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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.

Restricted stock units (RSUs) are a top perk for employees. Many tech companies that are growth stocks offer this stock-based compensation once an employee joins a company. In many cases, they are an alternative to stock options similar to ETFs.

In this TradingSim article, I will explain what a restricted stock unit is. Throughout this article, I will also explain which stocks can be added to rebalance portfolios and help their trading strategies because they are profitable enough to offer employees the best RSUs.

What are restricted stock units?

When a company hires an employee, at first they may receive the units as part of their compensation. RSUs are grants that are part of stock-based compensation that are equal to the value of a corporation’s common stock. When companies issue the grants, they are based on the value of the company’s stock.

How do RSUs work?

Employers distribute restricted stock units to employees after a vesting period. A vested definition means that an employee will own shares. During a vesting period, a certain amount of time an employee has to work at a company before they receive the shares.

For example, a company can give an employee 2,000 RSUs. If 25% of the RSUs vest each year, after one year, 500 shares will vest. In addition, employees can also receive the shares as cash. Once they vest, an employee can receive sell the shares.

If employees want to donate their RSUs to charity, they can help a good cause– and themselves at tax time. One benefit is that employees can get an itemized deduction that’s equal to the stock’s market value. The second benefit is that employees can avoid capital gains taxes by giving RSU shares to charities.

What are double trigger RSUs?

Double trigger RSUs are another kind of restricted stock unit that employers offer. They are offered by new companies before their IPOs(initial public offerings. Double trigger RSUs are not taxed until they are vested and the companies go public with their IPOs.

Garrett Perez, a CPA, notes that many companies have double trigger restrictive RSUs to protect their workers.

“Most companies who do in fact issue RSUs have this requirement [of double-trigger vesting] as it would be extremely punitive on their employees to have them recognize it as income with essentially no market to sell it in. I’ve never seen a pre-IPO company that does not have the double vesting requirement,” said Perez.

What is a restricted stock unit vested schedule?

Some employers offer RSUs on a graduated vesting schedule. In that case, the units may vest 10% after one year, 20% after two years, and so on.

Vested schedules for restricted stock units vary in three ways. For example, say an employee receives 120 RSU’s in January 2020. In cliff vesting, workers receive 100% of their benefits after a certain amount of time. In a three-year vesting schedule, an employee receives all their shares in January 2023.

With a graded vesting schedule, a company gives fewer shares of its stock at an annual rate. If there’s a three-year graded vesting schedule, an employee may receive 30 shares of a stock every January until 2023.

In a cliff/graded vesting hybrid, there is a mixture of the two vesting schedules. A company can issue 40 shares of its stock in January 2020. Then, they may issue 3-4 shares a month until the vesting period is over.

How do RSUs differ from stock options?

Similar to stocks vs. ETFs, RSUs are similar to stock options, but have key differences. In most instances, restricted stock units

don’t expire. They convert into shares after a vesting period. Because of the conversion, they don’t ever have an expiration date.
have the same fair market value during the vesting period.
complete a vesting schedule usually after five years.
are taxed as regular income when they’re vested.

In contrast, stock options

expire 10 years after employees receive them.
tie into the stock price. If a stock price drops below the grant price, the option’s value plummets. When a stock price rises, the stock option’s value jumps as well.
aren’t vested.
are taxed at the time the options are exercised.

What are the advantages of restricted stock units?

In a bear market, restricted stock units can be a safer option for employees. Because stock options are tied to a stock price, a diminished stock price can hurt an employee’s stock options. However, employees take RSUs at a stock’s current market value when they’re vested. At the time the units are vested, they could have a higher value to employees.

What are the disadvantages of RSUs?

Because restricted stock units are different from stock options, they may not reap all the benefits. Since most RSUs vest after five years, many employees may leave their jobs before they enjoy the stock perks. If an employee quits, their former employer forfeits the RSU that remain.

Even if employees stay with a corporation for five years, the value of their RSUs may not be the same after the vesting period. If the stock loses value during an economic downturn, the RSUs may lose value when the employee receives the shares.

How are restricted stock units taxed?

In the year they’re vested, RSUs are taxed as income if an employee keeps the units. If an employee sells the units, capital gains taxes will due at the time of the sale. Restricted stock units aren’t tax-free investment expenses. For example, if an employee vested 20,000 shares of a company’s stock at $20, the value of the RSUs will be $200,000. That amount is treated as taxable income by the IRS.

It’s important to have the RSU vested income set aside to pay taxes because tech companies usually may not pay them themselves. The success of tech companies may ironically mean that they don’t make withdrawals for employees.

Corporations usually withhold state, federal, Social Security, and Medicare taxes on RSU’s. The taxes are usually at a flat rate of 22%.

However, because tech companies are often in high tax brackets, a tech company’s workers often have to pay higher taxes on their RSUs. They would often owe more than what employers would set aside to cover taxes.

Special tax election can collect RSU taxes sooner

If an employee wants to take their taxes out before the restricted stock units vest, they can make a special election. The special Section 83(b) election taxes employees before the RSUs vest. The RSUs are taxed as extra compensation.

If employees keep the restricted stock units for more than a year, the RSUs are taxed at a lower rate as capital gains. However, the units are taxed in the year that employees receive them, even if the stock unit declines in value.

What are the RSU tax withholding methods?

There are four main tax withholding methods for restricted stock units.

In a same-day sale, all of the shares sell on the day they’re vested. The money can be used to pay taxes.
With a cash transfer, money is deposited from an employee’s account to pay taxes.
In the sell-to-cover method, an employee receives shares at the end of the vesting period. An employee’s broker can sell the shares to cover tax expenses. Then, a worker can keep the remaining shares.
With a net share settlement, an employee’s company can retain some of the vested RSUs. The shares are equal to the withholding tax amount. After that, the units that are left can be deposited to a brokerage account.

What is the cost basis for restricted stock units?

The cost basis for RSUs is the fair market original value of an employee’s shares on the day that the units vest and they receive the shares. That value will likely never change throughout the vesting period of the restricted stock units. The cost basis usually stays the same. It isn’t adjusted to calculate an employee’s tax calculations unless the unit amount is $0.

All of the corporations below offer generous RSUs to employees. These companies are the top corporations that offer restricted stock units to employees.

1. Amazon

Amazon’s stock soars during COVID-19

During the coronavirus pandemic, Amazon’s (NASDAQ:AMZN) stock soared 68% a year after hitting its rock-bottom low. Financial experts like Wedbush analyst Michael Pachter said the e-commerce boom during quarantine will boost Amazon in the long term.

“E-commerce is likely one of the biggest beneficiaries. E-commerce is likely to see a permanent shift away from offline stores,” said Pachter.

FBN Securities analyst Shebly Seyrafi believes that Amazon stock will continue to rise even if another quarantine happens in the U.S.

“To us[FBN Securities], AMZN[Amazon] is the ultimate ‘stay-at-home stock,'” wrote Seyrafi in a note to clients.

Amazon raises wages, but cuts RSUs for hourly workers

Amazon’s RSUs usually vest after four years. They vest on a 5-15-40-40 schedule. That means that after year 1, the restricted stock units vest 5%. Then they vest 15% the second year. In the last two years, they vest at 40%.

During 2018, Amazon eliminated RSUs for its hourly workers. In exchange for raising the wage of hourly workers to $15, Amazon ended RSUs as part of employee benefits. As noted in a company blog post, Amazon restricted stock units will vest this year, and in 2021. The corporation replaced the RSUs with direct stock. An Amazon spokesperson explained the changes.

“The significant increase in hourly cash wages more than compensates for the phase-out of incentive pay and RSUs,” said the spokesperson.

“We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable,” added the spokesperson.

Amazon RSUs help employees buy homes

For salaried employees that still receive RSUs, the units make it easier to buy pricey homes in the company’s home base of Seattle. Diana Bowar, a loan officer at 1st Security Bank, offers restricted unit stock loans to Amazon employees to buy million-dollar homes. Bowar noted that the employees receiving RSUs are more likely to stay in Seattle.

“There’s a need in our backyard. And we’ve seen that people who are getting RSU income and have contracts with Amazon, the likelihood that they’re going to stay in that job making that kind of income is good,” said Bowar.

In 2019, bank lenders usually need employees to show two years of RSU income before they consider restricted stock units as income. Don Zender is branch manager of Evergreen Home Loans and Veterans Lending. He noticed that Amazon employers couldn’t use their RSUs as a down payment on houses.

“But if you start at Amazon, you can’t do that. The biggest hurdle has always been the first couple years,” said Zender.

Many lenders like Evergreen are now open to providing loans to employees with Amazon RSUs.

“Some lenders are starting to say, well, RSUs are not really a one-time thing,” said Steve Geri, a financial adviser at Denny Park Investments in South Lake Union. “They’re a continuing form of compensation in many industries.”

Amazon is a top stock offering restricted stock unit

2. Uber

Uber stock strong as it moves beyond ridesharing

Uber(NASDAQ:UBER) stock recently rose 3% after recent reports it was purchasing food delivery service Postmates. The acquisition would be a welcome addition to Uber’s own food delivery division, Uber Eats. Canaccord Genuity Maria Ripps wrote a note to clients that suggested that Postmates would help Postmates raise Uber’s stock more.

“Postmates should continue to benefit from restaurant selection and strong positions in key markets. However, as the fourth-largest player in the US market, we also see it as a potential consolidation target,” wrote Ripps in the recent client note.

Uber benefits from being rideshare leader

The ridesharing giant has benefitted from being a rideshare leader. Uber CEO Dara Khosrowshahi noted that the company has an advantage over competitor Lyft because of its global reach and diversified businesses under the Uber umbrella.

“We[Uber] are structurally set up more efficiently and more optimally than anyone else to move to profitability. This environment is perfect for us,” said Khosrowshahi.

Uber established restricted stock units in beginning

When Uber first went public in 2019, it detailed in its IPO filing how it would distribute its RSUs.

Uber is a top tech stock that offers RSUs

“As we transition to become a publicly-traded company, we expect that the mix of service- and performance-based components of our equity compensation will shift,” said Uber.

To help us achieve our objectives of rewarding our executive officers for their experience and performance and motivating them to achieve our long-term strategic goals following this offering, we anticipate that performance-based vesting conditions applicable to RSUs granted to our executive officers will become more prevalent,” added Uber.

Uber employees see downside to RSUs

While Uber’s IPO has been successful, there was an unexpected tax burden to its employees. When the IPO launched, Uber recorded its shares at $45. The company tied the restricted stock unit settlement to its IPO launch in 2019. Uber was optimistic that the stock would rise and give a bigger payoff to employees.

In a letter to employees in May 2019, Uber hoped that the move would “mitigate the risk that the company could be responsible for paying a significantly higher amount in taxes if the stock price increases meaningfully after the IPO.

However, the opposite happened. Uber stock dropped to $23. Because the stock fell, employees have to pay extra taxes on capital losses. If the stock had gone up, Uber and its employees would have had to pay less tax in the long run. Employees at the time noted how the extra tax bill shocked them at the time.

“Word started dripping out to say, ‘Hey, I actually owe quite a bit of money to the government. There was a bit of panic and a lot of anxiety’,” said the former employee.

Uber’s RSU is cautionary tale for employees

While Uber offers generous benefits to employees like RSUs, at first, they weren’t implemented with the best advantages to employees. Barbara Baksa, director of the National Association of Stock Plan Professionals, noted that Uber thought its RSUs would rise as its stock was supposed to grow.

“If you think that you’re going to IPO and the stock price is going to continue to accelerate and in six months that stock is going to be worth a lot more, then it would definitely be to the employees’ advantage to have the tax withholding done at the IPO because it would reduce their tax liability and start their capital gains earlier,” said Baska.

Parkworth Wealth Management principal Bruce Barton said that Uber and other tech companies have untraditional ways to compensate employees. Restricted stock units are part of a new compensation package.

“We’re talking about large private companies that got very large, very fast and had to adopt this nontypical way to compensate employees. They’re still experimenting,” said Barton.

Uber offers generous RSUs, but employees must be aware of the possible tax responsibilities they may have when they receive them.

3. Apple

Apple stock rises during COVID-19

The tech giant’s stock skyrocketed by 46%, during the nationwide shutdown. Credit Suisse analyst Matthew Cabral raised his price target on Apple stock because the company’s App revenue grew 35% over the last few months.

“Despite a slow start, increased screen time amid widespread ‘stay at home’ measures is now translating into a rapid acceleration in App Store revenue,” wrote Cabral in a note to clients.

“We’re[Credit Suisse] encouraged by building App Store momentum, both as evidence of Apple’s ability to increasingly monetize its nearly 1 billion iPhone user base and in support of multiple expansion for the stock as the mix shifts to higher-quality, more recurring revenue,” added Cabral.

Evercore ISI analyst Amit Daryanani also expects Apple stock to rise as customers buy more Apple Watches and other devices.

“We expect wearables and services to sustain double digit growth driven by uptick in [average revenue per user] and better monetization of the install base,” said Daryanani.

Daryanani also expects Apple stock to outperform as the corporation recently announced that it would make its own chips in-house.

“It is encouraging that Apple continues to demonstrate its leading chip design capabilities as in-housing semi design remains key to product margin expansion,” noted Daryanani.

Apple’s restricted stock units expanded to many employees

Apple (NASDAQ:AAPL) has a generous restricted stock unit package for employees. The RSUs were implemented by CEO Tim Cook in 2018.

The tech company revealed that it will offer $2500 in restricted stock units to some employees. Cook explained the RSU compensation in an email.

“To show our support for our team and our confidence in Apple’s future, we’ll be issuing a grant of $2,500 in restricted stock units to all individual contributors and management up to and including Senior Managers worldwide. Both full-time and part-time employees across all aspects of Apple’s business are eligible,” said Cook.

While many employees received many RSUs, Cook benefitted the most from restricted stock units. When he reached the five-year mark of leading Apple, he gained 700,000 RSUs as part of a whopping $100 million bonus compensation deal.

Apple RSUs can be beneficial to part-time and full-time employees if they stay with the company for the long haul.

4. Verizon

Verizon(NYSE:VZ) offers substantial restricted stock units to employees. The phone company’s early adoption of 5G technology and high-paying dividend make the stock attractive to Goldman Sachs analysts. The analysts rate Verizon as a buy.

“We add Buy-rated VZ to the Conviction List as we see the stock offering investors the most attractive combination of total return and risk owing to its stable wireless business, well-covered dividend (4.6% yield) and strong balance sheet,” noted the analysts.

“We believe Verizon’s financial performance will not be materially impacted by a short-term economic shock. This is because a large majority Verizon’s revenues come from selling wireless connectivity services to consumers and businesses in the US,” added Goldman Sachs.

Verizon’s restricted stock units help employees

Verizon’s” Stock Together” program gives RSUs to its employees. Verizon RSUs have a three-year vesting period. On a graded vesting schedule, workers receive one-third of the units on the anniversaries of the date they started with Verizon. In order to receive the RSUs, an employee has to stay through the entire vesting period. If an employee leaves before the vesting period is over, an employee can get the RSUs depending on the reason they left.

In the Verizon RSU program, the amount awarded to employees depends on certain factors. Verizon gives the restricted stock units after dividing the employee’s fixed dollar amount by Verizon’s stock price at the end of the vesting date.

If an employee’s award amount is $3,000 and Verizon’s stock price on the vesting date is $50, the equation is 3,000/50. In that equation, 3,000/50=60. So, a Verizon employee will receive 60 RSUs at the end of each vesting date.

5. Bank of America

Despite the difficulty banks had during the recession, Bank of America (NYSE:BAC) still had a strong Q1 2020. The bank’s CEO, Brian Moynihan, touted the company’s $22.8 billion revenue.

“Our results reflect the strength of our balance sheet, the diversity of our earnings, and the resilience of our teammates to serve clients around the world. Despite increasing our loan loss reserves, we earned $4 billion this quarter’,” said Moynihan.

Bank of America offers large RSU bonuses to employees

During the bull market of 2019, the Bank of America gave 200 to 500 restricted stock units to part-time and full-time employees. The RSUs are for employees that earn between $100,000-$350,000 a year. In this graded vesting period, employees are given the RSUs over four years at the same annual time. Moynihan wrote in a company email about how he wanted the RSUs to lead to employee retention.

“This stock award…will further align the role these teammates play with our continued performance and our shareholders’ objectives,” wrote Moynihan.

Even though the Bank of America is struggling during the global recession, there is still a strong RSU program for employees.

6. Microsoft

Microsoft (NYSE:MSFT) essentially pioneered the restricted stock unit program for workers. Bill Gates spoke about why he thought RSUs were better options for its employees.

“The fact is that the variation in the value of an option is just too great. I can imagine an employee going home at night and considering two wildly different possibilities with his compensation program. Either he can buy six summer homes or no summer homes. Either he can send his kids to college 50 times, or no times,” said Gates.

“The variation is huge; much greater than most employees have an appetite for. And so as soon as they saw that options could go both ways, we proposed an economic equivalent. So what we do now is give shares, not options,” added Gates.

Microsoft stock struggles after closing physical stores

While Microsoft stock rose 45% after physically closing stores, the company’s stock dipped 2% after permanently closing the stores. Despite the slight decline, Microsoft Corporate Vice President David Porter said the closures signal a more cloud-based system to help customers.

“It is a new day for how Microsoft Store team members will serve all customers,” said Porter. “We are energized about the opportunity to innovate in how we engage with all customers, maximize our talent for greatest impact, and most importantly help our valued customers achieve more,” said Porter.

Microsoft restricted stock unit vesting schedule

Despite the drop in Microsoft stock, the Microsoft RSUs are still significant. The restricted stock units are granted every August . After three months, new RSUs are vested five percent over five years. Employees with older grants have them vested 10% every six months in the five year vesting period.

Microsoft’s restricted unit stock system has long been a benefit to its workers.

7. Starbucks

Analysts bullish on Starbucks after stock rise

Starbucks’ growth potential in the next quarter has garnered the attention of financial experts. The investment firm Ensemble Capital, says the coffee company’s stock is a buy. Ensemble Capital is bullish on Starbucks even though many stores were closed during the COVID-19 pandemic. Ensemble Capital believes Starbucks stock can rebound once the economy re-opens this summer.

“Starbucks, which nearly tagged $100 a share over the summer as investors finally realized that the company could return to solid levels of same store sales growth, backed off earlier in the quarter before another strong quarter of same store sales growth in both the US and China reminded investors just how dominant this company actually is,” wrote Ensemble Capital.

RSU’s from Starbucks pay off quickly

Starbucks’ RSU’s are very generous. The coffee giant’s Bean Stock program gives restricted stock units to employees. CEO Howard Schultz increased the benefit in 2016. He touted the plan in a statement.

“Every day, I strive to build the kind of company that my father never had a chance to work for, one that not only cares for its people but gives them opportunities to be their best selves,” wrote Schultz in his statement.

The RSU’s vest over a two-year period. In the graded schedule, 50% of the units vest a year after an employee starts working for the coffee company. After the second anniversary of a worker’s tenure, the other 50% of the restricted stock units vest.

If an employee leaves before all the units vest, all the vested RSUs are for the employees to keep. When there are unvested restricted stock units, they are forfeited once a worker leaves the corporation.

Starbucks’ RSUs pay off for employees in a shorter period of time than other corporations. Schultz has created a restricted stock unit system that greatly helps its employees.

8. IBM

The tech company IBM( NYSE: IBM) saw its stock rise as it bought the tech company Red Hat. Red Hat’s sales increased 18% from a year earlier after the acquisition. Victoria Greene, an analyst with G Squared Private Wealth, rates IBM stock a buy. She praises the company’s focus on cloud-based technology.

“IBM’s AI is leaps and bounds ahead of competitors since they have invested heavily in it for 10 years,” said Greene.

IBM’s restricted stock units benefit employees and CEO

Because of IBM’s strong stock, the corporation’s employees receive restricted stock units over a four-year vesting schedule. The RSUs vest at 25% each year on a graded schedule. The tech company’s CEO, Arvind Krishna, gets a similar deal to his employees. IBM detailed its RSU vesting period.

“RSUs will vest 25% on June 8, 2021, 2022, 2023 and 2024, provided Krishna is an active IBM employee on these dates ( unless certain requirements are met to be eligible for continued vesting. PSUs will be adjusted based on performance and will be paid out in February 2023,” noted IBM in its SEC (Securities and Exchange Commission) filings.

IBM’s graded vesting period enables employees and its CEO to reap many benefits from its compensation package.

9. Facebook

Facebook stock tumbles on ad boycott

A free speech debate is affecting Facebook stock. Facebook stock fell slightly after many companies are refusing to place ads on the social media company’s site to protest a Facebook policy. Facebook won’t take down controversial posts that are considered hate speech or misleading political ads by the companies.

The corporation pledged that it was trying to weed out misinformation on the site.

“We invest billions of dollars each year to keep our community safe and continuously work with outside experts to review and update our policies. We know we have more work to do,” said a Facebook spokesperson.

Despite the controversy, Rohit Kulkarni, executive director at MKM Partners says that the ad boycott of companies like Proctor & Gamble won’t greatly affect Facebook stock.

“Procter & Gamble is the largest advertiser in the world, but we think it accounts for less than 0.50% of FB’s revenues,” said Kulkarni.

Kulkarni agrees with Wall Street’s projections for 7% Q3 2020 growth.

“We believe near-term[Wall] Street estimates are reasonable and that there is upside potential given ad market recovery,” said Kulkarni.

Facebook RSUs helpful to workers

Despite the negative publicity, Facebook’s restricted stock units are beneficial to its employees. In Facebook’s RSU vesting period, the units vest on a quarterly schedule. In the graded vesting period, the employees vest 6.25% every three months. After vesting 25% a year, the RSU’s are fully vested after four years.

10. Intel

After the news that the aforementioned Apple was dropping Intel as a chip maker for its devices, Intel stock dropped. Despite the severance of their relationship, Intel took the partnership ending well.

“Apple is a customer across several areas of business, and we will continue to support them. Intel remains focused on delivering the most advanced PC experiences and a wide range of technology choices that redefine computing,” said Intel in a statement.

Despite the decline, some financial analysts want investors to buy the dip. Goldman Sachs rates Intel as a buy. The analysts say that more use of devices during the nationwide quarantine helped Intel.

“Despite the headwinds related to Covid-19, we are maintaining our estimates as we believe there are multiple near-term positive developments (i.e., potential strength/resilience in the high-end client CPU[ computer processing unit] and server CPU markets given a growing number of people working/studying from home) that could largely offset the headwinds (i.e., weaker consumption and enterprise spending),” wrote the analysts in a note.

Intel RSUs help employees even when they retire

The chipmaker’s restricted stock unit program is generous to employees. Intel RSUs distribute on a graded vested schedule. The restricted stock units vest at 25% over four years.

If retirees have unvested RSUs at the time of their retirement, they receive one extra year of vesting. That occurs for every five years of employment with Intel.

Intel’s restricted stock units are beneficial to workers even at the ends of their careers.

Restricted stock units a pivotal part of employee compensation

Corporations offer RSUs as a way to reward and retain employees. While it may not seem relevant to investors, they are connected. If a stock performs well, they can offer more benefits to employees and investors. With TradingSim charts and analysis, investors can find the best stocks that pay the best restricted stock units to its employees.

Working from home during the COVID-19 pandemic

Day trading stocks can be a successful way to create income- but it’s not easy. Many people want to make a profit in this bear market, but there are many challenges that day traders face in the COVID-19 era. This TradingSim article will explore how the real benefits and costs of being a day trader. The article will also teach day traders how to trade stocks from home and help them find the best strategies and stock picks to become a successful trader.

How do you get started day trading part-time?

Day trading involves quickly trading securities several times a day. Traders buy and sell stocks often throughout a trading day to make a quick profit. Volatility in the stock market helps day traders make a larger profit. However, stock fluctuations can backfire if a trader trades too hastily or makes a bad trade.

When is the best time to trade?

The best time to day trading is at the start of the day at 9:30 AM EST. The first hour of the trading day can be the most pivotal because there is more liquidity, when there is a higher volume of trading in the first trading hour. and there is the most volatility at the start of the trading day.

The other ideal time to day trade stocks is at the end of the trading day from 3 PM-4PM EST. Just as at the beginning of the trading day, high volatility at the end of the day can help day traders maximize profits.

What is a good day trading strategy?

Before traders get serious about day trading, they have to make some important decisions. Here are some things to consider before they start day trading stock strategy.

Determine whether you have the time and patience to day trade. Day trading is not a hobby. It’s a time-consuming job that takes up hours of a trader’s day. Even though day trading moves fast, a lot of methodical thinking is required to day trade stocks. Day traders also need excellent math skills, risk-taking abilities, and discipline to study the changes in the stock market.
Study the stock market. Day traders need to diligently study the stock market to be a successful trader. Traders have to possess a wide range of financial knowledge to withstand the ups and downs of the Dow Jones and NASDAQ. It can take years to master the stock market, so studying the nuances of the market is essential.
Study the different securities to trade. Day traders not only trade stocks. Traders have to research ETFs, foreign currency, or other assets to trade if they want to branch out beyond stocks. Novice traders may not realize that there are different rules and strategies for various assets.
Practice trading with simulated trading. Before traders risk their own capital, they should test their trading strategies. TradingSim would be a perfect outlet for traders to try out simulated trades before they decide to risk real money in the markets.
Start small, then expand. Once a trader has the capital, they should still slowly delve into trading stocks. Day traders should start small to minimize risk. If a day trader suffers losses, it won’t be as devastating if there is less money on the line. When a trader experiences success after three months, they can incrementally put more money into the markets. If they are still struggling after 90 days, they should maintain or even decrease the amount they have invested.

How much money do day traders need to start?

While there is no set amount to start day trading stocks, there is an amount that should be sufficient to weather the unpredictability of the stock market. When a day trader is ready to invest, they must have a lot of money saved to quickly buy and sell shares.

A trader should have at least $10,000 in disposable income ready to invest in the stock market. The Securities Exchange Commission notes that ideally, a day trader should have at least $25,000 in their day trading accounts. If a potential trader can’t afford to risk that much capital to withstand market volatility, they aren’t ready to day trade stocks.

A beginning day trader’s account also depends on what asset is being sold. To buy stocks, a trader needs at least $25,000. However, for day trading futures, $10,000 is recommended. For trading forex, $100 is likely the lowest amount needed. No matter what asset day traders buy and sell, all traders shouldn’t risk more than 1% of their trading income on one trade. For instance, if a day trader has $25,000 in their account, they should risk more than $2,500 on a single trade.

What equipment does a day trader need to work from home?

In order to treat day trading stocks like a work-from-home business, a day trader needs the right equipment. Traders should invest in a trading machine and trading software. Day traders should also have two monitors to watch charts and data.

The most important day trading equipment may be a steady internet connection. With a reliable wi-fi connection, traders have less risk of missing important trades if there’s an internet crash. A backup internet connection is also recommended for traders who are day trading at home.

Why is there a resurgence in day trading stocks?

Once investors start day trading stocks, they can join a plethora of new investors. There has been a recent revival in day trading for two key reasons. The recent volatility in the stock market has led many people to try to make money by day trading stocks.

Goldman Sachs analysts noted that the new influx of traders is driving movement in the options market.

“Investors are increasingly asking us about the participation of individual investors in the shares and options market. Our data suggests that individual investors are indeed a significant proportion of daily volume, ” noted Goldman Sachs analysts.

Sports betting drought leads to day trading increase

Another reason for the resurgence in day trading stocks is strangely enough because of sports. COVID-19 shut down sports events, so there were fans missing games to watch- and bet on as well. Instead of betting on the performance of LeBron James, gamblers are now betting on the performance of Tesla (NASDAQ:TSLA) stock.

In addition to trading on their own, sports gamblers are also following the stock picks from the head of a sports website. Barstool Sports’ Dave Portnoy has picked winning stocks during this bear market. He compares day trading in the current market to the unpredictability of a sports event.

“With the volatility, it is kind of like watching a sports game,” said Portnoy.

Jim Bianco is president and macro strategist at Bianco Research and monitors day trading trends. He noted that young gamblers are moving to day trading with the latest sports hiatus.

“Sports gambling is a huge business in this country and a lot of sports gamblers and a lot of these millennial gamers are now playing the stock market, day trading,” said Bianco.

What are the benefits of day trading?

After Buffett dropped his airline holdings, Portnoy bought stock in the troubled industry. When the airline stocks rebounded, he felt vindicated as a budding financial expert.

“I’m a little surprised that it’s become pretty well known within the financial community. That’s kind of our target audience regardless of what we’re covering and I think Barstool was popular in those circles to begin with,” said Portnoy.

Portnoy’s contrarian investing is a day trading strategy that can work if a day trader is diligent and studies the markets well. If a day trader is savvy with their trades, they may profit from going against the popular opinion of Wall Street experts.

Zero-commission apps lead to more day trading

The rise of Robinhood and other zero-commission trading apps are helping drive the rise of day trading. Andrew Laphorne is a stock analyst at Societe Generale. He said that new day traders bought cheap stocks as the economy cratered and profited as the market is slowly rebounding now.

“For all the mocking of Robinhood investors, their timing back into the market looks impeccable, with a significant pick-up in holdings as equity markets bottomed in mid-March,” noted Laphorne.

Airlines rebound with new day traders

Despite Warren Buffett selling airline stocks, young day traders are lifting the industry back up. An airline ETF, JETS, saw its value rise a whopping 2,000%. Millennial day traders purchasing the ETF led to its rebound.

Frank Holmes, chief executive officer of JETS issuer U.S. Global Investors, loves the recovery. He believes that young day traders buying the dip helped JETS’ value grow to $1 billion.

“All these millennials, being stuck at home with no bars to go to and no beaches to travel to, took their money and became day traders. They’re bored, they want to make money,” said Holmes.

Financial advisors cheer new growth in day trading stocks

Many financial advisors welcome the new breed of day traders. Nate Geraci is president of the investment advisory firm, the ETF Store. He sees Portnoy as a social media savvy version of investing giant Warren Buffett. Geraci also credits Portnoy for making day trading entertaining to his millennial followers.

“It’s really been a perfect storm. Investors are seeing firsthand the thrill of victory, the agony of defeat, and he’s doing it with large sums of money, so I think for younger investors, that’s really enticing,” said Geraci.

Day trading may be best for people who want to make quick profits from short sales. For short-term investors, day trading can be a quick way to earn money. Josh Brown is the chief executive of Ritholz Wealth Management and says day traders are just having fun day trading stocks.

“They’re not expecting to retire off of trading stocks. They’re having fun and they’re learning the market, and I think it’s great,” said Brown.

Day trading can also best for self-starters who want to work independently. Day trading stocks may be best for traders who learn best by learning on their own.

What are the risks of day trading?

While there are some benefits to day trading stocks, there are many risks associated with day trading.

Despite his recent success with day trading, Portnoy cautions that his Twitter followers shouldn’t heed all his financial advice.

“I’m not a financial advisor. Don’t trust anything I say about stocks,” said Portnoy.

While Portnoy’s day trading venture is currently paying off, it’s risky to follow advice from people who aren’t financial experts. In addition to not listening to experts, day traders shouldn’t just follow their emotions. Making rash trades based on emotion leads to more losses. Traders who buy and sell stocks without stop-loss limits can risk losing more capital than they can afford.

Day traders can lose a lot of money if they don’t limit their number of trades. Trading too much can lead to a lot of fees for traders. Setting stop-loss orders can help minimize risk. Many traders also buy stocks on margin and borrow too much money to trade stocks. Day traders should stick to a set limit on how much to trade and not depend too much on margin and leverage.

Financial experts warn about day trading inexperience

Day trading novices may feel a rush from their new venture, but there are risks. Caleb Silver, Investopedia’s editor-in-chief, believes that day trading beginners should be cautious with the large volatility in the stock market.

“People are new to trading and new to investing and want to take advantage of these wild swings,” said Silver.

“These are the most dangerous times to start day trading … This is when people really get hurt,” added Silver.

Silver noted that day traders must know their limits when trading so they don’t lose too much money.

“This is a super volatile time. You could lose your shirt in a day. You could gain two shirts back the next day, but you have to know what your limits are,” said Silver.

Mark Cuban cautions about day trading boom

Shark Tank star and Dallas Mavericks owner Mark Cuban is wary about the day trading boom. He thinks that zero-commission costs enable day traders to take more unnecessary risks.

“We have day traders who are able to go into margin with next to 0% interest. They’ve got nothing else to do. Their transaction costs are zero,” said Cuban.

Cuban also believes that once the economy slows again, there will be huge sell-off among day traders.

“You can also make the argument that this whole run-up is just buying the rumor. Once we start to really have definitive data on the other side, people are going to sell on the news, and if I had to make a bet, that’s it,” said Cuban.

Cuban also noted that the resurgence in the stock market will depend on how many workers are rehired.

“A key question is how many workers will be rehired and how consumer spending will fare once enhanced unemployment benefits end on July 31,” noted Cuban.

Cuban doesn’t think that day traders are fully prepared for another economic slowdown.

“We don’t know if all the jobs are going to be there, and we don’t know what happens with demand. I don’t think the market is truly understanding the challenges that we may be facing,” added Cuban.

Day trading rarely leads to profits

In addition to the risk of losing money, there is the risk of not earning much money at all. While many day traders tout the quick money that can be made, those profits rarely come through. A Brazilian study found that only 0.1% of day traders earned more than the nation’s minimum wage after almost a year of day trading stocks. The study noted the poor success rate of independent day traders.

“97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading,” noted the study.

Day traders should expect to lose a lot of money before they see any profits. Even if traders earn any income, they can lose portions of their wins through high taxes. Short-term gains are taxed at a higher rate than long-term capital gains.

What advice do day traders give?

Day traders can get advice from more experienced traders. Jason Bond is an experienced trader that touts his experience as a trader.

“Having trained multiple clients who’ve gone from cubicles with small trading accounts between $10,000 to $37,000 to successful, full-time day traders, making millions in just a few years, I have verified proof people can make the leap from their career to trading full time,” said Bond.

Bond also suggests that beginning day traders should get mentors to help them navigate the ups and downs of the markets.

“The best way to become a day trader is to learn from existing profitable day traders. There’s an overwhelming amount of theoretical material on the internet about how to day trade, but nothing beats learning from someone who is currently successful at it,” said Bond.

Day trading expert Brandon Wendell also says that not holding stocks for too long can lower risk.

“One of the best ways to control risk is limiting the length of the trade. The longer you are in a position, the greater the likelihood is that price could move against you. By day trading, you eliminate overnight and weekend risk, especially when you trade markets that close, like stocks,” said Wendell.

Discipline is key to day trading stocks

While Bond had success as a trader, many other day traders note that success doesn’t come easily. Deeyana Angelo is a managing director of Market Stalkers. She stresses that being a day trader requires a lot of training and discipline.

“Becoming a day trader is something that a lot of people see as an easy way to make money where you don’t need much experience – just click a few buttons and hey presto, you’re rich! But nothing is further from the truth,” said Angelo.

Brandon Wendell, an investment expert, noted that limiting risk and not holding stocks for too long is key to success as a day trader.

“Day trading is a very difficult performance discipline, much like becoming a professional football player or playing a musical instrument to a virtuoso level. You first need to have a natural talent, followed by years of practice,” added Angelo.

Merlin Rothfeld is an investment strategist that studies day trading. Rothfeld advises investors who are day trading stocks to be patient because they will monitoring screens all day. Rothfeld also doesn’t want traders to stray from a well-thought-out trading strategy out of fear or haste.

“Quite often, day traders will take trades because they are just sitting in front of their screen all day. A forced trade is generally going to be a losing trade. Always follow your rules,” said Rothfeld.

How much do day traders make?

A day trader’s salary can vary greatly. If a trader is working independently, they face an uphill climb to a steady salary. Freelance day trading is similar to a sales position. There are times when income is high, especially if trades are executed well. A day trader may also make very little money if the stock market tumbles or a trading strategy backfires.

An independent day trader’s salary will also depend on how much capital they have invested in the stock market. As noted in a previous TradingSim article about a day trader’s salary, an average day trader’s salary has a 20% annual return. If a trader has $100,000 in an account, they may have profits of $20,000 in the best-case scenario.

Day trading for a firm has a more stable salary. According to ZipRecruiter, the average salary of a day trader is $80,000. However, that depends on experience and the city a trader is located in as well.

If a day trader has years of experience and lives in a small town, that’s a substantial amount of money. However, if a day trader has substantial debt from buying stocks on margin, lives in a major city, and has other major expenses, that amount may not go as far as originally thought.

How does day trading at home compare to working from a firm?

There are many differences between day trading stocks at home and at a proprietary trading firm. When a day trader is working from home, they have more flexibility. Day trading stocks requires a lot of studying and commitment. Traders can focus on the stock market in their home offices and their trades without distractions in a noisy firm. Day traders can also keep more of their profits than a trader in a firm.

However, there are downsides as well. Many distractions from friends, family, and IT emergencies can derail a trading day. Day trading at home means that they have to shoulder economic burdens on their own.

For day traders in private trading firms, there are some advantages. Day traders in an office can have more help on a trading floor from more experienced traders. Day trading with a firm’s funds lessens a financial burden of day traders.

There disadvantages of being a day trader in a proprietary firm as well. Day traders in proprietary firms are just paid as contractors and not salaried employees. They also keep less of their profits than an independent trader. Day traders in firms often have to pay for training fees or give their employers a cut of their profits.

How does day trading at home compare to other work-from-home jobs?

Day trading can be much more challenging than other work-from-home jobs. There is a range of jobs that pay less and some that pay more than day trading at home.

Working from home is a growing option. A study from Upwork and the Freelancers Union found that over 50% of workers were working from home just three years ago. After the COVID-19 pandemic, that number is sure to increase.

If a trader from home can make $40,000 a year on average, there are jobs that pay less. Virtual assistants that perform administrative duties can make on average $26,000 a year. Freelance writers can earn a range from $10,000 to $30,000 a year.

Those careers pay less than an average day trader’s salary. There are some work-from-home jobs that pay more like in the customer service industry.

Brie Reynolds is a career development expert at work-from job site FlexJobs. She notes that customer service is an in-demand job that can pay more steadily than day trading stocks at home.

“Customer Service is the No. 1 field for remote jobs right now. This is a field without a lot of barriers to entry in terms of experience or education levels. Unemployed retail workers who enjoy helping people may be able to use their skills in communication, problem- solving and sales to transition to a remote customer service job,” said Reynolds.

Customer service jobs may pay as much as $60,000 a year. Data and IT work-from home jobs are the most lucrative. Data analysts can make $50,000 a year. A website support specialist can earn $100,000 a year.

Some jobs pay less and some are more lucrative than day trading from home. Day trading is on average at the low end of the spectrum with earnings of $20,000-$30,000 a year

How do day traders find the best stocks?

As noted in a previous TradingSim article about finding the best stocks to day trade, there are methods to pick top stocks. Day traders should look for stocks that have high volume to move quickly in and out of their positions. They can monitor them on financial websites like Yahoo Finance. TradingSim charts enable day traders to simulate trading and test out their strategies before investing in stocks.

Below are five stocks that would be best for day traders that are day trading at home.

1. Apple

As a TradingSim article noted, Apple(NASDAQ:AAPL) is a perfect stock for day traders. Apple is moving 22 million shares are bought and sold daily. The tech giant’s high volume makes the stock attractive to day traders.

Financial experts rate Apple as a buy

Many financial experts think that Apple is a buy in this bull market. Todd Gordon is managing director at Ascent Wealth Partners and monitors Apple stock. He believes that Apple stock can rise 40% over the next few weeks.

“If you look at the three advances since 2013, each has been at least 130% followed by a one-third giveback. The current advance is only 66%, so we can easily — if history is to repeat — see another 70% in years to come, putting us at $490 potentially,” said Gordon.

Steve Chiavarone, portfolio manager at Federated Hermes, also believes that a strong balance sheet and consumer demand will drive high volumes of Apple stock.

“Growth has been the new defensive. Strong cash flows have met strong balance sheets which means you haven’t been under pressure because you needed external financing, and your return on capital is safe,” said Chiavarone.

He also believes Apple “consumers have pent-up demand. They have stockpiled savings, and we expect the consumer to have a good second half.”

Charts show Apple stock a top pick for day traders

Blue Line Capital President Bill Baruch noted that charts show that Apple avoided a death cross. A death cross is when the 50-day moving average moves below the 200-day moving average. Apple has avoided that drop, which makes it a top pick for day trading, according to Baruch.

“It broke out above last year’s high, a big resistance level at $327. Now, that is support, and overall you also have a rising trend line from the lows in March, and for me $327 to $330 is going to be a huge support level,” said Baruch.

“I also want to point out that it did not get the death cross, and the fact that the 50-day moving average rejected crossing below the 200-day moving average in May — it fueled the upside as it has done in many of the tech stocks,” added Baruch.

Apple’s high volume of stock movement and bullish analysis from financial experts make the stock a top pick for day traders.

2. Facebook

As noted in a TradingSim e-book, Facebook(NASDAQ:FB) is a favorite stock for day traders. Facebook has 25 million shares moving daily. The liquidity makes Facebook an ideal stock for day traders to quickly exit positions. Facebook CEO Mark Zuckerberg noted that the company’s success depends on its Marketplace division and dependence on small businesses.

“Overall, though, our business depends on the success of small businesses. So, this is a moment where we feel that we’re well-positioned to be champions for small businesses interests and supporters of important infrastructure that they’re going to need in order to move online,” said Zuckerberg.

Financial experts bullish on Facebook stock

Financial expert Jim Woods says Facebook’s stock is outpacing other tech stocks.

“That stock is outpacing 97% of all other publicly traded companies in terms of relative price strength,” said Woods.

Citi’s Jason Bezinet predicts a $7 billion growth for the company because of its upcoming Shops e-commerce division. “

“The firm should benefit from: a) the continued growth in e-commerce and b) the growing propensity of consumers to shop within social media apps,” said Bezinet.

3. Tesla

Tesla(NASDAQ:TSLA) would be a great stock for day traders that want a stock with high volume and volatility. The corporation’s stock is trading at 16 million shares a day. The electric car company’s stock soared to $1,000 a share after a better-than-average rate of car deliveries.

Jefferies upgraded its price target of Tesla up to $1,200 after Tesla’s stock climbed. Analyst Phillipe Houchois wrote in a note to clients that coronavirus will drive consumers to want more electric automobiles like Tesla.

“We see COVID-19 as an accelerator of the transition to EVs and renewables, from consumers and public policy,” said Houchois.

Horchois also noted that Tesla is more advanced than its automobile competitors with its technology.

“Tesla remains significantly ahead of peers in product range, capacity and technology. Near term, EV-friendly incentives in the European Union and lower-priced Model 3 support second-half volume, making Tesla more resilient than peers,” wrote Horchois.

“Against expectations even a few months back, the gap with peers is widening, from product to battery tech/capacity,” added Horchois.

Some analysts bearish on Tesla stock

While Jefferies upgraded Tesla to a buy, Goldman Sachs downgraded its rating of Tesla down to neutral because of its high valuation.

“We’d look to become more positive on Tesla stock again if we had more confidence in the near to intermediate-term trajectory of fundamentals, or if valuation became more attractive. We maintain our view that the electric vehicle market offers attractive long-term growth, and we think Tesla will be able to sustain a leading position in EVs[electric vehicles] (and with solid margins),” noted Goldman Sachs.

Morgan Stanley also downgraded its rating because of something that may be a benefit to day traders- Tesla’s high volatility.

“While Tesla has long been an expensive stock, and we recognize that valuation has expanded for the entire market, we believe that there is a higher bar for Tesla’s fundamentals than other stocks that may have challenging near-term results given Tesla’s premium absolute multiple along with the historical volatility of Tesla shares,” said Morgan Stanley.

While establishment banks may disapprove of Tesla’s volatility, the high volatility and volume make the stock a good choice for day traders.

4. Microsoft

Microsoft (NASDAQ:MSFT) is another large-cap, high-volume stock that may be good for day traders. The corporation’s stock rose after a positive Q1 2020 earnings report. Jefferies analyst Brent Thill rated Microsoft stock a solid buy. The work-from-home boom during the recent quarantine boosted its Microsoft Teams service.

“The biggest beneficiary of the new work from home environment is in the productivity suite and especially Microsoft Teams, which has seen a large spike in demand,” wrote Thill in a note to clients.

5. Roku

Roku (NASDAQ:ROKU) is a streaming disruptor that has soaring stock and volume. The company has 19 million shares moving each day. Roku will partner with Kroger to use data to attract more customers. The move led Rosenblatt analyst Mark Zgutowicz to rate Roku stock a buy.

“Roku shopper data program, launched with one of the largest global grocery retailers, shows significant potential to alleviate friction between linear and CTV ad buys,” said Zgutowitz.

Roku’s stock rose 6% this year as more customers stayed home and canceled their cable subscriptions.

The high volume of Roku stock makes it a good buy for day traders.

Laura Martin is also bullish on Roku stock as more American viewers move from cable to streaming TV services.

“Roku had 45% (40 million of 88 million) of total connected TV homes in the US at 3/31/20, and therefore we believe Roku will be the winning aggregator of streaming TV and film content apps,” said Martin.

Analysis and patience key to day trading from home

To make money quickly from day trading at home, ironically, a lot of waiting is required. Building an effective trading strategy and studying the stock market is key. Working from home as a day trader can be a nice side hustle for beginners, but not a lucrative career to retire from in 30 years.

Despite what some traders on zero-commission apps may say, day trading is not a harmless get-rich-quick scheme. The stock market is cyclical and what goes up always eventually comes down. With TradingSim’s blogs, charts, and insights, day traders can learn more about how to withstand the unpredictability in the stock market to make money in the stock market.

How to Invest on Your Own

Why are people hesitant to invest on their own?

Why should you invest on your own?

401ks a great way to invest on your own

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

Dividend reinvestment plans another investment option

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

What are the advantages of investing on your own?

What are some disadvantages of investing on your own?

What are your financial goals before investing on your own?

Tips to remember when you invest on your own

Robinhood makes investing on your own easier

Dave Portnoy popularizes investing on your own

Invest on your own with caution on Robinhood

Robinhood not only option for investing on your own

Financial expert advises people investing on their own

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

Top 5 stocks that you can choose on your own

1.Microsoft

Microsoft Q4 earnings show continued strength

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

2. Google

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

3. Apple

Apple is a buy for financial analysts

4. Pfizer

Pfizer has strong Q1 2020 earnings report

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

5. Netflix

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

Investing on your own can be done with research and patience

Why do people put off investing?

1. Starting investing early gives people time to build wealth

Compound interest helps increase profits

Starting to invest early can help young people meet financial goals

2. Investing early leads to automatic savings

Regular 401K contributions help build wealth

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

Financial experts notes growth of trading apps in starting investing early

Acorns lets people use spare change to start investing early

Stash another app that enables early investing

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

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

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

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

Financial experts advise people to do research before starting investing early

Diversified portfolio pivotal to start investing early

What should new investors have in a diversified portfolio?

6. Starting to invest early leads to patience and profits

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

Millennials saving more as they start investing early

Financial experts advise long-term strategy to start investing early

7. Starting to invest early can lead to early retirement

Starting investing early can help start FIRE

Investing early can lead to financial security in crises

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

Starting investing early is key to financial freedom

Why should people start investing?

What financial terms should investors know?

What platform should beginning investors choose?

How much money is needed for investing for beginners?

Should investing for beginners follow the stock market?

What taxes do investors pay for stocks?

What options are best for investing for beginners?

Bonds often a safer investment for new traders

Corporate and municipal bonds another way to invest

Stocks and bonds can lead to diversified portfolio

CD’s another low-risk way to invest

ETFs another option for investing for beginners

401 K’s are common entryway for investing for beginners

What criteria should be included for stocks for new investors?

1. Berkshire Hathaway is top stock for investing for beginners

Berkshire Hathaway is a buy for financial experts

2. AT&T

AT&T has high dividend payout to investors

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

3. Google

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

4. Apple

5. Amazon is key stock for investing for beginners