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

What are the rules for a Roth IRA withdrawal?

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

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

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

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

What are the penalties of early Roth withdrawal?

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

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

Some financial advisors say not to make Roth withdrawals

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

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

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

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

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

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

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

SEP IRA — Roth IRA withdrawals can help account holders

Consulting a financial advisor is key to Roth

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

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

Financial Expert — Financial advisor can help people decide how to make Roth IRA withdrawal

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

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

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

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

Can a Roth IRA withdrawal buy a home?

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

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

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

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

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

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

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

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

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

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

What is the difference between traditional and Roth IRA withdrawals?

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

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

Some of the exceptions include medical expenses and disabilities.

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

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

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

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

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

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

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

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

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

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

Roth IRA withdrawals have more options for account holders

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

CARES Act helps make Roth IRA withdrawals easier

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

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

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

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

Roth IRA withdrawal can benefit account holders

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Saving money with Roth IRA withdrawals is crucial

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

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

Top 10 Stocks for Roth IRA investors

1. Apple

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

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

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

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

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

Apple’s new products will help stock rise

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

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

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

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

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

2. Amazon

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

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

Amazon stock is a top choice for Roth IRA withdrawal replacements

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

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

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

3. Netflix

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

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

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

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

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

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

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

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

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

4. Zoom

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

Zoom stock is a top stock to supplement Roth IRAs

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

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

Zoom will grow as a Roth IRA withdrawal supplement

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

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

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

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

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

Zoom is a strong stock to supplement Roth IRA withdrawals.

5. Google

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

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

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

6. Microsoft

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

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

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

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

Microsoft stock top for Roth IRA withdrawal supplement

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

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

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

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

Microsoft is a strong stock for Roth IRA withdrawal supplements.

7. Gilead

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

Gilead stock a key stock for Roth IRA withdrawal supplement

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

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

8. Pfizer

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

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

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

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

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

Analysts says Pfizer is a buy for Roth IRA’S

Risinger also predicts Pfizer has strong growth potential.

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

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

Pfizer is a strong stock for Roth IRA’s.

9. IBM

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

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

IBM stock good to prevent Roth IRA withdrawal

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

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

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

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

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

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

Kavanaugh also touted its strong dividend yield.

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

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

10. NVDA

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

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

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

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

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

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

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

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

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

Conley sees little downside to Nvidia’s growth.

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

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

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

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

Roth IRA withdrawals can be beneficial with proper planning

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

When people are saving for retirement, many debate whether to open a Roth IRA vs. traditional IRA. Whether there is a bull or bear market, investors can decide which method will help them rebalance their portfolios. This TradingSim article will assist investors who want to decide which method is best for them.

What is the difference between a Roth IRA vs. traditional IRA?

In the comparison between a Roth IRA vs. a traditional IRA, there are many differences.

A traditional IRA has these key characteristics :

Traditional IRA’s are offered by employers to workers.
An account holder can put away a significant part of their pre-tax earnings.
With a traditional IRA, taxes are delayed until funds are withdrawn.
Funds can’t be withdrawn penalty-free until the account holder is 59 1/2.
If an account holder makes large contributions to the IRA, it can lower their taxable income.
Compound interest can help account holders build more wealth in retirement.
Traditional IRA’s don’t have income limits.
Account holders can’t make contributions after they turn 70 1/2.
When account holders turn 70 1/2, they take required minimum distributions.

On the other hand, a Roth IRA has these characteristics:

Roth IRA’s are purchased by an individual.
In 2020, the maximum contribution limit is $6,000.
There is no age limit to Roth IRA contributions.
In contrast to traditional IRAs, Roth IRAs don’t have required minimum distributions.
When a person makes a withdrawal at any time, there are no penalties.

What are the advantages of a traditional IRA?

Steve Frazier is president of financial firm Frazier Investment Management. He says that people that earn too much for a Roth IRA could benefit more from a traditional IRA.

“It’s possible (to be) disqualified from the Roth in the first place,” said Frazier.

David Johnson is a financial adviser at Modern Horizons Wealth Advisors. He said the pretax contributions to traditional IRA’s can help people save money.

“Pretax contributions are one of the few tax reduction strategies many workers have available. Especially now, since fewer are able to itemize because of the increased standard deduction,” said Johnson.

What are the downsides to a traditional IRA?

Some financial experts like Ed Slott says account holders that have a traditional IRA can be affected by increased tax rates.

“With a traditional IRA, you’re at the mercy or uncertainty of what future higher tax rates might do to your retirement savings. With a Roth IRA, you don’t have to worry about future rates, because your tax rate in retirement will be zero,” said Slott.

Young people may also balk at traditional IRAs if they want to make withdrawals before the assigned age of 59 1/2. Slott noted that Millennial account holders may see that requirement as a downside to a traditional IRA.

“That’s a big deal for lots of younger people who are worried, ‘What if I need to get to my money?’” said Slott.

Chris Chen is a financial adviser at Insight Financial Strategists. He said that going from a traditional IRA to a Roth IRA can cause tax liabilities.

“Going from a traditional to Roth is giving up a lot of assets and income. The name of the game is not to pay no taxes on distribution, but to minimize taxes over a lifetime,” said Chen.

Financial experts say Roth IRA has advantages

Some financial experts say that Roth IRAs have a benefit. He said that even though Roth IRA holders have to pay taxes up front when they open an account, they can make tax-free withdrawals in retirement.

“Most people are better off taking a tax hit now,” said Frazier.

Steven Elwell is a certified financial planner and partner with Level Financial Advisors. He believes that as a person’s income increases, the lack of withdrawal taxes make Roth IRA’s more attractive.

“If you expect your income to go up, then something like a Roth might make sense,” said Elwell.

As financial expert Ed Slott noted, Frazier agrees that the Roth may be a better option for younger people saving for retirement.

“If you’re looking for flexibility, the Roth is the superior saving vehicle for the younger generation,” said Frazier.

Clayton Alexander is a registered investment advisor and founder of Teton Wealth Group. He said that starting a Roth IRA has benefits for people open one at an early age.

“One of the benefits of starting a Roth at an earlier age is the concept of compounding interest that can occur inside the investment, tax-free,” says Alexander.

Compound interest impacts comparison of Roth IRA vs. traditional IRA

Elwell isn’t sure that a traditional or Roth IRA is better.

“I don’t think there is a hard and fast rule that (one) is better,” said Elwell.

Jeannette Bajalia is president and principal advisor of Petros Financial. She said either option is good for investors saving for retirement.

“It’s not whether you should take a Roth over a traditional 401(k), but what is the right mix of savings to achieve your life and retirement goals,” says Bajalia.

Financial expert Chris Hogan says to consult a tax professional before opening a traditional IRA.

“If you have the money to pay the taxes on that money, it is a fantastic thing to do each and every year,” said Hogan.

Financial experts say people can use Roth to save

For many people who are struggling with finances, some withdrawals may be acceptable if they held the accounts for at least five years. Mark Jaeger is the director of tax development at TaxAct. He said that Roth IRA’s can be used as emergency funds in emergency situations.

“People are starting to be laid off, and it’s difficult to find that money when you start being put out of work. But you can always get your basis back from the Roth IRA,” said Jaeger.

Financial experts recommend Roth vs. traditional IRA

Another financial expert for Roth IRAs is retirement expert Jeanne Fisher. She is the managing director at Strategic Retirement Partners. She says that Roth IRA’s are beneficial for its low federal tax rate.

“If they are in a very low effective federal tax rate, or even a negative tax rate, the Roth is very beneficial. Finally, it can be used as a flexible bucket in retirement for high-income, high-net-worth clients,” Fisher says. “We consider all things like: How is the rest of the nest egg saved? Is it all tax-deferred? Are they expecting a pension? Do they need all of their retirement savings or do they intend to pass it to the next generation? Will they need all of their projected RMDs? I’m not exaggerating when I say—especially particular to the 401k—that eight out of 10 times I will recommend a Roth contribution,” said Fisher.

Fisher and other financial advisers show how Roths help people save on taxes.

“We illustrate the total growth of the portfolio and what the cumulative account balance could be in retirement. We also educate to how it affects their paycheck. Electing the Roth in the 401k isn’t going to result in a big tax bill when you file your taxes. Instead, the tax withholdings are adjusted on your paycheck, and in most cases, you are seeing only a minor adjustment each pay period,” said Fisher.

Fisher also touts the tax-free growth in Roth IRA’s.

“For one, investors always decide how much they want to save first, and then we talk about taxes. I have never, in my 12-year career, had someone walk back in my office with their ‘tax savings’ and ask to invest it. It just doesn’t happen. Also, most people max out the IRA contributions, which completely negates the argument,” said Fisher.

Financial experts say to talk to advisors before converting to Roth vs. traditional IRA

Jennifer Weber is vice president of financial planning at Weber Asset Management. She said that it’s key to consult a financial advisor before choosing a Roth vs. traditional IRA.

“It’s important to understand the following: what your company offers, does your company offer a match on retirement contributions and are you eligible to contribute directly to a Roth IRA (based on income limits),” said Weber.

Clark Howard is a financial expert that recommends traditional IRA’s because of potential rising tax rates.

“Our tax rates today are unusually low because we’re running a massive budget deficit. At some point, those tax rates will increase. That means there’s a good chance tax rates will be higher when you go to spend your nest egg in 25 or 30 years,” said Howard.

Howard said that Roth IRA’s may be taxed at a higher rate later, so people should choose traditional retirement accounts.

“Remember, in general, tax rates are likely to go higher over the years no matter which political party is in power. That means it may make more sense to skip the deduction of a traditional IRA now to avoid tax later with a Roth IRA,” said Howard.

Financial experts say Roth IRAs have tax benefits

Financial expert Suze Orman said Roth IRA’s could be best for investors while tax rates are low. She suggests people should invest in a Roth before taxes increase to pay off the increasing national debt.

“Do you really think that tax brackets aren’t going to have to go up five, 10, 15 years from now in order to pay for all the debt that we’re carrying? Of course, they’re going to have to,” said Orman.

While Suze Orman recommends Roth IRA’s, there are financial analysts that disagree with the world-renowned financial analyst. Monica Dwyer is vice president at Harvest Financial Advisors. She thinks that Orman’s advice may be too general. Dwyer said people should pick a traditional IRA or Roth based on their own financial situations.

“I think that Suze is concerned that future taxes will be much higher because we cannot continue on the spending parade that we have been on, our deficit is ballooning and, just like someone with a lot of credit card debt, this debt will have crushing consequences at some point,” said Dwyer.

“Does that mean her advice is good? Not necessarily. It just depends on the person,” added Dwyer.

Roth IRAs have advantages for young investors

Thomas Scanlon is an adviser at Raymond James. He said that a Roth IRA can give tax-free advantages to young investors.

“Folks just starting out might have almost 40 years of tax-free growth. What a great way to build wealth,” said Scanlon.

Mark Beaver is a financial adviser at Keeler and Nadler. He said that a favorable tax code can help investors save more money.

“The tax code today is about as favorable as it’s ever been and the likelihood of that changing (to be higher) in the future is pretty good. Because of that, we look to add to Roths directly or do things like backdoor Roth contributions or conversions where it makes sense,” said Beaver.

Financial experts recommend Roth IRA for young people

Because Roth IRAs don’t have age withdrawal limits, young people can let money grow tax-free. Ryan Marshall is a New Jersey-based certified financial planner. He said young investors should consider a Roth IRA.

“This is an area most young people don’t consider. We have seen a lot of clients who are withdrawing more from their 401(k) account than they actually need to live on in retirement. The Roth IRA currently does not force you to withdraw funds and continues to grow tax-free so long as you leave money invested,” said Marshall.

“It is great to build up those Roth funds when you are younger because you may not qualify when you are older,” added Marshall.

Pete Hunt is a certified financial planner and director of client services at Exencial Wealth Advisors. He recommends Roth IRA’s for most of his clients. However, he doesn’t recommend Roths for high-income clients.

“I recommend it to all my clients, unless they are in a situation where they think they will make significantly less income in the future,” said Hunt.

‘I like having a Roth IRA, if they are eligible for it, just because it gives a lot of flexibility that if they need that money, they can pull the contributions at any time for any reason,” Hunt said.

What are the disadvantages of a Roth IRA vs. traditional IRA?

While the Roth IRA can have benefits, there can be a tax downside. Dwyer said Congress can still add increased taxes to Roth IRA’s.

“Congress can get pretty creative about where they are going to collect taxes from and there is no guarantee that they won’t someday go after Roths,” said Dwyer.

How can a person make a Roth conversion?

Since many people want to save money on their Roth IRA’s, there can be an advantage with reduced required minimum deductions. Maria Erickson is a financial adviser. She said taxpayers can save on taxes without a required minimum distribution.

“This year is an unprecedented opportunity. The numbers are pretty compelling. You can reduce your tax bill by 30% to 40%,” said Erickson.

How can Roth IRA’s help with homeownership?

In addition to Roth IRA’s helping people save for retirement, Roths also can be used for another purpose. If a person meets certain requirements, they can withdraw $10,000 from their Roth IRA’s to purchase a home. Daniel Galli is the principal of Daniel J. Galli & Associates. He suggests that young people can use their Roth IRA’s to buy a home.

“We’ve long suggested that young people use a Roth IRA to save the considerable amount needed for a first-time home purchase,” said Galli.

“As long as we can meet the five-year rule, they can use all contributions plus up to $10,000 of gain, free of tax and penalty,” Galli said.

While people can use their Roth IRA’s to buy a home, Galli notes that people have to aggressively invest to fund the accounts in the future.

“This strategy requires some market risk in order to enjoy some gains, but the rewards can balance that,” said Galli.

While Galli is for people using the Roth IRA for buying homes, some financial planners are opposed. Certified financial planner and CPA Jeffrey Levine is the director of advanced planning at Buckingham Wealth Partners. He said that Roth withdrawals should be rare and reduced over time.

“You might want to make it more conservative over time,” Levine said.

Financial experts advise caution witth Roth IRA home ownership

In addition to Levine, there are other experts who think that people should save their Roth IRA funds. Shon Anderson is president of Anderson Financial Strategies.

“These accounts are designed to help people accumulate as much money as possible for retirement,” said Anderson.

“You can obtain a loan for a home, car, business venture, college tuition … but no one will ever receive a loan to retire,” said Anderson.

Galli said some younger account holders should use Roths to buy homes.

“If the person is contributing to a 401(k), getting a decent match, they’re on a good track for retirement and the Roth is just a nice addition, I might consider it,” said Galli.

However, he doesn’t advise Roth IRA’s for home ownership if people are closer to retirement.

“But if their only retirement savings is the Roth and they’re, say, in their 40s, I probably wouldn’t,” said Galli.

IRS lets people take more from IRAs

With the current economic volatility, the IRS has stepped in to help IRA holders. The IRS lets people withdraw up to $100,000 from their retirement accounts. The CARES(Coronavirus Aid Relief and Economic Security) Act says that spouses of account holders can also withdraw up to $100, 000 from their accounts. Jeffrey Levine is CPA and director of advanced planning at Buckingham Wealth Partners. He notes that the changes are helpful to account holders’ spouses.

“The spouse thing is pretty big. I had a lot of people in that camp, where the spouse was out of work and didn’t have significant retirement account assets,” said Levine.

Retirement plan consultant Denise Appleby says eligibility can help people who encounter economic difficulties.

“If you experience adverse financial consequences, because a member of your household, related to you or not, had their income adversely affected by COVID-9, you are eligible for the $100,000 coronavirus-related distributions,” she said.

Some financial advisors against extra Roth borrowing

While some financial advisors want their clients to take advantage of the new IRS rule, some disagree. Certified public accountant Ed Slott doesn’t think people should take extra funds out of their Roth IRA’s. He says the withdrawal now will lead to more taxes later.

“Remember, it’s still not a good thing: You’re taking your own money and you’ll owe the taxes,” said Slott.

Financial planner Mark Scribner also wants people to borrow from Roth IRA’s as a last resort.

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

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

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

Poppy still advocates for IRA’s over other online trading apps.

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

While Poppy is against Roth IRA borrowing, he says people can borrow tax-free if they meet certain requirements.

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

Poppy says people should consult financial planners before borrowing from a Roth.

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

Poppy also wants people to consider whether they can afford to replace the withdrawn funds later.

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

Can a new administration change traditional IRAs?

The new election may bring new changes to traditional IRA’s. Presidential candidate Joe Biden has promised to reform traditional IRA’s in a new plan. His website had these details:

“Under current law, the tax code affords workers over $200 billion each year for various retirement benefits—including saving in 401k-type plans or IRAs. While these benefits help workers reach their retirement goals, many are poorly designed to help low- and middle-income savers—about two-thirds of the benefit goes to the wealthiest 20% of families. The Biden Plan will make these savings more equal so that middle class families can enter retirement with enough savings to support a healthy and secure retirement,” noted Biden’s website.

J. Mark Iwry is a nonresident senior fellow at the Brookings Institution. He said that the changes may not affect traditional IRA’s.

“Don’t assume the private pension tax expenditure would necessarily be a deficit reduction target in a Biden-Harris administration. The private pension system plays a unique role in our economy,” said Iwry.

The Tax Foundation noted that Biden’s plan will “shift some of the benefits of tax deferral in traditional retirement accounts toward lower- and middle-income earners with the goal of encouraging additional saving by those taxpayers.

Would auto-IRA’s replace Roth or traditional IRA’s?

Biden’s plan would also implement auto-IRA’s for workers whose employers don’t offer retirement accounts. Iwry said the new system will help traditional IRA’s.

“The pension tax expenditure will be even easier to defend when auto-IRA makes the system far more inclusive and progressive,” said Iwry.

Iwry noted that partisan politics hurt the chances of enacting the auto-IRA program.

“The Obama-Biden administration made auto-IRA the centerpiece of their retirement proposals, but then Obamacare was enacted,” Iwry continued. “The ensuing divisive politics and toxic partisanship meant it was no longer the right moment.”

However, Iwry believes that the idea can grow with some states enacting auto-IRA’s and have “been steadily acquiring proof of concept as seven states have enacted it; others are considering it, and three of those seven states have begun implementation, which is going smoothly,” Iwry said.

Iwry hopes that an act of Congress to enact nationwide auto-IRAs will help compliment Roth and traditional IRA’s.

“Congress can achieve nationwide uniformity with a federal auto-IRA that builds on, preserves and integrates the state auto-IRAs”, said Iwry.

Top 5 stocks for Roth IRA vs. traditional IRA

No matter which IRA a person chooses, they can choose these top stocks for investment.

1. Amazon

If some people want to invest their IRA, Amazon (NASDAQ:AMZN) is the best stock choice. During the pandemic, Amazon has become the go-to online marketplace. The e-commerce giant’s latest line of products, including its new Amazon Fire TV stick, will bring in new revenue. Amazon’s vice-president, Sandeep Gupta, spoke about the new Fire TV features.

“Today, you can search for comedies, or stuff by Tom Cruise, but we’ve tried to make a landing spot for when you don’t know what you want to watch. This shows you stuff that’s free, movies and TV shows, broader categories, apps and more,” said Gupta.

Financial expert Puja Tayal noted that Amazon’s varied revenue streams like grocery delivery and cloud technology make it an attractive investment for Roth vs. traditional IRA’s.

“AMZN’s biggest win was its entry in grocery. Grocers were reluctant to go online. But the lockdown forced people to buy almost everything online. AMZN increased its grocery delivery capacity by over 160% to cater to the threefold surge in online grocery demand,” wrote Tayal.

“The e-commerce giant also saw a 29% year-over-year surge in Amazon Web Services (AWS), as companies shifted their work to the cloud to facilitate remote working. Moreover, it saw a 29% uptick in its subscription services like Amazon Prime videos,” added Tayal.

CNBC financial analyst Jim Cramer also rates Amazon as a buy for retirement accounts.

“I don’t care that it’s up 50% for the year, it has more catalysts than nearly any other stock under the sun: new revenue streams, great balance sheet, stay-at-home economy exposure and, of course, 5G. Now that it’s come down from its highs … I think you have to buy it,” said Cramer.

Amazon is a top stock for Roth and traditional IRA’s.

2. Netflix

Netflix( NASDAQ: NFLX) is a growth stock that is a great investment for Roth or traditional IRA’s. Because of the worldwide quarantine, many people stayed home and binge-watched Netflix shows like Tiger King. Netflix’s chief financial officer, Spence Neumann, spoke about the streaming company’s future.

“So Netflix 2021 is going to be a much better service than Netflix 2020, which gives those newer members and existing members even more reason to stay highly engaged and stick around and also to entice future members to join. So we think that the growth opportunity is as big as ever. There’s just that kind of near-term pull forward that you’re seeing,” said Neumann.

Financial analysts bullish on Netflix stock

With Netflix’s popularity and international expansion, Jefferies analyst Alex Giaimo says Netflix stock is a buy.

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

Netflix is a top stock for Roth and traditional IRA investment because of its growth.

3. Apple

In addition to Netflix, Apple (NASDAQ:AAPL) is a stock that outperformed during the COVID-19 crisis. Apple’s chief financial officer Luca Maestri touted the tech company’s Q2 2020 results.

“So the revenue for the quarter was $58.3 billion, up 1% from a year ago, despite the extreme circumstances from the impact of COVID-19 and a headwind of 100 basis points from foreign exchange,” said Maestri.

Maestri also spoke about Apple’s growing Services profits.

“Services revenue followed a different trend with very strong year-over-year growth of 17%. We set a new all-time revenue record of $13.3 billion, with all-time records in many of our Services categories and in most countries we track,” said Maestri.

With its potential bundling of services like Apple TV+ and Apple Music, Morgan Stanley analyst Katy Huberty rates Apple stock a buy.

“We have long argued that bundling services is a unique tool that Apple has at its disposal,” said Huberty.

UBS analyst David Vogt says Apple stock could rise if the revenue increases in the future.

“If several of Apple’s under monetized Services live TV+, and News mature and contribute to a segment revenue reacceleration back to 17% growth the next three year FY23, consolidated revenue could come in $13 billion higher than our forecast,” added Vogt.

With Apple’s new products, Apple is a stock that can be an impressive investment for Roth or traditional IRA’s.

4. Microsoft

With its established reputation in tech, Microsoft (NASDAQ: MSFT) is a top stock for Roth or traditional IRA investment. The company wants to increase its gaming division with its purchase of Bethesda Softworks’ parent, ZeniMax. Joost van Dreunen, founder of video game investment firm New Breukelen, said the deal will help Microsoft’s stock.

“The ZeniMax acquisition instantly increases the value of GamePass and closes the content gap between Xbox and [PlayStation]. It raises the barriers to entry for aspiring new contenders like Amazon and Google,” said van Dreunen.

Wedbush’s Dan Ives also believes the acquisition will boost Microsoft stock.

“While Xbox and gaming have been successful, [Microsoft] recognizes its need for consumer based revenue growth, which we believe this deal will directly help drive along,” wrote Ives.

In addition to Wedbush, Amana Mutual Funds also rates Microsoft a buy.

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

Microsoft is a top stock for Roth and traditional IRA investment.

5. Spotify

In the music streaming world, Spotify (NYSE:SPOT) is king. The streaming service’s growth during the COVID-19 pandemic helped the company increase its subscriber growth. Spotify spoke about its Q2 2020 results.

“After making adjustments to help us weather the pandemic in Q1, consumption returned to normal levels this quarter. Monthly active users increased to 299 million, and subscribers grew to 138 million, both exceeding our expectations. Advertising revenue, which took a significant hit in Q1, improved notably throughout the quarter, and we feel good about our momentum as we enter Q3,” said Spotify.

Financial analysts say Spotify could be top stock for Roth or traditional IRA

Bernstein analyst Todd Juenger said Spotify’s stock should rise with the addition of popular podcaster Joe Rogan. His Joe Rogan Experience podcast will be part of Spotify’s podcast collection.

“The market has added $20B of value to Spotify since the Joe Rogan podcast announcement…However, the analyst continue to believe it is unlikely that Spotify will generate much earnings from podcasts. He sees 37% potential downside in Spotify shares at current levels,” said Juenger.

In addition to Joe Rogan and former first lady Michelle Obama’s podcasts, Spotify’s ad revenue should drive its stock up as well.

“The stock is up sharply since the Joe Rogan podcast deal in mid-May, but there is further upside as podcasts help Spotify drive ad revenue on owned and licensed content, premium subscriptions and gross margins,” said Juenger.

Spotify is a stock with great potential in a Roth or traditional IRA.

Roth vs. traditional IRA’s can be good choice for investors

Whether a person chooses a Roth vs. traditional IRA, investors can sure that either retirement account will help increase wealth. If a person wants to choose the best stock for retirement account investment, they can practice trading those stocks on TradingSim. TradingSim’s blogs and charts can help people find the best stocks for their Roth or traditional IRA investments.

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

What is QQQ stock?

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

What is TQQQ stock?

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

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

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

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

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

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

ProShares advise caution about TQQQ

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

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

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

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

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

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

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

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

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

1. Amazon

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

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

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

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

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

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

Amazon wants to increase empire with wearables

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

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

Analysts say Amazon is a top QQQ holding

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

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

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

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

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

Ripps also sees growth from its Amazon Web Services.

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

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

2. Google

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

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

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

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

Google a buy to some analysts

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

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

Google is a strong holding in QQQ’s ETF.

3. Apple

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

CEO Tim Cook spoke about the company’s results.

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

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

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

Apple stock split may help QQQ stock grow

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

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

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

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

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

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

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

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

4. Tesla a key QQQ stock holding

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

Tesla has strong Q2 2020 earnings report

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

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

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

Musk also touted Tesla’s positive cash flow.

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

Tesla stock split boosts shares

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

Some analysts say stock splits help QQQ stock

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

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

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

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

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

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

Some experts think stock split will hurt QQQ stock

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

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

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

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

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

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

5. Facebook

Facebook a profitable holding in QQQ stock

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

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

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

Facebook stock a profitable QQQ stock holding

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

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

6. Netflix

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

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

Financial experts bullish on Netflix stock

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

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

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

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

7. Zoom

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

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

Analysts rate Zoom a buy for investors

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

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

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

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

8. Nvidia

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

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

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

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

Analysts bullish on Nvidia stock

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

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

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

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

Cowen also says Nvidia key part of QQQ stock

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

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

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

9. Microsoft

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

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

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

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

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

Experts bullish on Microsoft stock

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

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

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

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

10. Adobe

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

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

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

Experts say Adobe is vital part of QQQ stock

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

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

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

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

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

QQQ stock a good addition to investors’ portfolios

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

Investing can seem like it’s impossible to understand. However, with guidance and patience, anyone can invest. This TradingSim article will help budding investors start investing early to build a strong portfolio. In this article, I will also help new investors invest on their own to thrive at the end of this bear market.

What is investing?

Investing is owning a piece of a corporation. When you invest in a stock, you put money into that corporation hoping that you will increase that money at a profit. For example, say you buy Google stock at its (NASDAQ: GOOG) stock. If Google stock increases after a new Google product is released, your $100 will grow.

Google stock is a popular stock if you want to learn how to start investing

What are you investing in when you invest in the stock market?

When you invest in the stock market, you are buying stocks on a stock exchange. The New York Stock Exchange is the most exchanges that trades stocks. Many stocks like Nike (NYSE:NKE) and Starbucks (NYSE:SBUX) are offered on the New York Stock Exchange.

In contrast, many tech stocks like Apple (NASDAQ: AAPL) and Microsoft (NASDAQ:MSFT) are traded on the NASDAQ (National Association of Securities Dealers Automated Quotations) exchange.

All the performances of the top 30 companies on the exchanges are measured on the Dow Jones Industrial Average. If the Dow Jones rises, stocks are performing well and investments gain more money. If the Dow Jones falls, then stocks are performing poorly and your investment funds shrink.

The Standard & Poor 500(S &P 500) is an index that tracks the top 500 largest companies in the U.S. Many stocks that investors choose are in the S&P 500.

What do the symbols on the New York Stock Exchange mean?

When you’re monitoring stocks you purchase, you may see a series of one to three-letter symbols. Those symbols are called ticker symbols. For example, if you have Walmart stock, on the New York Stock Exchange, the ticker symbol would be NYSE:WMT.

On the NASDAQ exchange, tech stocks have four-letter symbols. For example, Apple stock is listed as NASDAQ: AAPL.

How do companies choose their stock prices?

When corporations go public and sell shares to investors, they issue an initial public offering (IPO). When companies list their stock on the New York Stock Exchange or NASDAQ, they list their stock at a certain price.

For instance, when Uber started selling shares to investors, the shares sold at $45. If investors buy a lot of the shares, the company’s stock price rises. If investors sell a lot of shares of a company, the company’s stock price falls.

How do you start investing in the stock market?

With trading apps like Robinhood, it’s never been easier to invest. New investors can start trading within minutes on trading apps.

A Robinhood spokeperson noted that the millions of investors have started investing through the app.

“It is not lost upon us that our company and our service have become synonymous with retail investing in America, and that this has led to millions of new investors making their first investments through Robinhood,” said a Robinhood spokesperson .

“We[ Robinhood] aim to provide the best investing experience as well as the resources customers need to get and stay informed,” added the spokesperson.

Robo-advisors and financial advisors can help you start investing

Rick Swope is vice president of investor education at E-Trade, a brokerage firm. He advises young new investors to use robo-advisors to get started in the stock market.

“Young investors who are just starting out should look to simple solutions like robos[robo advisors] and when investors graduate to more complex financial needs, like estate planning, they may turn to the services that a financial advisor can provide,” said Swope.

Then, there are options if you want to passively invest and have a computer program pick stocks for you. If you want another investing strategy, Robo-advisors are investing programs that use algorithms to help investors pick stocks.

One robo-advising trading app, Betterment, saw a 25% jump in new investors this spring. Dan Egan is Betterment’s managing director of behavioral finance and investments, He noted the increase in investing since the start of 2020.

“We have a large number of younger people who have opened up accounts and are getting started with investing,” said Egan.

Brokerage firms can help investors learn how to start investing

If you want more guidance with your investments, you can open an account with an established brokerage firm like TD Ameritrade or eTrade.

With a brokerage firm, you can more easily change your investment strategy. They can also help you rebalance your portfolios every few months to recalibrate your investment strategies.

Once you purchase a series of stocks, you have a portfolio of stocks. You can monitor that portfolio and rebalance your portfolios if you want to buy or sell stocks.

How much does it cost to invest with a brokerage firm?

While trading fees vary, there are fees for different services if you’re learning how to start investing with a brokerage firm. Mutual funds often come with high fees. If you have a mutual fund manager, discuss the fees with that advisor.

Kevin Dorwin is managing principal at wealth management firm Bingham, Osborn & Scarborough. He commented that mutual funds have fees because of their costs to brokerage firms.

“Mutual funds, for the most part, are still priced much higher because they’re harder for the brokerages to administer. And I think a lot of people use mutual funds, so they’re not really saving on that at this point,” said Dorwin.

Evan Kulak is co-founder of Polaris Portfolios, a Chicago-based financial planning firm. He noted that brokerages have many fees.

“Brokerages still charge commissions and fees on mutual fund trades, options contracts, broker-assisted trades and international securities,” said Kulak.

“Many accounts still have wire, transfer, research, and/or inactivity fees. In addition, there will likely be an increase in nontransparent fees such as such widening bid-ask spreads, sale of order flow data and low cash sweeps rates,” added Kulak.

Investors should be cautious about brokerage fees

If you have money left in your account after buying stocks or investing in other assets like gold, you have to pay fees on that as well. Steve Sanders is the executive vice president of marketing and product development at Interactive Brokers. He notes that “idle cash” that isn’t moved to a money market account is taxed.

A money market account is a high-interest savings account. If you have idle money in a brokerage account that isn’t moved, there are hidden fees.

“Those that do pay interest often require clients to sweep money into a money market account. Many people don’t think to do that or don’t have time, so the broker is able to pocket the money,” said Sanders.

Broker fees can add up for people learning how to start investing

Sally Brandon is senior vice president of client service and advice at Rebalance. She noted that even if broker fees sound small, they’re not.

“The trouble with fees is they sound small because many are less than 1%, but the reality is that many investors don’t understand what that means in dollars,” said Brandon.

“Be mindful of the multiple layers of fees. Look for an advisor charging below 1% to manage your portfolio, invest in low-cost funds like index funds and ETFs,” added Brandon.

Spreads and market makers have an impact on investor fees

When a market maker makes a trade, they profit from the spread- the difference between the bid and the ask prices. Investors don’t usually get the market price when buying or selling a stock. Because of that, they may pay more when they purchase the stock and make less when it’s sold.

Luke Lloyd is an investment strategist at Strategic Wealth Partners. He noted that the spread between the bid and ask prices can cause more brokerage fees.

“With stocks, there isn’t much to watch out for besides the spread between the bid and ask: The bid is the best price available where somebody wants to buy a security, and the ask is the best price available where somebody wants to sell a security,” said Lloyd.

Lloyd noted that brokerage fees make money when investors buy stock at the market price.

“If you want to buy at the market price, you will pay a couple percent premium to buy it. Some brokerages make money on that spread. It’s just something you want to look out for when placing an order,” said Lloyd.

Many online traders are free for people learning how to start investing

If brokerage firm fees are too confusing, there are many commission-free alternatives. In addition to Robinhood, established firms like Charles Schwab are also offering commission-free online trading.

JMP Securities’ Devin Ryan wrote in a note to clients that Robinhood accelerated the change to make it easier to start investing.

“Free trading isn’t a new theme in the industry, but the cadence of announcements from firms offering zero-commission trades seems to be picking up, and we also note that many of these companies have more credible platforms (and capital behind them) than the offerings of the past,” wrote Ryan.

While new trading apps are flashy, Scott Coyle, CEO of Click IPO, isn’t impressed by them. He thinks that other dealers offer more financial infomation to new investors than Robinhood.

“These broker- dealers that have been around much longer have more robust platforms, they offer a lot more things than some of the newer free-trading firms do,” he says.

How can you save for investing?

No matter how much you spend on investing, it’s crucial to have an investing budget. With that budget, investors can delve into the stock market without losing too much money.

When you invest in a stock with a broker, you can place a stop-loss order. When you place a stop-loss order, you can have a broker sell a stock when the price drops below a certain point.

For instance, if Uber stock plummets below $45, you can place a stop-loss to sell the Uber stock. When you place a stop-loss, you can prevent yourself from losing too much money when a stock’s price plummets.

In addition to stop-losses, you should have an emergency fund to cover losses. Since the stock market is so volatile, it’s crucial to have money to cover trading expenses and losses. Personal finance expert Ramit Sethi advises investors to have an emergency fund.

“An emergency fund is money saved for any unexpected expenses. It gives you the piece of mind knowing you have a hedge against the worst financial disasters,” wrote Sethi.

How to start investing with 401ks

If you have a 401k or 403b retirement account, you’re already investing. When you work for a corporation that offers a 401k, your employer has helped you start investing in stocks. If you work for a non-profit, you likely have a 403b account. A group of stocks comprises a 401k.

Since an employer deducts a certain amount of your paycheck, you’re investing a portion of your income into the stock market. If you want to start investing more gradually, you can increase the 401k deduction to invest more in the stock market.

Kelly Lannan is vice president of young investors at Fidelity Investments. She advocates investors having automatic deductions from their accounts to contribute to 401k’s.

“Some people really benefit from this automated approach as the money is never in their bank account to be tempted to spend,” says Kelly Lannan, vice president of young investors at Fidelity Investments.

If you don’t make any premature withdrawals before the age of 59, you can get your 401k account money tax and penalty-free. You have to withdraw your funds from a retirement account after you turn 72.

529 plans can help you invest for children’s tuition

In addition to 401ks, you can invest in 529 plans. If you have children and want to save for their tuition, 529 plans are a good option. These state-run programs are often offered by brokers. An investor can set aside money into the plan until their child is ready to attend college. Those funds can be withdrawn to use for tuition.

This investment plan lets investors contribute up to $15,000 to beneficiaries tax-free. Jim White is the founder of J.H. White Financial. He recommends that people learning how to invest should contribute to 529 plans to save for their offspring’s future.

“529s are still the best savings tool for college tuition. Any of the various alternatives frequently mentioned either have contribution limits or lack tax benefits,” said White.

Ksenia Yudina is CEO of U-nest and touts the versatility of 529 plans.

“529 plans can now be used for virtually any kind of education expense, not just college. You can even use them to pay down your own college loans,” says Ksenia Yudina CEO of U-Nest, a 529 investment app.

A change to a tax law in 2017 helps more parents who want to invest in 529 plans. Ben Birken is a financial advisor with Woodward Financial Advisors in Chapel Hill, North Carolina. He commented that the new law expands to let parents contribute to the plans for K-12 education. Parents can contribute to 529 plans to pay for tuition for private elementary and high schools in addition to colleges.

“For most people, this change doesn’t amount to much due to the high cost of private school and the limited amount of time that would be available for tax deferred/tax-free growth,” he says.

How much should you invest in 529 plans for your kids’ tuition?

When parents invest in 529 plans, there are questions about how to invest in these plans and when. White believes that dollar-cost investing is best in this volatile stock market. Dollar-cost averaging for 529 plans is contributing more to the account when the stock market is down. In contrast, you can contribute less to the account when stock prices are up.

“While the (recent market) volatility has not changed my view on 529s, it has strengthened my opinion that monthly savings in age-based target portfolio is the way to go,” said White.

“You cannot predict the future and trying to do so usually doesn’t end well. Dollar-cost averaging in an age-based portfolio that will slowly reduce risk as the student approaches college is simple and prudent and doesn’t require trying to remember to reallocate,” added White.

What approach should you take to invest in 529 plans?

Katie Vercio is a 529 expert and a wealth consultant at Evergreen Wealth Consultant. She recommends that parents take a cautious approach to investing in these plans if their child is entering college soon.

“If a child is in high school, I would recommend taking a conservative track. If a child is starting school in fall 2019, it may be a good idea to switch to a cash or (a certificate of deposit) option,” said Vercio.

Emily S. Boothroyd is a private wealth advisor at Price Financial Group. She advises parents to invest for their financial future first before investing in 529 plans for their children.

“For younger parents or those who are focused on their own financial planning, please use the oxygen mask analogy when thinking of your kids: Help yourself first, then them,” Boothroyd says.

“If you have credit card debt, you probably should not be adding to a 529. If your retirement isn’t on track, you probably shouldn’t be adding to a 529,” added Boothroyd.

When you’re starting to learn how to start investing to save for your kids’ future, 529 plans can be a prudent choice.

Where can you practice how to start investing?

If you want to practice trading stocks before investing real money, TradingSim is a great place to start. You can practice buying and trading stocks by simulating trades on TradingSim. By simulating trades with your account, you can learn risk-free about how to start investing.

What else can you invest in when you learn how to start investing?

In addition to stocks, you can invest in other assets as well. You can invest in mutual funds, ETF’s, or foreign currency exchange(forex) as well. Many of them can be purchased through online brokers.

Mutual funds are low-risk investing options

Mutual funds are a collective investment fund that combines money from different investors to buy hundreds of stocks. Because they’re considered low-risk investments, they’re usually included in 401k retirement accounts.

Index funds are mutual funds that match the stocks that comprise stocks that are usually in the S&P 500. Warren Buffett is a legendary investor that became a billionaire through his shrewd investments. Because he usually makes low-cost investments, he advocates for investors to pick index funds.

“Most institutional and individual investors will find the best way to own common stock is through an index fund that charges minimal fees. Those following this path are sure to beat the net result [after fees and expenses] delivered by the great majority of investment professionals,” said Buffett.

Mutual funds and index funds are low-cost, low-risk options for people who want to know how to start investing.

Bonds are a stable option for learning how to start investing

Bonds are another asset that you can invest in as well. While stocks mean you own part of a company, bonds mean that a company owes you a debt.

When a corporation or government wants to fund a project, they issue bonds. Bonds are issued by corporations and the U.S. government to fund projects. When they issue bonds, they’re essentially IOUs to investors. The corporation or government promises to pay off the debt with interest within a certain amount of time at a fixed interest rate.

For instance, if you buy a company’s bond for one-year at $10,000 at 5% interest, you have a fixed-rate coupon bond that pays the same rate over time. After a year, you would get $500 in interest from the bond.

Throughout history, U.S. government bonds have a record of strong returns. Saturna Capital portfolio manager Bryce Fegley said that U.S. government bonds were issued to investors and had strong value.

“During the Great Depression, U.S. government bonds were among the only investments that retained their value as the government was one of the only institutions that could be trusted to make payments in a hostile economic environment,” said Fegley.

Diversification of investment is key

When you start investing, you may want to just focus on one stock that you’re familiar with to play it safe. However, having a wide range of stocks can be a better way to increase profits. When you own a lot of different stocks and other assets, you have a diversified portfolio.

Josh Barrickman is a senior portfolio manager at investment firm Vanguard. When he advises investors, he says that holding many different stocks and bonds can help increase profits in the long run.

“By potentially holding hundreds – sometimes thousands – of bonds in a single fund, you get more diversification than you would (by) buying individual bonds,” said Barrickman.

If one industry is underperforming, diversification in other stocks and bonds can help. If you have stocks in the airline industry and they tumble during the COVID-19 era, you can recover. When you have investments in better-performing industries like tech, you can keep your portfolio healthy and increase profits.

ETFs can be a good option if you’re learning how to start investing

In addition to bonds, ETF’s (exchange-traded funds) are a good option if you want to learn how to start investing. Exchange-traded funds are a basket of stocks and bonds for investors to pick.

While ETFs sound similar to mutual funds, there are differences. ETF’s tend to track an index like the S&P 500. Jay Jacobs is senior vice president and head of research and strategy at Global X ETF.

Schwab ETF is a popular choice for people who are learning how to start investing

He says that investors should invest in tech ETFs if they’re learning how to start investing. His ETF contains stocks like Zoom(NASDAQ:ZM) and Netflix (NASDAQ:NFLX). Jacobs noted that many people use cloud computing stocks are a good choice to invest in as part of an ETF.

“These are companies that we can’t survive without, whether it’s video conferencing, whether it’s chat functions, whether it’s accessing data and being able to do remote work. Cloud computing technologies are at the very center of every part of our daily lives, and they’re proving it,” said Jacobs.

“These are very valuable companies that are just really beginning to take off for what we think is a long-term structural trend,” added Jacobs.

Forex is an international option if you want to know how to start investing

If you want to explore investing outside of the U.S. stock market, forex or foreign exchange trading is an option. Forex or FX trading involves trading different currencies. For example, the U.S. dollar is traded against another currency, like the Japanese yen. If the American currency rises and the yen falls, an investor can make a profit.

Robert Johnson is professor of finance at Creighton University’s Heider College of Business. He explains FX trading to people learning how to invest.

“The FX market does not set a currency’s absolute value but rather determines the value of one currency relative to another. You can take a position in virtually any major currency against another major currency in the FX market,” said Johnson.

Sergey Savastiouk, CEO of Tickeron, a market intelligence platform that assist users with portfolio and trading decisions on assets like foreign currency. He says that forex trading can be safe if investors choose a reputable firm like IG or Forex.com.

“Forex trading is safe if you properly select a brokerage account and firm,” said Savastouk.

Forex trading requires patience and extra funds

While forex trading can be exciting, people learning how to start investing should exercise caution. Even forex trading firms warn that investors can lose 70% of their funds in forex trading. Johnson notes that there are different aspects to forex trading. While stock values can rise over time, there isn’t the same growth with foreign currency.

“Investing in currencies, whether traditional currencies or cryptocurrencies, is fundamentally different than investing in stocks, bonds or real estate. “Over the long term, investing in the stock market is a positive-sum game,” said Johnson.

“Over both the short and long term, investing in currencies is a zero-sum game,” Johnson says. “When the U.S. dollar strengthens versus the yen, those holding U.S. dollar positions win and those holding yen positions lose an equal and opposite amount.”

Forex trading can be a good start to learn how to start investing. However, you need a lot of capital to start and a lot of patience.

How do you invest in real estate when you start learning how to start investing?

In addition to forex, you can invest in real estate. If you invest in real estate, you can invest in real estate investment trusts or REIT’s. These trusts are owned by companies that own assets like buildings and warehouses. Public Storage( NYSE: PSA) is an example of a REIT because the company owns several storage warehouses. Investing in REITs is a way to generate passive income from real estate.

Public Storage is a popular REIT to invest in

Investments in REITS can be lucrative, according to David Lebovitz, global market strategist at JPMorgan Asset Management.

“We believe it is about combining REITs and direct real estate, particularly given that REITs provide greater exposure to more forward-looking sectors,” he said.

“We still see value in direct real estate as a source of income, and more broadly, as a portfolio diversifier,” added Lebovitz.

Investing in real estate can be lucrative for people learning how to invest

In addition to REIT stocks, people learning how to invest can choose commercial real estate. With research and a lot of capital, you should find the best mortgage lender, lawyer, and other support to start buying real estate. With low interest rates, purchasing real estate is easier if you want to start learning how to invest.

You can also act as a loan processor and focus on making commissions on loans you originate.

Now this is not passive income like stocks or rental incomes, but another investment stream.

How is the real estate industry for people learning how to invest?

While there is a decline in house sales, the housing market is poised to rebound. Dhruv Arora, CEO of digital wealth manager Syfe, said the real estate market is resilient.

“In most historic recessions, the property market has either remained largely resilient or was only impacted across certain real estate sectors,” noted Arova.

In Australia, Trent Wilshire, an economist at the Australian property site Domain, notes that the economy restarting will help real estate.

“Transactions will start rising again in coming weeks but are still likely to be sluggish compared to late 2019/early 2020.“We’re already seeing a pick-up in recent weeks, with new ‘for sale’ listings rising the past few weeks and rising inquiries on Domain from potential buyers,” said Wilshire.

Where should you invest in the real estate market?

In addition to the real estate market overall, investors should look at the best locations. Kristina McPherson, a real estate agent at The Corcoran Group in Palm Beach, Florida, notes that the key to investing in real estate is location, location, location.

“You can look at all of that information and make a determination on which specific city in a state that you want to invest in,” said McPherson.

“It really varies on the specific location,” she says. “If you’re two blocks off the intercoastal [waterway] here, it’s suddenly a different price than if you’re right on the intercoastal,” added McPherson.

Vered Raviv-Schwarz is a chief operating officer of Guesty, a technology platform in the vacation rental market. She wants investors in real estate to consider the type of property they want to buy and how long they want to rent the property.

“If you buy a property in a ski resort, is it also available for summer holidays like hiking trips in the area? “If so, then you’re also likely to have occupancy in the summer months, too. When “it’s near a major city, long-term rentals may make sense,” said Vered Raviv-Schwartz.

Real estate experts like Noah Rosenfarb, the founder of Florida-based Freedom Family Office notes that investors need a lot of capital to invest in real estate. The amount of capital needed depends on how much rent you want to charge tenants.

“If the rent is $1,000 a month, then you should pay $100,000,” he says. “If you’re going to buy a condo for $250,000, you should hope that the monthly rent is $2,500. When ” it’s only $1,800 you’re going to have a tough time servicing the debt, paying maintenance, covering the taxes and so on.”

What do financial experts want to tell people who want to learn how to start investing?

Christine Benz is the director of personal finance for Morningstar, an investment research firm. She noted that individual stocks may not be the best first choice when you’re learning how to start investing.

“I’ll say it: Individual stocks are terrible investments for people just starting out,” said Benz.“[W]e[ Morningstar] haven’t talked enough about how poorly many small investors are apt to do with individual-stock purchases, especially if they’re just learning.”

How can you save and invest?

If you’re insure how much to invest, you can start with small amounts, even as little as $100. Josh Simpson is an investment advisor representative with Lake Advisory Group. He says that his clients started investing with very little money.

“Some of the wealthiest clients that I have started off investing small amounts of money when they could,” Simpson says.

Christine Benz is the director of personal finance for investment research firm Morningstar. She advocates for people learning how to invest to still save a significant amount of their income.

“Unfortunately the key to financial success is incredibly mundane — it’s disciplined savings,” she says. “Your savings rate is, by far, going to be the biggest determinant of how you do financially over time.”

starbucks stock — Starbucks stock is a good choice if you want to learn how to start investing

Benz also wants investors to diversify their portfolios.

“I think it makes sense for young folks to have more of a globally diversified equity portfolio,” Benz says. “You can buy a total world stock index fund — one fund that gives you exposure to every economy on the planet, practically.”

Learning how to invest can pay off with patience and education

Unless you are like Jordan Belfort who clearly can make money legally just as easily as he did illegally, you will need to have a long-term game plan.

When investors are learning how to invest, there are many options. With research from simulating trades on TradingSim, expendable capital, and a lot of patience, any can learn how to start investing to build their financial futures.

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.

Pure play businesses are becoming safer investment options in this uncertain time of COVID-19. These corporations that offer one product can be great investments. But what is the complete picture of pure play? This TradingSim article will explain what a pure play stock is and how their business models work. This article will also pick the top 10 pure play businesses investors can choose.

What is a pure play stock?

A pure play business focuses on selling only one product. For example, Starbucks (NYSE:SBUX) stock just specializes in coffee. Tiffany &Co. (NYSE:TIF) stock focuses exclusively on luxury jewelry. Many pure play businesses are value stocks because they are able to excel in one field.

What is a pure play business model?

A pure play business model helps a company stand out. For example, if a company like Tesla (NASDAQ:TSLA) only produces electric cars, it can have an advantage over Ford (NYSE:F). Tesla noticed its difference from other car stocks in its IPO prospectus.

“We design, develop, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components. We have intentionally departed from the traditional automotive industry model by both exclusively focusing on electric powertrain technology and owning our vehicle sales and service network,” said Tesla in its IPO launch.

As opposed to diversified stocks, pure play stocks focus on one specific sector. While Coca-Cola(NYSE:KO) is purely a beverage company, Pepsi (NASDAQ:PEP) has food and drink products.

Tesla stands apart with its business model

Because Tesla focuses on electric cars, Tesla can have more control of production of its vehicles. Founder Elon Musk noted that being selective about Tesla’s car production helped the company stand out.

“If we could have [mass marketed] our first product, we would have, but that was simply impossible to achieve for a startup company that had never built a car and that had one technology iteration,” said Musk.

In addition to dominance in production, Tesla’s business model means that the corporation can have more direct interaction with customers. In opposition to car companies that sell through dealerships, Tesla sells its vehicles directly to customers in its own. That enables Tesla to reach a large number of customers.

Tesla also offers its own charging stations for its vehicles. That insular production of electric vehicle accessories also helps the company’s singular pure play business model.

Is pure play a good investment strategy?

As an investment strategy, pure play can be effective. There are some advantages to having a pure play stock strategy. For beginning investors, pure play stocks can have an analysis that’s easier to understand.

What are the benefits of trading pure play stocks?

If a trader is investing in Coke, they just have to follow trends in the beverage industry. With Coca-Cola stock, the company’s revenue stream and business model are easy to understand.

However, with Pepsi, there are many different food and drink sectors to track. In a diversified stock, there are varied metrics to measure. Because they tend to dominate certain industries, if they perform well, they can pay off larger dividends for investors. In a bull market, pure play stocks can enjoy a longer period of high returns, especially if they’re growth stocks.

What are the risks in trading pure play stocks?

While there are benefits to pure play, there are downsides as well. If an industry is struggling, then a pure play stock will likely tumble. After COVID-19 shut down the cruise industry, Royal Caribbean( NYSE:RCL) stock fell by double digits. Exposure to one industry can also hurt investors in a bear market when stocks are falling. Pure play investing can be riskier because there is less protection against a decline in stock prices.

What are the top 10 pure play stocks?

The following stocks are some of the most effective pure play businesses. These stocks can pay off for investors with their focus in a specific industry.

1. Netflix

Netflix(NASDAQ:NFLX) is perhaps the most successful pure play stock in the stock market today. Even though the company started as a DVD rental service , the company moved on to dominate the streaming entertainment space.

When Netflix started, co-founders Reed Hastings and Mark Randolph wanted just wanted to create a mail-order DVD rental service.

“We were sitting down having coffee one morning in Santa Cruz and we were talking about whether or not you could mail a DVD in a first-class envelope or not,” Randolph remembers.

Netflix already was a pure play DVD service. When movie downloads became popular, Hastings knew that he wanted Netflix to evolve to streaming video.

“Movies over the internet are coming, and at some point it will become big business,” said Hastings in an interview.

“We started investing 1 percent to 2 percent of revenue every year in downloading, and I think it’s tremendously exciting because it will fundamentally lower our mailing costs. We want to be ready when video-on-demand happens. That’s why the company is called Netflix, not DVD-by-Mail,”, added Hastings.

Even though Netflix added 16 million subscribers in Q1 2020, Hastings noted that he was uncertain how Q2 2020 earnings would be in the future. With the economy re-opening, Hastings thinks there will be fewer subscribers staying at home.

“We don’t use the words guess and guesswork lightly. We use them because it’s a bunch of us feeling the wind and it’s hard to say. But again, will internet entertainment be more and more important over the next five years? Nothing’s changed in that,” said Hastings.

Analysts bullish on Netflix stock

Despite Hastings’ uncertainty, many financial analysts think Netflix will increase its subscriber base. Analysts at Jefferies rate Netflix as a buy. Because of the company’s international growth, Jefferies analysts wrote in a note to clients that Netflix should perform well in Q2 2020 even if subscription rates increase.

“Importantly, our revenue growth assumes a 15% subscriber CAGR[ and just a 3% ARPU [average revenue per user] CAGR(compound annual growth rate), mitigating the bear thesis that sizable price hikes are necessary,” wrote the analysts.

The Jefferies analysts also noted that they believe that Netflix’s positive operating cash flow will help the corporation remain profitable.

“We believe NFLX[Netflix] will soon reach sustained FCF[free cash flow] profitability, in which it will be able to self-fund content and become less reliant on tapping the capital markets,” wrote the analysts.

Netflix’s pure play business model of focusing on streaming entertainment has paid off. Investors looking for a successful pure play stock can pick the streaming company’s stock.

2.Coca-Cola

Coca-Cola (NYSE:KO) is a classic example of a pure play business. The corporation focuses exclusively on selling its syrup to other bottling companies to manufacture.

Coca-Cola produces about 500 beverages. As customers turn away from sugary drinks, the company is branching out into energy drinks, bottled water, tea, and coffee. By putting more of the bottling and manufacturing responsibilities to outside sources, Coke has become very profitable.

Coca-Cola impacted by nationwide shutdown

While Coca-Cola is a top pure play stock, the nationwide shutdown has hurt Coke’s sales. Many Coke sales are through restaurants and sporting events. With the closure of restaurants and cancellation of games, Coke’s revenue dropped 1% to $860 billion. Coca-Cola’s CEO, James Quincey, said that with the coronavirus outbreak shutting down businesses, he wasn’t sure how the company’s future results would be.

“The ultimate impact on the second quarter and full-year 2020 is unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact to the second quarter will be material,” said Quincey.

Quincey also noted that despite the sluggish results, Coca-Cola is poised to recover.

‘We’ve been through challenging times before as a company, and we believe we’re well-positioned to manage through and emerge stronger,” said Quincey.

Coca-Cola a strong pure play stock to financial experts

Even though Coca-Cola’s Q1 2020 results were disappointing, financial experts still rate Coke stock as a buy. Financial analyst Nicholas Johnson is bullish on the beverage company.

“Despite solid first-quarter results, management opted against issuing formal guidance, and its commentary seemed to portend a pretty ugly second quarter. Nevertheless, we remain confident in the Coca-Cola system’s strategic advantage and believe the right tactical competencies are in place to allow the firm to navigate disparate dynamics across its territories,” said Johnson.

HSBC analyst Carlos Laboy also rates Coke as a buy. He believes that Coke will recover as European and American bottlers re-open their factories. He believes the bottlers are “poised to accelerate their growth contribution [to Coca-Cola’s profits] as they grow into market developers with better tools and a richer service culture.”

Warren Buffett values Coke’s pure play stock

Legendary investor Warren Buffett is a long-time Coke investor. Buffett’s Berkshire Hathaway has $18 billion invested in Coke. Buffett owns 9% of Coca-Cola’s stock because it’s a globally renowned brand with a substantial dividend payout of 3.5%. As a pure play beverage company, Coke’s low debt and reliable dividend makes it a stable choice for investors.

3.Chewy

Chewy(NYSE:CHWY) is a pure play e-commerce company that focuses on a subscription-based service for pet food and supplies. Chewy’s business model is to add a personal touch to its customer service. They’re so hands-on with their customers that they even send portraits to customers of their pets.

Since the company went public, pet parents have helped Chewy have a strong Q1 2020 earnings report. Sales grew 46% year-over-year to $1.62 billion. Chewy CEO Sumit Singh commented on the pet food company’s robust revenue report.

“We had a strong start to 2020 with first-quarter net sales increasing 46 percent year-over-year and gross margins expanding 50 basis points,” said Singh.

Singh observed that more customer spending through its subscription service helped Chewy’s profits.

“Higher spending from our existing customers and growing Autoship sales reflect strong business momentum as more customers continue to shift their spending to Chewy, driving increased basket size and higher repeat purchase activity,” said Singh.

Singh also spoke about how Chewy is poised to expand with more people adopting pets.

“We are proud to be the e-tailer of choice for millions of new and existing pet parents during this unprecedented time. Chewy is well-positioned to thrive in this expanded marketplace, and we remain focused, as always, on our mission of becoming the most trusted and convenient online destination for pet parents (and partners) everywhere,” added Singh.

With an increase in pet adoption during the quarantine, Chewy stock enjoyed a whopping 75% increase so far this year.

Chewy stock a buy for RBC Capital

As a successful pet supply pure play stock, Chewy is a buy for financial analysts. RBC Capital’s Mark Mahaney rates Chewy as a top pure play stock in a note to clients.

“Importantly, CHWY’s [NYSE:CHWY] results and outlook suggest to us that the company is at an inflection point and that it is a structural winner from the COVID crisis,” wrote Mahaney.

Mahaney expects Chewy stock to rise as pet adoptions continue to increase.

“Pet product purchases have meaningfully accelerated their online adoption, and we don’t expect a reversion,” said Mahaney.

Some financial experts neutral on Chewy stock

While RBC Capital is bullish on Chewy stock, some financial analysts are neutral on the stock. Jefferies analyst Brent Thill rates Chewy stock as a hold despite its positive earnings report and its“position as a key beneficiary of a shift to online in essential categories (like pet) driven by the pandemic.”

Thill rated Chewy stock as a hold because of the company’s reduced full-year guidance with the unpredictability of the economy later this year. His hold rating is “likely a reflection of Chewy being pragmatic during heightened uncertainty.”

Chewy’s a pure play stock that investors can pick for results. Its dedicated customer service and promising profits make Chewy stock a top pure play

4.Beyond Meat

Beyond Meat(NYSE:BYND) is a pure play meat alternative producer that is performing well. Despite the COVID-19 crisis diminishing sales in restaurants, chief marketing officer Mark Nelson touted the positive Q1 2020 results.

“We maintained our solid top-line momentum while driving our best-ever performance in production unit cost per pound,” said Nelson.

“Despite near-term challenges ahead stemming from the ongoing global health crisis, our improving operating results and continued strength of our balance sheet give us added confidence about the Company’s long-term financial position,” added Nelson.

Analysts bullish on Beyond Meat

Because of Beyond Meat’s positive Q1 2020 results, many financial analysts are bullish on Beyond Meats stock. Steven Strycula of UBS rates Beyond Meat stock as a buy. He asserts that because many restaurants were closed during the quarantine, Beyond Meat can still be sold in grocery stores.

“With food service industry traffic down, BYND plans to lean-on its retail platform to drive growth and is repurposing production capacity to meet demand,” wrote Strycula in a note to clients.

He also believes that Beyond Meat will also benefit from rising beef prices.

“BYND[Beyond Meat] seeks to use value packs & increased trade to stimulate trial, particularly as beef prices spike,” added Strycula.

Beyond Meat is a pure play plant-based meat alternative that has found success by catering to customers who want healthier eating options.

5. Trulieve Cannabis

With a rise in cannabis sales during COVID-19, (CSE:TCNNF) Trulieve Cannabis (CSE:TRUL) is a pure play pot stock that’s outperforming its competition. The Florida-based company has built a loyal customer following by promptly responding to customers’ needs. CEO Kim Rivers notes that Trulieve’s pure play business model works because Trulieve reaches out personally to customers.

“One of our mottos at Trulieve is that we grow one patient at a time. In Florida, our patient base are some of the most vulnerable population, and it’s really important that we respond to them not only in a timely manner, but in a very compassionate manner,” said Rivers.

“I think it’s incredibly important, especially in this current phase, for us to be very, very connected with our patient base and responsive in setting that high level of customer service experience. I’m very proud of our team and our ability to be responsive in real-time to patients,” added Rivers.

Trulieve profits soar by triple digits

In Trulieve’s Q4 2019 results, the pot producer earned $79.7 million. That amount shows a whopping 146% increase over Q4 2018. Rivers commented on the positive revenue report.

“Our fourth-quarter results reflect our strong brand and customer loyalty, which were key factors in our success for the year. We continued to grow our footprint in Florida and made significant strides building out the infrastructure needed to maximize efficiencies and achieve economies of scale,” stated Rivers.

Rivers also touted Trulieve’s positive cash flow and expansion of dispensaries.

“Trulieve’s execution of key fundamentals and financial discipline coupled with market share growth this quarter contributed to positive free cash flow, further strengthening our balance sheet and validating our financial stewardship,” added Rivers.

Trulieve a pure play buy for Wall Street analysts

According to financial analysts, Trulieve stock is a strong buy. Many analysts polled by the TipRanks website say shares should rise by 68%. With a bullish outlook from investors and an effective pure play business model, Trulieve could be a top marijuana stock for investors.

6. Salesforce

Salesforce(NYSE:CRM) is a pure play customer relationship management solution company. The company’s successful business model comes from its early adoption of cloud technology. In addition to offering its own cloud services to customers, Salesforce added customers by letting them build apps on Salesforce as well.

Salesforce’s CEO, Marc Benioff, noted that he wanted to make cloud technology and customer relationship technology easily accessible.

“This [cloud delivery] model made software similar to a utility, akin to paying a monthly electric bill. Why couldn’t customers pay a monthly bill for a service that would run business applications whenever and wherever?”

The corporation had a positive Q1 2021 earnings report with $4 billion in revenue despite the coronavirus outbreak.

Salesforce stock falls but is still top pure play business

Benioff spoke about the company’s results.

“Our results, amidst this global crisis, demonstrated our ability to execute at speed, innovate at scale and the strength of our business model,” said Marc Benioff, Chair & CEO, Salesforce.

Benioff also noted that the company is still making changes during the COVID-19 era.

“We made long-term investments in keeping our employees safe, supporting our customers, delivering crucial innovation like Work.com, and helping our communities with PPE, grants, and technology. The pandemic showed us that digital is an imperative for every company, and we’re confident Salesforce will continue to accelerate as we bring our customers into the new normal,” said Benioff.

Jefferies rates Salesforce as a buy

Jefferies analyst Brent Thill believes Salesforce is a buy. He thinks that the company can continue to be profitable after its recent purchase of analytics platform Tableau. The deal was reportedly worth $16 billion.

“We[Jefferies] believe we saw a meaningful acceleration in M&A in 2019, and CRM needs to take a breather to digest the Tableau deal, the biggest one so far,” said Thill.

Thill thinks that Tableau’s integration with Salesforce is critical before Salesforce acquires more businesses.

“CRM needs to make sure the integration between the various clouds is seamless before embarking on more M&A,” said Thill.

Thill notes that Salesforce stock will grow because of more businesses using cloud technology because of work-from-home orders.

“We[Jefferies] continue to be positive on CRM and believe there is ample value to unlock. [The long-term] pipeline is robust. We also believe COVID-19 has been accelerator driving more businesses to the cloud, which should benefit CRM,” said Thill.

Salesforce a SaaS pure play stock pick

Salesforce is a successful pure play SaaS( software-as-a-service) company. Morningstar financial analyst Dan Romanoff also agrees that Salesforce is a top pure play stock because of its business model.

“We[Morningstar] believe Salesforce.com represents one of best long-term growth stories in software. After introducing the software-as-a-service model to the world, Salesforce.com has assembled a front-office empire that it can build on for years to come,” said Romanoff.

Like Thill, Abramoff believes that Salesforce’s pure play business model will grow once the corporation integrates the services of Tableau, its latest acquisition.

Salesforce should “benefit further from natural cross-selling among its clouds, upselling more robust features within product lines, pricing actions, international growth, and continued acquisitions,”.

“The tight integration among the [company’s] solutions and the natural fit they have with one another makes for a powerful value proposition,” added Abramoff.

Salesforce has been helping businesses keep track of customer service in the cloud for years. Its customer relationship management dominance makes Salesforce stock a top pure play choice for traders.

7. Starbucks

Starbucks stock (NYSE:SBUX) is a pure play business that dominates the coffee industry. The Seattle-based coffee company made rare gourmet coffee an everyday treat in its business model. The fast expansion of stores and diverse mix of coffee flavors all helped Starbucks become a top pure play stock.

Starbucks has mixed Q2 2020 results

Because of the COVID-19 crisis, Starbucks CEO Kevin Johnson said that revenue fell to $6 billion. Many Starbucks stores closed down during the pandemic, so Starbucks’ sales slowed.

“As a result, consolidated revenue in Q2 was $6 billion, reflecting a 5% decline compared to prior year, primarily due to a 10% contraction in comparable store sales globally, ” said Johnson.

Chief financial officer Patrick Grismer also noted that US sales declined because of the pandemic.

“Revenue for our Americas segment was flat in Q2 relative to the prior year at $4.3 billion as incremental sales from net new store growth of 3% over the past 12 months was effectively offset by a 3% decline in comparable store sales,” said Grismer.

While Starbucks had disappointing results, the coffee behemoth did have an increase in its customer loyalty program Starbucks Rewards. Grismer noted that the program had an increase in members.

“Of note, during the second quarter, 90-day active Starbucks Rewards members, our highly routinized, highly engaged and loyal customer base with whom we can directly communicate digitally, increased to 19.4 million in the US, up 15% from a year ago,” said Grismer.

Some analysts rate Starbucks a pure play buy

Despite the sales slump, Broyhill Asset Management, a boutique investment firm, is bullish on Starbucks stock. Broyhill is optimistic that its Chinese stores will re-open soon.

“Starbucks (SBUX) was one of the first US companies to warn investors of the financial hit from the pandemic. But after closing nearly 80% of its stores in China by early February, the company had already re-opened roughly 95% of those stores by March month-end,” said Broyhill.

“We established a position in the stock near it’s lowest valuation in years as we gained confidence that the company’s China stores would fully recover in a couple quarters. In the near term, mobile orders (which represented ~ 80% of China’s sales mix in the last weeks of February) should put a floor under US sales, while the resumption of development in China, with best-in-class unit economics, provides a multi-year runway for expansion,” added Broyhill.

Financial expert Matthew McCall also thinks Starbucks stock is a buy even if Starbucks stock is falling. He wants investors to buy the dip because it’s “a high-quality, well-run company. That should put it on investors’ radar for buy on dips.”

Because Starbucks is a massively popular brand that has many loyal customers, investors can choose Starbucks stock as a pure play coffee stock.

8. Activision Blizzard

Activision Blizzard(NYSE:ATVI) is a gaming pure play stock that has outperformed during the quarantine. With many people stuck inside, Activision monthly users rose 18% . Gamers rushed to play the new Call of Duty game and played mobile games like Candy Crush more as well.

Because of the rise in gaming, the company had a positive Q1 2020 earnings report. Dennis Durkin, Activision’s chief financial officer, spoke about the results.

“Activision revenue was $519 million growing 64% year-over-year. Growth was driven by Call of Duty: Modern Warfare and Warzone in-game revenues, strong game sales of premium Modern Warfare and the addition of Call of Duty Mobile. Operating income was $184 million with an operating margin of 35%, 12 percentage points higher year-over-year,” said Durkin.

While some many say Activision is too dependent on a few gaming franchises like Call of Duty and World of Warcraft, CEO Bobby Kotick thinks the pure play gaming business strategy is still profitable.

“At a time when so many forms of social interactions and entertainment experiences have been shut down, we’re providing entertainment with positive impact for hundreds of millions of people through our games,” said Kotick.

Activision a buy for financial experts

Because of Activision’s dominance as a pure play stock, many financial analysts rate Activision as a buy. Todd Gordon, managing director at Ascent Wealth Partners, is bullish on Activision stock.

“It’s[Activision] a $46 billion market cap. They’ve got franchises like Call of Duty and Candy Crush. They have a better share of mobile gaming. Activision is well-represented across multiple platforms including PC, console, gaming, stuff like that. So, we hold Activision in our global growth portfolio,” said Gordon.

Danielle Shay, director of options at Simpler Trading, also thinks Activision is a pure play stock that investors should choose. She thinks that Activision is a buy because there is an increase in gaming during the quarantine.

“More people are staying at home, they’re looking for entertainment and options at home, and with the client base that these two companies [Activison and another gaming pure play stock Two Play] already have, I think this is going to be fantastic for them,” said Shay.

With a focus on popular games and increased customers, Activision is a successful gaming pure play stock.

9. Peloton

Like Activision, Peloton(NYSE:PTON) is a pure play company that’s benefitted from the pandemic shutdown. The exercise bike company’s stock has skyrocketed 100% over the last few months as it attracts more customers.

Peloton’s business model comes from combining an old-school exercise bike with new technology of subscription-based online classes. Founder and CEO John Foley noted that Peloton’s pure play business model ties fitness with tech.

“Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time,” Foley says. “It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people,” said Foley.

Peloton has robust Q3 2020 earnings report

Peloton’s Q3 2020 earnings report showed revenue growth from an increase in longer free trial subscriptions to its video service. Foley touted Peloton’s better-than-expected results.

“Early in the COVID crisis, we extended the digital subscription free trial period from 30 days to 90 days resulting in over 1.1 million downloads of Peloton Digital in the past six weeks. We were extremely proud to offer so many people free access to our incredible fitness content during this time,” said Foley.

“I am also proud of our financial performance this quarter with revenue growing 66% year-over-year to $524.6 million. With strong revenue flow through and leverage against our fixed costs, we achieved our first adjusted EBITDA positive quarter as a public company in Q3 with an adjusted EBITDA margin of 4.5%,” added Foley.

Peloton a strong pure play buy for some analysts

With Peloton’s strong revenue result, Wall Street analysts are raising their target price for the exercise bike’s stock. Cowen upped its Peloton price target from $54 to $70.

Cowen noted that Peloton is “helped by the pandemic, alongside marketing & logistics efficiencies. PTON(Peloton) also benefits from multi-year secular tailwinds behind the connected home fitness trend that PTON is pioneering. We raised FY20 to FY30 estimates and rolled DCF[discounted cash flow] to ’21; PT[price target] to $70 from $54, maintain Outperform.”

Analyst Todd Gordon noted that Peloton’s pure play business model helped the company succeed more than other fitness companies.

“This company was a first mover. It succeeded in the online fitness and social communities, unlike the other ones [with] hardware offerings like GoPro and Fitbit that I don’t think capitalized. They have a loyal customer base, high retention levels, and good margins from the subscription business”, said Gordon.

Some Wall Street analysts bearish on Peloton

While some analysts are bullish on Peloton, some financial experts are bearish on the pure play business. Gina Sanchez, CEO of Chantico Global, thinks that the company is facing stiff competition from other fitness equipment companies.

“It’s not just facing competition from SoulCycle. It’s is also facing competition from other bike makers like NordicTrack, Echelon, ProForm who are all forming their own studio offerings to help give a Peloton-like experience. They are a pioneer in this space but they’re also opening up the space for a lot of competitors,” said Sanchez.

Peloton is a fitness pure play stock that investors can choose to add to their portfolios.

10. Stitch Fix

Like Peloton, Stitch Fix (NYSE:SFIX) has a successful subscription-based service. The pure play e-commerce business has been booming since April as people are cleaning out their closets and updating their wardrobes.

Founder and CEO Katrina Lake noted that Stitch Fix’s strategy is to combine personalized shopping experiences with data science.

“We send you clothing and accessories we think you’ll like; you keep the items you want and send the others back. We leverage data science to deliver personalization at scale, transcending traditional brick-and-mortar and e-commerce retail experiences,” said Lake.

Stitch Fix a successful pure play e-commerce stock

Because of its combination of personalized customer service and data analytics, Stitch Fix’s Q1 2020 earnings report showed growth in clients. Lake commented on the results.

“We had another quarter of great momentum in Q1, delivering net revenue of $445 million, exceeding guidance and representing 21% year-over-year growth. We grew our active clients to 3.4 million, an increase of 17% year over year. Demonstrating the power of our data science, we continued to delight our clients, growing revenue per active client by 10% year over year, our sixth consecutive quarter of growth,” said Lake.

Analysts mixed on Stitch Fix stock

While Stitch Fix had a positive earnings report, the company had a sales decline in March. Because of the nationwide shutdown, some warehouses closed and many order couldn’t be filled as quickly. Because of the setback, many analysts like RBC Capital’s Mark Mahaney wrote a note to his clients about concerns about the pure play business.

“Given the COVID disruption, we expect weaker new/infrequent client conversions and the UK rollout to continue be challenged”, wrote Mahaney.

SunTrust Robinson analyst Youssef Squali is more bullish on the Stitch Fix stock. He believes that the company has an advantage with strong growth potential in ecommerce.

“We[SunTrust Robinson] remain bullish on the stock however, given SFIX’s strong competitive position in the structurally challenged Retail, robust unit economics, strong growth/margin potential in FY21 and beyond, and compelling valuation,” noted Squali.

Pure play businesses can have pivotal stocks for investors

Pure play businesses can have stocks that can pay off for investors. While pure play stocks carry risk, the stocks mentioned above persevered because of their uniqueness and innovation. With TradingSim charts and analysis, investors can find the best pure play businesses to add to their portfolios.

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