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

What is a rollover IRA?

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

How can you rollover an IRA?

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

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

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

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

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

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

IRA to HSA rollovers are possible

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

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

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

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

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

Young people are at an advantage with IRA rollovers

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

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

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

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

How to Roll Over a 401k to an IRA

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

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

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

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

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

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

Saving money with IRA rollovers is crucial

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

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

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

More advice about 401k to Roth IRA conversion

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

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

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

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

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

More advice on rolling over 401k to IRA

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

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

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

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

Timing is key for an IRA rollover

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

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

SEP IRA — IRA rollovers can help account holders

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

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

Account holders should exercise caution

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Find a reputable IRA manager for rollovers

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

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

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

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

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

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

Financial Expert can help people decide how to make IRA rollover

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

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

Some advisors want 401k rollovers into IRA’s

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

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

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

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

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

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

What do financial advisors say about rollover IRA’s?

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

First, he spoke about the details of a rollover.

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

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

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

In addition to that information, he added more insight.

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

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

What are some IRA rollover rules?

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

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

In additon to that advice, Moissand offered more guidance.

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

What is the timeline for an IRA withdrawal?

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

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

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

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

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

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

In addition to that advice, Brenner offered more guidance.

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

Should a person rollover an IRA during the economic downturn?

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

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

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

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

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

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

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

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

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

Fidelity changes IRA rollover rules

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

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

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

“It’s their choice,” said Gray.

Are IRA rollovers necessary?

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

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

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

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

Some financial experts advocate not making IRA withdrawals

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

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

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

Demographic changes causes Fidelity rollover changes

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

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

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

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

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

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

Fidelity offers more flexibility for IRA rollovers

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

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

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

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

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

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

Advice for retirees on IRA rollovers

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

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

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

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

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

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

1. Amazon the top pick for IRAs

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

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

Amazon stock is a top choice for IRA rollover stock

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

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

2. Proctor and Gamble

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

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

Proctor and Gamble is a top stock for IRA accounts.

3. Apple

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

Apple stock a good option for IRA rollovers

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

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

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

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

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

4. Google

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

Google stock is a strong stock to add to IRA rollovers

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

Google is a solid holding in an IRA rollover.

5. Tesla

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

Tesla stock can be an interesting addition to an IRA rollover

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

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

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

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

IRA rollovers can help save money

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

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

What is QQQ stock?

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

What is TQQQ stock?

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

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

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

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

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

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

ProShares advise caution about TQQQ

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

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

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

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

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

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

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

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

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

1. Amazon

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

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

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

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

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

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

Amazon wants to increase empire with wearables

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

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

Analysts say Amazon is a top QQQ holding

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

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

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

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

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

Ripps also sees growth from its Amazon Web Services.

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

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

2. Google

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

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

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

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

Google a buy to some analysts

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

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

Google is a strong holding in QQQ’s ETF.

3. Apple

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

CEO Tim Cook spoke about the company’s results.

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

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

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

Apple stock split may help QQQ stock grow

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

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

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

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

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

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

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

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

4. Tesla a key QQQ stock holding

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

Tesla has strong Q2 2020 earnings report

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

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

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

Musk also touted Tesla’s positive cash flow.

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

Tesla stock split boosts shares

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

Some analysts say stock splits help QQQ stock

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

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

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

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

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

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

Some experts think stock split will hurt QQQ stock

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

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

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

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

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

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

5. Facebook

Facebook a profitable holding in QQQ stock

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

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

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

Facebook stock a profitable QQQ stock holding

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

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

6. Netflix

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

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

Financial experts bullish on Netflix stock

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

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

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

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

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

7. Zoom

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

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

Analysts rate Zoom a buy for investors

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

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

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

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

8. Nvidia

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

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

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

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

Analysts bullish on Nvidia stock

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

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

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

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

Cowen also says Nvidia key part of QQQ stock

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

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

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

9. Microsoft

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

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

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

Microsoft stock — Microsoft part of QQQ stock

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

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

Experts bullish on Microsoft stock

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

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

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

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

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

10. Adobe

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

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

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

Experts say Adobe is vital part of QQQ stock

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

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

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

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

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

QQQ stock a good addition to investors’ portfolios

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

There is an old saying about the stock market: ” A bull market will climb a wall of worry, while a bear market will slide a slippery slope of hope.” Loosely translated, that means that a bull market may have periods of decline, while a bear market may have short-term rallies. With the current upswing in stocks during the end of the bear market, is it safe to say Wall Street has recovered from COVID-19?

In this TradingSim article, I’ll explore whether the latest rallies mean that the stock market is in a sustained recovery for new investors. I’ll also write about 10 stocks that are performing well and driving the recent Wall Street rebound.

What is a slope of hope?

A slope of hope is a glimmer of hope in a bearish market. The phrase comes from financial expert Robert Prechter. He noted that even if stock prices are falling, there’s still hope for a rally. He explained the meaning of the phrase in 2010.

“Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished. For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of the bear market is the ‘Slope of Hope’,” said Prechter.

Is the U.S. still in a recession?

Even though the stock market is recovering, the U.S. economy at large is still struggling. The country’s gross domestic product (GDP) contracted at 32.9%, the largest drop since the Great Recession in 2009.

Nariman Behravesh, chief economist at IHS Markit, noted that while some industries like construction and dentistry are doing well, others like airlines are still struggling. The oil industry and natural gas ETFs are especially hit hard by decreased oil prices.

“It’s very much a sort of two-tiered economy right now,” said Behravesh.

Van Eck natural gas dropped during bear market

When the GDP plummets for two quarters in a row, that means the U.S. is in a recession. While the economy is cratering, this recession is different from the previous one ten years ago. Liz Ann Sonders, Schwab’s chief investment strategist, notes that the nationwide shutdown caused the current recession.

“We’ve never had a full-stop economic shutdown by government mandate ever in history,” said Sonders.

This recession is in contrast to the one caused by the collapse of big banks in 2008.

Why are stocks sliding down the slope of hope?

While the economy is still sluggish, stocks have been on a volatile ride. As Sonders noted, the rollercoaster ride of the stock market over the last few months has been unprecedented.

‘We went from an all time high on February 19 to down 35% on March 23 at a record clip, the fastest move from an all-time high to bear market territory in history. But the speed with which the rebound happened is unlike anything we’ve seen before,” said Sonders.

Senior economists like Bob Schwartz is optimistic that low mortgage rates and an increase in housing activity will help spur the stock market.

“Record-low mortgage rates, the onset of spring and improving sentiment are spurring a burst of activity in the housing market. For the most part, economic indicators are showing more strength than expected, confirming that the worst of the COVID-19 recession is behind us,” said Schwartz.

Ironically, the economic hardships that many Americans are experiencing are helping drive optimism in the stock market. When the COVID-19 crisis started, many people had to quarantine and miss work. The government paid out $1,200 economic stimulus checks to Americans to supplement missed income. As a result, many Americans finally had money to spend on household goods and food, which spurred Wall Street optimism.

Economic analysis firm IHS Markit noted that increased spending helped the economy.

“Household spending has benefited from federal stimulus payments (“economic impact payments”) and been reinforced by the return to work for some employees,” noted IHS Markit.

Jurrian Timmer is the director of global macro at Fidelity Investments. He’s another financial expert who believes that the stock market is a leading indicator about the economy’s eventual road to recovery.

“Typically the market will start declining before a recession is visible and it will start recovering about four months before the end of a recession”, said Timmer.

When did the slope of hope start?

While the economy is in a recession, ironically, the stock market has been climbing. Quincy Krosby is a chief media strategist at Prudential Financial. He commented that the stock market tends to rise and fall based on future hopes, not current reality. For example, in May, despite high unemployment and civil unrest, the stock market climbed. That was because of news about possible coronavirus vaccines.

“Every time there has been a positive announcement regarding a vaccine, it’s had a halo effect on the market. This is a market that has been desperate to see the other side of this, and the only way it can do that, is watching those announcement from the companies moving towards a vaccine,” said Krosby.

Why is the stock market rising despite negative economic news?

Despite the negative news about the overall economy, Krosby commented that the stock market is often independent of the economy.

“The market always seems heartless, without any emotion, without caring, without empathy. But that’s the nature of the market. The algorithms almost certainly have no shred of empathy. They’re not supposed to,” said Krosby.

Nicholas Colas is co-founder of DataTrek Research. He notes that the stock market has a history of rising despite volatility outside Wall Street.

“There are many valid reasons to be bearish on risk assets like stocks or corporate debt just now, but history shows markets look through many sorts of tumultuous events and have done so for decades. That may seem counterintuitive, and perhaps not even ‘fair,’ but it’s absolutely true,” said Colas.

Sam Stovall is the chief investment strategist at investment research firm CFRA. He’s bullish on the stock market and believes that the recent rally is a sign of long-term recovery.

“I think the March 23 low will eventually be regarded as the start of the new bull market,” said Stovall.

“The reason for my optimism is the massive amount of stimulus,” added Stovall.

Some economists are pessimistic about stock market recovery

While many economists are bullish on the stock market, some are bearish. James Montier is a behavioral economist who writes that the stock market may not recover so quickly. He writes that the economy may not recover as fast if struggling small businesses don’t rebound as well.

“The impact on business in terms of bankruptcies and lower investment will also be key. It is easy to imagine that in the wake of the virus, entrepreneurs may be hesitant to try and start new businesses, which are often said to be the lifeblood of the U.S. economy. Sadly, many businesses will have failed due to the effects of the pandemic, and even those that do survive may likely find their animal spirits dampened significantly,” wrote Montier.

Montier added that while he isn’t trying to predict the future of the stock market, Wall Street is still trying to predict the future with certainty.

“I don’t know the answers to these questions, and I am going to refrain from participating in the very popular trend of becoming an armchair epidemiologist or virologist, but I do know that these questions and many others exist,” said Montier.

“I am also certainly not in the business of trying to second-guess how the future will unfold, but I do know that anyone claiming certainty of foresight is likely to be sorely disappointed. And yet, Mr. Market appears to be doing exactly that,” added Montier.

Some analysts say stock market is still on wall of worry instead of slope of hope

In addition to Montier, Doug Ramsey is chief investment officer and portfolio manager at the Leuthold Group. He’s skeptical that the latest rally will match the last bull market rally in 2009.

“The current rally is either the first up-leg of a new bull market or the second-largest bear-market rally in the past 125 years,” said Ramsey.

“I’m trying to look at the glass as half-full, but how can we embark on a multiyear bull market when we’re at valuations that are so much higher than what they were at the same stage of the last bull market?” added Ramsey.

Ryan Detrick is a senior investment strategist at LPL Financial. He notes that there is no way to predict what will happen in the stock market during this volatile year.

“There are no roller coasters that can replicate what stocks have done so far in 2020,” said Detrick.

Despite the volatility of the stock market, there are some stocks that are performing well. Here are ten stocks that are doing well despite the pandemic.

1. Clorox

Clorox stock (NYSE:CLX) has been a top performer since the quarantine. With a demand for cleaning products, the company’s antiseptic wipes have been in high demand. Clorox stock roared up 54% this year. The stock has jumped 16.6% just over the past three months.

Clorox had excellent Q3 2020 earnings

In its Q3 2020 earnings, Lisah Burhan, Clorox’s vice-president of investor relations, spoke about Clorox’s positive earnings report. Clorox’s Q3 revenue surged 15% to $1.78 billion.

Clorox stock is climbing, leading to a slope of hope

“The business had another quarter of double-digit sales growth behind continued elevated demand across the portfolio,” said Burhan.

“While we’ve been able to add significant capacity, demand still far exceeds supply, leading to continued out-of-stocks for many products,” added Burhan.

Clorox’s CEO, Benno Dorer, noted that in Q3 2020, Clorox is still trying to meet demand for its cleaning wipes that were flying off shelves during the quarantine.

“Since Q3, we were able to bring on more than 10 new suppliers to help us maximize our output, not just for disinfecting products, but for other parts of our portfolio too,” said Dorer.

“For disinfecting products, we’re continuing to run our plants 24/7, and we’ll be bringing more disinfecting capacity online in the midterm. With all the levers we’re pulling to expand output, I am confident in our ability to do better for our customers and consumers,” added Dorer.

Analysts rate Clorox stock as a buy

Because of Clorox’s strong sales, many analysts rate Clorox stock as a buy. Linda Bolton Weiser is D.A. Davidson’s senior research analyst. She wrote in a note to clients that the strong demand for Clorox products makes Wall Street go down a slope of hope.

“Clorox continues to chase demand for disinfecting products and is still prioritizing shipments to healthcare facilities, which has caused some stock-outs on retail shelves and therefore share losses,” wrote Bolton Weiser.

2. Proctor & Gamble a stock that takes Wall Street on slope of hope

In addition to Clorox, Proctor & Gamble(NYSE:PG) is another stock that is performing well during the COVID-19 pandemic. The cleaning product company had a profitable Q4 2020 as well. Sales rose 4% to $17.7 billion in Q4 2020. Jon Moeller spoke about the corporation’s positive earnings report.

“Capping a strong year, a very strong April-June quarter. Organic sales up more than 6% on top of the base period, that was up 7%. Volume, pricing and mix each contributed to top line growth. Strong organic sales growth in our two largest markets up 19% in the U.S. and 14% in Greater China,” said Moeller.

Analysts rate P&G stock as a buy

Because of its robust earnings report, analysts rate P& G stock as a buy.

“With momentum behind both pricing and volumes, we believe P&G can still generate mid-single-digit-plus organic sales growth in 2020 despite the challenges presented by COVID-19,” analysts wrote.

“We expect P&G to leverage its improving top-line throughout its P&L, as we believe P&G will be able to drive operating leverage throughout the business (as it has done in the past) and unlock additional cost savings from its productivity programs.”

3. Zoom

Zoom growth drives Wall Street down a slope of hope

It’s hard to imagine a stock that grew more in the last few months than Zoom (NASDAQ: ZM). The videoconferencing company had a whopping 169% growth from last year. In its Q1 2021 earnings report, CEO Eric Yuan spoke about the ubiquity of Zoom as more people worked from home.

“We were humbled by the accelerated adoption of the Zoom platform around the globe in Q1. The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom. Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives,” said Yuan.

“I am proud of our Zoom employees who dedicated themselves to support customers and the global community during this crisis. With their tremendous efforts, we were able to provide high-quality video services to new and existing customers,” added Yuan.

Analysts rate Zoom stock a buy

Because of Zoom’s strong earnings and its success as a growth stock, Needham analyst Richard Valera said that Zoom’s growth was impressive.

“Never have I seen something of that magnitude in my 20 years of covering technology,” said Valera.

Daniel Milan is managing partner of wealth manager Cornerstone Financial Services. He believes that Zoom’s success will continue after the pandemic is over.

“Companies want to get folks back into the office and schools long for the in-class experience, but there will now be a strong Zoom component to these businesses,” said Milan.

Zoom is a stock that is performing so well that Wall Street is going down a slope of hope despite bearish tendencies.

4. Amazon leading Wall Street down a slope of hope

One of the best-performing stocks this year is Amazon (NASDAQ:AMZN). With many people quarantined, Amazon became a lifeline for ordering household items. Amazon’s shares surged 70% over the past year. The e-commerce company’s Q2 2020 revenue was an impressive $89 million.

Amazon CEO Jeff Bezos spoke about the results.

“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” said Bezos said in a statement.

“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. And 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,” added Bezos.

Is Amazon stock a buy?

With Amazon’s strong Q2 2020 earnings, many analysts rate Amazon stock as a buy. K.C. Ma is president of KCM Asset Management and is a finance professor at the University of West Florida. He rates the stock as a buy for investors.

“The strong gains in ad, cloud and international margins may help offset the free one-day shipping for Prime,” he says. Long-term trends of cloud consumption should “propel (Amazon Web Services’) revenue even higher,” said Ma.

“With further economies of scale at AWS, likely continued strong growth in digital advertising and an increasingly predominant growing e-commerce base of third-party sellers, Amazon seems to us well-positioned to further prosecute its strategic mix shifts toward higher-margin businesses in 2020,” added Ma.

Mike Bailey is director of research with FBB Capital Partners. He notes that Amazon stock has the potential to grow with more advertising.

“Despite the run in Amazon shares, our sense is investors have yet to fully price in the potential upside from Amazon’s entry into the advertising business, which is growing quickly but currently is only a fraction of the size of Facebook and Google,” said Bailey.

Amazon’s stellar performance this year has led Wall Street down a slope of hope that the bear market is officially over.

5. Tesla

In addition to tech stocks, Tesla (NASDAQ:TSLA) is a stock that is rocketing up during the COVID-19 pandemic. The electric car company is now the most valuable car company in the world. Tesla had an impressive Q2 2020. The corporation reported $ 6 billion in revenue and turned a profit. The automaker spoke in a statement about the results.

“Our operating profit improved in Q2 despite challenging circumstances. Positive impacts included lower operating costs due to a temporary reduction in employee compensation expense, a sequential increase in regulatory credit revenue and deferred revenue recognition of $48M related to a Full Self Driving (FSD) feature release,” said Tesla.

“These positive contributions were offset by significant costs related to factory shutdowns, as well as a sequential increase in non-cash SBC expense primarily attributable to $101M related to 2018 CEO award milestones,” added Tesla.

Tesla stock soars after stock split

The company’s stock continued to soar after a recent five-for-one stock split.

“Tesla, Inc. (“Tesla”) announced today that the Board of Directors has approved and declared a five-for-one split of Tesla’s common stock in the form of a stock dividend to make stock ownership more accessible to employees and investors,” said Tesla.

Since making the decision, Tesla stock jumped 30%. The electric car company continues to be one of the best-performing stocks of the year.

Analysts bullish on Tesla stock as Wall Street goes down slope of hope

Cowen analyst Jeffrey Osborne is bullish on Tesla stock despite the controversies with founder Elon Musk. Osborne spoke about how Tesla is a buy because electric cars are becoming more popular.

“We[Cowen] continue to be cautious on Tesla, but anything EV related is red-hot for investors now and there is a scarcity of ways to invest in the theme, thus we see the stock continuing to ‘work’ near-term despite our caution on competitive positioning over time and valuation,” wrote Osborne in a note to clients.

Wedbush’s Dan Ives also rates Tesla stock as a buy. He thinks that Tesla’s widely available electric car battery will raise Tesla’s stock even more.

“We[Wedbush] continue to believe [electric vehicle] demand in China is starting to accelerate in July/August with Tesla competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success which remains the prize that [Chief Executive Elon] Musk and Tesla are laser-focused on capturing,” wrote Ives in a research note.

Tesla is a stock that has shown enormous growth and is leading Wall Street down a slope of hope.

6. Moderna

In addition to tech stocks, pharmaceutical stocks are performing well during the new bull market, like Moderna (NYSE: MDMA). The stock appreciated over 200% this year. Moderna received $1.525 billion from the government to develop a COVID-19 vaccine. CEO Stephane Bancel spoke about the deal.

“We appreciate the confidence of the U.S. government in our mRNA vaccine platform and the continued support,” said Bancel.

Moderna leads investors on slope of hope with robust Q2 2020 earnings

Along with the coronavirus vaccine, Moderna’s Q2 2020 earnings were impressive. Moderna’s chief financial officer, David Meline spoke about the company’s $66.35 million revenue.

“We ended Q2 2020 with cash and investments of $3.1 billion, compared to $1.7 billion at the end of Q1. The increase is driven by the capital raise in May of this year. Net cash used in operating activities was $130 million for the first half of 2020, compared to $253 million in 2019,” said Meline.

Moderna a buy to many financial experts

Because of Moderna’s strong earnings and potential COVID-19 vaccine, analysts led by Geulah Livshits see Moderna as a buy for investors.

“We now await visibility on what agreements with other countries might look like but see the news as a positive signal re: Moderna’s potential entry into a commercial space often dominated by big-cap,” wrote Geulah Livshits in a note.

Danielle Shay is director of options at Simpler Trading. She advises traders to invest in Moderna stock.

“If you’re a little bit more of an aggressive trader and like to trade on more of an intraday basis, [stocks] like Moderna look absolutely amazing,” said Shay.

Moderna is a strong pharmaceutical stock that leads Wall Street down a slope of hope.

7. Gilead

Another pharmaceutical stock that’s soaring is Gilead (NYSE: GILD). In addition to Moderna, Gilead’s COVID-19 treatment, remdesivir, is in the trial stages. Gilead recently partnered with another pharmaceutical giant, Pfizer, to manufacture the drug. Gilead’s CEO Albert Bourla spoke about the deal in a statement.

“From the beginning it was clear that no one company or innovation would be able to bring an end to the COVID-19 crisis. Pfizer’s agreement with Gilead is an excellent example of members of the innovation ecosystem working together to deliver medical solutions,” said Bourla.

Gilead stock led investors on a slope of hope

“Together, we are more powerful than alone. As one of the largest manufacturers of vaccines, biologics and sterile injectables, it is a privilege to offer our expertise and infrastructure to help fight this pandemic. In that spirit, we are pleased that Gilead is using our manufacturing capacity to help facilitate supply of this medicine to patients as quickly as possible,” added Bourla.

Gilead’s Q2 2020 has strong earnings report

With the potential for remdesivir to be a COVID-19 vaccine, Gilead had a mostly positive Q2 2020. Total revenue for the second quarter was $5.1 billion with earnings per share of $1.11. CEO Daniel O’Day spoke about how remdesivir will be priced.

“We price remdesivir well below the value it provides to enable access at this critical time and ensure that we continue to meet our responsibilities in the future with further investment in remdesivir and in research that will help us to prepare for any future pandemics. The extensive clinical development work continues on remdesivir, so that we can potentially extend the treatment to many more patient groups,” said O’Day.

Because of its promising COVID-19 vaccine, Gilead is a strong stock that will lead investors on a slope of hope.

8. Target rise sends Wall Street on a slope of hope

During the pandemic, online shopping has boomed and Target(NYSE:TGT) benefited from that growth. The store chain’s stock climbed 37% in the last few months. In addition to online shopping, in-store sales and curbside pick-up also jumped in the last few months.

Target has record Q2 2020 growth

Target’s Q2 2020 revenue topped $23 billion, a 24% surge. CEO Brian Cornell spoke about the phenomenal results.

Target stock leads investors down a slope of hope

“The results we reported this morning are truly unprecedented. On the top line, we delivered second-quarter comparable sales growth of 24.3%, the strongest we’ve ever reported. Equally remarkable on the bottom line, we generated adjusted EPS of $3.38, a new record high,” said Cornell.

Target a buy to top financial experts

Because of Target’s excellent Q2 2020 report, retail experts like Neil Saunders rate Target stock a buy in a note to clients. As managing director of GlobalData Retail, he’s impressed by the company’s record-breaking quarter.

“The basic point is that Target has developed a proposition that is cohesive which means its guests will happily shop multiple categories allowing Target to maximize its share of wallet,” wrote Saunders.

“This has always been beneficial, but it came into its own at a time when consumers have been reducing the number of shopping excursions that they make. Target’s position also stands in contrast to some of its competitors, such as Walmart, which is far less able to get people to shop across multiple departments,” added Saunders.

Raymond James is also bullish on Target stock. The financial analysis firm believes Target’s robust sales make the stock a buy for investors.

“We believe the company was able to take a significant amount of share during the quarter, which bolsters our long-term view for a large share opportunity,” wrote Raymond James in a note to clients.

Evercore analyst Greg Melich also said Target stock is a buy because of its blockbuster sales online and in stores.

“Target’s digital offer is working in tandem with their fleet of 1,900 stores and shows that the multichannel mojo is a strategic positive in the battle vs. Amazon and Walmart,” said Melich.

With Target’s strong brick-and-mortar and online sales rising, the chain’s stock is leading investors down a slope of hope.

9. PayPal

In the middle of COVID-19, digital payments have become pivotal. PayPal (NYSE:PYPL) stock skyrocketed 78% over the past year. CEO Dan Schulman spoke to CNBC about the digital payment company’s growth.

“Across every industry, we’re seeing this surge towards a digital-first strategy, and all of the tools and products and services that we offer are probably more relevant and important across multiple industries than they’ve ever been before,” said Schulman.

PayPal growth drives Wall Street down a slope of hope

Because of the recent surge in digital payments, PayPal’s Q2 2020 earnings were better-than-expected. Schulman spoke about the results.

“In the midst of the COVID pandemic, we have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business. The world has accelerated from physical to digital across multiple industries including retail. Merchants are embracing a digital-first strategy, and these trends have fueled the rapid rise of digital payments,” said Schulman.

“Revenues grew by 25% on an FX-neutral basis to $5.26 billion, accelerating after our strong 20% revenue growth in April. This is the first time our quarterly revenues have exceeded $5 billion,” added Schulman.

PayPal a buy to financial experts

As a result of PayPal’s successful Q2 2020 results, Goldman Sachs is bullish on the company’s stock.

“Given increased digital adoption over the last couple of months, convenience offered by these platforms amid the pandemic, and a large number of retailer store closures & bankruptcies, the shift to online could remain elevated over the coming quarters,” said Goldman Sachs.

PayPal’s growth during the pandemic is leading the stock market down a slope of hope to end the bear market.

10. UPS

As a result of COVID-19’s quarantine, UPS (NYSE:UPS) stock has soared with an increase in home deliveries. The package delivery company had revenue increase to $20.5 billion, a 13% jump from Q2 2019. CEO Carol Tomé spoke about the results.

“Our results were better than we expected, driven in part by the changes in demand that emerged from the pandemic, including a surge in residential volume, COVID-19 related healthcare shipments and strong outbound demand from Asia,” said Tomé.

“UPSers are keeping the world moving during this time of need and I want to thank our team for their hard work and outstanding efforts to serve our customers, our communities and each other,” added the CEO.

UPS a buy because of more deliveries in quarantine

Because of UPS’ increase in deliveries and profits, Bernstein analyst David Vernon rates the stock as a buy.

“E-commerce parcel pricing is expected to remain strong as the pull forward of e-commerce penetration has strained delivery capacity,” wrote Vernon in a research note. “With UPS looking to get ‘better, not bigger,’ FDX [FedEx]emphasizing returns and the [U.S. Postal Service] curtailing capacity, the rate environment at present is outstanding.”

BofA Securities analyst Ken Hoexter also is bullish on UPS stock.

“Given that UPS provides both a critical and difficult-to-replace service for many of its customers, we believe this strategy shift could drive a multi-year tailwind for financial results,” wrote Hoexter in a note to clients.

Slope of hope leads investors into new bull market

With the success of the previously mentioned stocks, Wall Street is going down a slope of hope. After the end of the shortest bear market, investors can feel confident that they’re trading stocks in a new bull market. With TradingSim blogs and charts, traders can determine when the stock market will slide down a slope of hope into a long-term rally.

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

Why do people put off investing?

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

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

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

1. Starting investing early gives people time to build wealth

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

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

Staring investing early in ETFs can help build wealth

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

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

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

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

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

Compound interest helps increase profits

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

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

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

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

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

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

Starting to invest early can help young people meet financial goals

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

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

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

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

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

2. Investing early leads to automatic savings

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

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

Regular 401K contributions help build wealth

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

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

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

Starting to invest early can involve picking value stocks like IBM

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

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

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

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

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

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

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

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

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

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

Financial experts notes growth of trading apps in starting investing early

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

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

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

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

Acorns lets people use spare change to start investing early

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

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

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

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

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

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

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

Stash another app that enables early investing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financial experts advise people to do research before starting investing early

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

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

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

Diversified portfolio pivotal to start investing early

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

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

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

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

What should new investors have in a diversified portfolio?

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

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

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

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

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

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

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

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

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

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

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

6. Starting to invest early leads to patience and profits

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

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

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

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

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

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

Starting to invest early shouldn’t involve timing the market

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

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

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

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

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

Millennials saving more as they start investing early

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

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

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

Financial experts advise long-term strategy to start investing early

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

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

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

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

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

7. Starting to invest early can lead to early retirement

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

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

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

Starting investing early can help start FIRE

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

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

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

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

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

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

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

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

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

Investing early can lead to financial security in crises

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

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

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

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

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

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

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

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

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

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

Starting investing early is key to financial freedom

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

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

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.

Working from home during the COVID-19 pandemic

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

How do you get started day trading part-time?

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

When is the best time to trade?

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

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

What is a good day trading strategy?

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

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

How much money do day traders need to start?

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

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

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

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

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

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

Why is there a resurgence in day trading stocks?

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

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

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

Sports betting drought leads to day trading increase

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

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

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

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

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

What are the benefits of day trading?

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

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

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

Zero-commission apps lead to more day trading

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

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

Airlines rebound with new day traders

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

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

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

Financial advisors cheer new growth in day trading stocks

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

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

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

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

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

What are the risks of day trading?

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

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

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

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

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

Financial experts warn about day trading inexperience

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

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

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

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

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

Mark Cuban cautions about day trading boom

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

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

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

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

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

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

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

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

Day trading rarely leads to profits

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

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

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

What advice do day traders give?

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

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

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

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

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

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

Discipline is key to day trading stocks

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

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

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

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

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

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

How much do day traders make?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How do day traders find the best stocks?

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

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

1. Apple

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

Financial experts rate Apple as a buy

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

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

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

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

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

Charts show Apple stock a top pick for day traders

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

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

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

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

2. Facebook

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

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

Financial experts bullish on Facebook stock

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

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

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

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

3. Tesla

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

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

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

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

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

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

Some analysts bearish on Tesla stock

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

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

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

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

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

4. Microsoft

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

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

5. Roku

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

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

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

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

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

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

Analysis and patience key to day trading from home

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

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

How to Create an IRA Rollover

What is a rollover IRA?

How can you rollover an IRA?

IRA to HSA rollovers are possible

Young people are at an advantage with IRA rollovers

How to Roll Over a 401k to an IRA

More advice about 401k to Roth IRA conversion

More advice on rolling over 401k to IRA

Timing is key for an IRA rollover

Account holders should exercise caution

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

Find a reputable IRA manager for rollovers

Some advisors want 401k rollovers into IRA’s

What do financial advisors say about rollover IRA’s?

What are some IRA rollover rules?

What is the timeline for an IRA withdrawal?

Should a person rollover an IRA during the economic downturn?

Fidelity changes IRA rollover rules

Are IRA rollovers necessary?

Demographic changes causes Fidelity rollover changes

Fidelity offers more flexibility for IRA rollovers

Advice for retirees on IRA rollovers

1. Amazon the top pick for IRAs

2. Proctor and Gamble

3. Apple

4. Google

5. Tesla

IRA rollovers can help save money

What is QQQ stock?

What is TQQQ stock?

ProShares advise caution about TQQQ

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

1. Amazon

Amazon wants to increase empire with wearables

Analysts say Amazon is a top QQQ holding

2. Google

Google a buy to some analysts

3. Apple

Apple stock split may help QQQ stock grow

4. Tesla a key QQQ stock holding

Tesla has strong Q2 2020 earnings report

Tesla stock split boosts shares

Some analysts say stock splits help QQQ stock

Some experts think stock split will hurt QQQ stock

5. Facebook

Facebook a profitable holding in QQQ stock

6. Netflix

Financial experts bullish on Netflix stock

7. Zoom

Analysts rate Zoom a buy for investors

8. Nvidia

Analysts bullish on Nvidia stock

Cowen also says Nvidia key part of QQQ stock

9. Microsoft

Experts bullish on Microsoft stock

10. Adobe

Experts say Adobe is vital part of QQQ stock

QQQ stock a good addition to investors’ portfolios

What is a slope of hope?

Is the U.S. still in a recession?

Why are stocks sliding down the slope of hope?

When did the slope of hope start?

Why is the stock market rising despite negative economic news?

Some economists are pessimistic about stock market recovery

Some analysts say stock market is still on wall of worry instead of slope of hope

1. Clorox

Clorox had excellent Q3 2020 earnings

Analysts rate Clorox stock as a buy

2. Proctor & Gamble a stock that takes Wall Street on slope of hope

Analysts rate P&G stock as a buy

3. Zoom

Zoom growth drives Wall Street down a slope of hope

Analysts rate Zoom stock a buy

4. Amazon leading Wall Street down a slope of hope

Is Amazon stock a buy?

5. Tesla

Tesla stock soars after stock split

Analysts bullish on Tesla stock as Wall Street goes down slope of hope

6. Moderna

Moderna leads investors on slope of hope with robust Q2 2020 earnings