it’s at the forefront of digital payments. During the coronavirus, many people are using credit cards more.

Chief financial officer Vasant Prabhu noted that many consumers are using digital payments as social distanced shopping increases.

“There is certainly a growing tendency to not want to use cash. And also, of course, not even just a tap your card, the aversion to cash could be persistent, which means that even face-to-face transactions or penetration of digital forms of payment could be growing in a permanent and structural way faster than it might have prior to the crisis,” said Prabhu.

International growth make Visa a top stock for investing for beginners

Chief Product Officer Jack Forestell noted that 13 million Latin American customers used Visa cards for the first time in March.

“We’re seeing a massive acceleration toward e-commerce adoption,” said Forestell.

Visa is also expanded internationally by adding a payment feature to the popular social media network WhatsApp in Brazil. Through its Visa Direct payment system, people can send money to each other through the app. Visa touted the deal in a statement.

“Using our technology to open up avenues like WhatsApp for more people to shop and pay each other digitally is an incredibly powerful proposition that we’re excited to bring to life,” wrote Visa in a press release.

Visa’s international expansion and use of the most current technology makes the stock a top choice for investing for beginners.

8. Disney an established stock for investing for beginners

Disney (NYSE:DIS) is a world-renowned brand that’s a top choice for investing for beginners. While the coronavirus crisis has shut down many Disney theme parks, the slow re-opening of the economies could help Disney rebound. For new investors, Robert Bacarella, the founder of Monetta Financial Services recommends Disney stock because he believes it can recover from recent economic lows.

“Look to companies that provide services and products you use and which you believe should return to normal profitability once this pandemic is behind us. We currently don’t know the extent of the damage, but we do know that people will eventually shop again, go to restaurants, fly and even plan a trip to Disney or go on a cruise,” said Bacarella.

Bank of America analyst Jessica Reif Ehrlich also believes Disney stock is a buy when its theme parks re-open. She also thinks the corporation’s stock is worth purchasing because of its successful Disney Plus streaming service, especially its recent premiere of the Broadway blockbuster Hamilton. Disney also added many more viewers through ESPN’s Last Dance documentary about Michael Jordan and the ’90s Chicago Bulls. (ESPN is a Disney property.)

“Although Covid-19 pressures should continue to weigh on near-term financials, we believe Disney is positioned to grow stronger through the crisis (e.g., a faster Disney+ rollout, better long-term theme park margin potential and improved ESPN programming appeal) and numerous catalysts exist to drive growth higher,” said Reif Ehrlich.

Disney+ makes stock solid choice for new investors

Bob Chapek, Disney’s CEO touted the success of Disney + since it launched last year. The recent quarantine led the service to grow to 50 million subscribers.

“In late March as planned and despite COVID-19, we had an incredibly successful launch of Disney+ in Western Europe, followed by a highly successful launch in India. We announced in early April that in just five months, we had surpassed 50 million subscribers globally, a significant milestone for us. We’ve been quite pleased with the growth that we’ve seen in the four weeks since then and there is more to come,” said Chapek.

The diverse entertainment services that Disney offers Even though Disney’s stock price has fallen, the lower price could make the quality stock a more affordable option for new investors.

9. AbbVie

Pharmaceutical stocks are usually blue-chip stocks for investing for beginners. Blue-chip stocks have steady growth and reliable dividends. AbbVie(NYSE:ABBV) is a drug manufacturer that had sales increase by 10% in the first quarter of 2020.

The blue-chip stock is from a company that manufactures Humira, which treats arthritis. AbbVie’s acquisition of the lucrative Botox maker Allergan should also help AbbVie remain a steady stock for investing for beginners.

Financial analyst Gina Sanchez says Humira’s possible expanded uses and Allergan purchase make AbbVie a good stock for new investors.

“They[AbbVie] have a tremendous ability to potentially expand the uses of existing products that have already been approved, but also the potential for Humira to get expanded uses as well,” she said. “And, of course, the tie-up with Allergan along with other expanded product pipeline[s]. I think all those things, regardless of the politics, are going to be very, very positive for AbbVie,” said Sanchez.

Todd Gordon, managing director at Ascent Wealth Partners, also thinks AbbVie stock is a good buy for investing for beginners. He also thinks that the diversification of revenue will help increase its profits.

“The acquisition of Allergan was a great way to diversify revenue streams. They have large, private cosmetic drugs like Botox. And then European regulators cleared the deal with the U.S.,” said Gordon.

AbbVie’s stock is a good one for new investors because of its widely-used medicines and recent acquisitions that can expand its profits.

10. Clorox a good defensive stock for investing for investors

Clorox(NYSE:CLX) is a defensive stock that’s best for new investors. When investing for beginners, defensive stocks usually are strong regardless of an economic downturn. They usually have items that people will always need, such as Clorox’s cleaning products.

Clorox stock skyrocketed 40% during the COVID-19 crisis as many people were quarantined and throughly disinfecting their homes. Lisah Burhan, the company’s vice-president of investor relations spoke about the company’s positive Q3 (third quarter) 2020 results.

“Sales were up 11% for the quarter driven mainly by 60% volume growth as we saw very high demand from not just our cleaning and disinfecting products, but also our household essential household products. Growth was broad-based with double-digit volume increases in every single region,” noted Burhan.

Financial experts think Clorox is long-term stock for new investors

DA Davidson financial analyst Linda Bolton Weiser says that Clorox will be a good stock for new investors to buy even after the coronavirus crisis subsides.

“Indications are that heightened awareness of the role of disinfecting in public health may be more lasting than following past global health crises,” said Bolton Weiser.

Bolton Weiser also thinks that Clorox stock and sales will continue to rise in 2021.

“We believe habits around disinfecting are changing for the long term, and that Clorox’s sales may NOT decline in the high-single digits in the second half of fiscal 2021 as the consensus is projecting,” said Bolton Weiser.

She also believes that increased demand will continue after the panic buying of the coronavirus ends.

“The majority of the higher demand for disinfecting products is coming from incremental household penetration, not just stockpiling or higher use by existing households,” said Bolton Weiser.

Burhan also agreed that new customers are buying Clorox continuously, not just once.

“While early, we’re encouraged to see from our data that the majority of the higher demand is coming from incremental households rather than just stockpiling or higher usage from existing users. With the pandemic expected to have a sustained positive impact on consumers’ disinfecting and hygiene habits, we’ll invest further in our brands, turn incremental usage into loyalty,” said Burhan.

Clorox is a relatively safe investment for new investors. The company’s products are household staples that people will repeatedly purchase. That stock is a good choice for investing for beginners.

Investing for beginners requires time and research

While investing in the above stocks can be lucrative, it won’t be easy. Investing for beginners requires time and patience. By choosing wisely and conducting research, new investors can pick the best stocks for them. By testing investment strategies and reading financial news blogs on TradingSim, investors can find the top stocks to help them have their best financial futures.

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