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For people with high incomes, Roth IRA’s may be inaccessible. However, there is another option- a backdoor Roth IRA . This TradingSim article will help readers understand how to use backdoor Roth IRAs. In addition, this article will also help investors find the best companies offering alternative retirement accounts in this bull market.

What is a backdoor Roth IRA?

In order to contribute to a Roth IRA in 2020, a person’s income must be below $139,000 if they’re single. Married high-income people must have an income below $203,000. For high-income people, there is the option of a backdoor IRA.

Ajay Sarkaria is a vice president of advanced planning at Fidelity. He noted that the IRS lets high-income people make that conversion.

“The IRS made it pretty explicit that this is a permitted technique, and it is quite commonly utilized by many of our clients,” said Sarkaria.

Christine Russell is the senior manager of retirement and annuities for TD Ameritrade. She notes that high-income investors can save more with backdoor Roth IRAs.

“The backdoor Roth IRA makes it possible for investors to tweak the rules a bit. If you have a traditional IRA, you can convert funds into a Roth IRA, whatever your income level,” said Russell.

Fred Egler is a certified financial planner at Betterment. He says that backdoor IRA’s are a good option for high-income earnings.

“They are a great way for high income individuals to get money into a Roth IRA without contributing directly to one because of the income cap,” says Egler.

Financial IRA expert explains backdoor Roth IRA benefits

IRA expert Ed Slott explained how to open a backdoor IRA.

“You contribute to a traditional non-deductible IRA as long as you have earnings and then convert it to a Roth, since anybody can convert. There is one caveat though, not everybody can contribute to a traditional non-deductable IRA. First, you have to have earnings, and with traditional IRAs you can’t contribute after you are 70 1/2. You can with a Roth but you can’t with a traditional. So, if you are listening to this and you are 75, that tactic won’t work for you,” said Slott.

Slott also explained what to do if a person has extra traditional IRA assets.

“What happens is, if you do a nondeductible, you have to do what’s called, it’s a little technical, a pro-rata calculation. In other words, you can’t just, and this is a question we get a lot so I am glad you asked, some people say well if I do a non-deductible IRA say for $5,000, can I just convert the $5,000 and pay no tax? Not if you have other IRAs because all of your IRAs by tax rules are considered one. So, if $5,000 was only 5% of your whole IRA, only 5% would be tax-free. You have to do a percentage for every dollar you convert,” said Slott.

What do financial experts say about the backdoor IRA?

Victor Carlstrom is CEO of Vinacossa Enterprises Group based in New York. He said that financial advisors in addition to SEP IRAs, they should tell their clients about the backdoor IRA choice.

“Advisors should encourage most of their clients that exceed the contribution income limits to open Roth IRAs through the backdoor process. The benefits of tax-free growth and withdrawals are exceedingly powerful,” said Carlstrom. “And the flexibility that comes with Roth IRAs opens multiple estate planning and retirement pathways,” said Carlstrom.

There are restrictions on Roth IRA contributions and the stretch IRA essentially ended. However, the 2017 Tax Cuts and Jobs Act enables people to make a contribution to a traditional IRA. Then, an account holder can convert the IRA to a Roth.

SEP IRA — Backdoor Roth IRAs can help people save for retirement

“Although an individual with [adjusted growth income] exceeding certain limits is not permitted to make a contribution directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA,” stated the act.

How does a person know if a backdoor Roth is right for them?

Christine Russell is the senior manager of retirement and annuities for TD Ameritrade. She spoke about which situations may be best to use a backdoor Roth IRA.

“If you expect to owe a little less in taxes for the year, and you can handle the tax bill for a Roth conversion now, it might make sense. You pay taxes now, but later on, if taxes go up or if you’re in a higher bracket, you don’t have to pay taxes on your Roth withdrawals. And you won’t have to take any required minimum distributions (RMDs) from your Roth IRA once you reach age 70 1/2,” said Russell.

“Avoiding RMDs during your lifetime may allow you to leave more assets to your heirs, because they won’t be taxed on the Roth IRA assets that they inherit, either,” added Russell.

What are other advantages to making a backdoor Roth IRA conversion?

For people who are retiring, there is a chance to reap benefits from a Roth conversion. Because of the CARES ACT, there is a change in required minimum distributions. There is a new waiver on the required minimum distributions.

“This year is an unprecedented opportunity,” says Maria Erickson, a financial advisor at Freedom Financial and Business Planning in Tampa, Fla. “The numbers are pretty compelling. You can reduce your tax bill by 30% to 40%.”

Can the CARES Act help people who have retirement funds?

The recent CARES (Coronavirus Aid, Relief, and Economic Security) Act lets people withdraw funds from a backdoor IRA if they lose their jobs because of COVID-19 related reasons. However, not all employer retirement plans will allow the withdrawals. Charlie P. Nelson is the chief executive officer of Retirement and Employee Benefits for Voya Financial, Inc. He explains that there are employers who won’t accept early IRA withdrawals.

“Not all retirement plans will accept the CARES Act provisions for COVID-19 related hardships. The provisions are entirely within the purview of the retirement plan, so participants must check first to see what their plan sponsor offers,” said Nelson.

When is a backdoor Roth conversion a bad idea?

While many high-income people want to make Roth conversions, there may be a downside if a person doesn’t have the extra funds to pay taxes.

Dan Stolfa is the managing director, wealth and fiduciary adviser at Evercore Wealth Management. He said that there can be tax consequences for older high-income people.

“In the year of a Roth IRA conversion, the full amount of the withdrawal is included in taxable income and a large conversion can easily push someone from a lower tax bracket into the highest tax bracket. The break-even point on paying significant taxes can take years or even decades to reach. If that tax burden is paid from IRA assets, it will take even longer,” said Stolfa.

He advised an older client like Lyn not to make the conversion to a backdoor Roth IRA.

“For most people like Lyn who are past RMD age and are using IRA assets to fund living expenses, large-scale conversions don’t make sense,” said Stolfa.

What are other disadvantages to Roth conversions?

When a person is making a conversion to a Roth IRA before converting to a backdoor IRA, there can be disadvantages.

“The shorter the time period, the less advantageous the Roth conversion can be, because the tax-free growth has less time to compound and grow,” said Fred Egler, a financial planner.

“Once you do a Roth conversion, it’s irreversible. If you’re going to do one, you should certainly make sure it’s for you, ” added Egler.

Are there alternatives to backdoor Roth IRAs?

While a backdoor Roth IRA may be a retirement planning strategy for high-income people, Russell says there are alternatives.

“If you want Roth benefits, there are other alternatives,” Russell pointed out. “You might be able to contribute to your workplace 401(k) if it allows Roth contributions, or open an individual/solo 401(k) with Roth contributions if you own your own business—even as a freelancer or side gig,” said Russell.

“There are no income limits on Roth 401(k) eligibility, and the contribution limits are much higher than what you see with IRAs: $19,000 versus $6,000 for 2019,” added Russell.

How does a person open a backdoor Roth?

A person can use a backdoor Roth IRA as a strategy to build for retirement. In a backdoor IRA, a person opens a traditional IRA. After that, a person can make non-tax-deductible contributions to the account. Then, it converts into a Roth IRA. David Desmarais is a certified public accountant. He explained how people can create a backdoor Roth IRA.

“You can make a nondeductible IRA contribution and immediately roll it over into a Roth. The reason why you roll it over immediately is if there are no earnings in the IRA,” said Desmarais.

“Before it is rolled into a Roth, there is no income to pick up on the conversion,” added Desmarais.

What are the step-by-step instructions for a backdoor Roth?

When an account holder wants to make a backdoor Roth conversion, these are the key steps:

An account holder should put after-tax funds into a traditional Roth. If an account holder uses after-tax funds, there will be fewer assets in the IRA to tax.
Then, an account holder can make a non-deductible contribution to a Roth. The contribution limit for 2020 is $6,000 for account holders under 50. For account holders over 50, the limit is $7,000.
Next, keep the account in cash to avoid more taxes.
Wait for a statement from an account holder’s IRA provider.
Then, rollover IRA funds into a Roth before the end of the year.
After that, an account holder has to report the conversion on IRS Form 8606.
Repeat these actions every year.

What are the implications of a Roth IRA conversion?

Nick Defenthaler is a partner at the Center for Financial Planning in Southfield, Michigan. He advises clients to keep their funds in cash if they’re not converting their IRA into a Roth right away “to avoid any earnings on the funds prior to the actual conversion.”

John Knolle is principal at Saranap Wealth Advisors. For existing IRAs with large pretax balances, a conversion to a Roth IRA could bring more expenses. He noted it’s “because after-tax contributions are converted pro-rata to the overall balance.”

How to Invest — Backdoor Roth IRA can have tax consequences

“This is known as the ‘cream in the coffee’ rule,” said Knolle. The “cream in the coffee” or pro rata rule means that before-tax and after-tax funds can’t be separated.

He adds the cream in the coffee rule is “meaning once after-tax dollars are mixed with pretax dollars, it’s impossible to separate the two,” said Knolle.

How do multiple IRAs impact backdoor Roths?

Timothy Wyman is a financial advisor that is a managing partner at Center for Financial Planning. He warns his clients that there can be consequences for retiring clients doing a backdoor conversion in January. If a client retires in July and rolls the 401k into a backdoor IRA, there is an “aggregation rule”. In the aggregation rule, the IRS treats multiple IRA accounts as one.

“That will likely result in tax associated with the backdoor conversion you completed earlier in the year,” said Wyman.

What are the tax implications of a backdoor IRA?

In addition to Wyman, Russell noted that there are taxes that must be paid if there are Roth IRA conversions. While a backdoor Roth IRA may bring benefits, taxes still must be paid.

“If you got a tax deduction for making your traditional IRA contributions, you’ll need to pay taxes on the amount you convert over to the Roth IRA. If your IRA assets originally came from a workplace plan, like a 401(k) or SEP IRA, you have not been taxed on some or all of that money yet, either. So, converting that to a Roth IRA will also require you to pay taxes,” said Russell.

Research key to starting backdoor Roth IRA strategy

Because of the aggregate rule that Wyman noted, Russell also thinks that people should consider the implications of owning multiple IRAs . He said that when they want a backdoor Roth conversion, they should consider their financial situation.

“This is where you really have to think about the situation, because you owe taxes based on your total IRA balances,” said Russell. “You can’t just focus on the IRA that you’re using for the backdoor Roth.”

“Having different types of IRAs can change the equation”, said Russell.

“So, it’s important to talk to a professional before you decide to move forward with a backdoor Roth,” said Russell.

Should an account holder have a traditional and backdoor Roth IRA?

Jason Grantz is the director of Institutional Retirement Counseling at Unified Trust Company. He notes that both accounts may not have one tax advantage over another.

“It hasn’t been proven that tax-deferred growth is better or worse [than tax-free growth]. Only time will tell,” said Grantz.

In addition, Grantz recommends that account holders have a traditional and Roth account so they don’t have to have the same tax liability.

“That basically means building both traditional and Roth accounts over the course of your working years, so you have options to pick from”, said Grantz.

The accounts are “buckets that are treated differently from a tax perspective,” added Grantz.

Financial experts advise people who want to use backdoor Roths

If people want to open a backdoor IRA, Russell also recommends that traditional IRA holders get an IRS form to keep their different IRA accounts organized.

“And get all your records in order, so you reduce surprises. If you do have nondeductible contributions in your traditional IRA, you need to keep track of them on IRS Form 8606. “Otherwise, you may eventually be taxed on money you already paid tax on,” said Russell.

If people want to make a backdoor Roth IRA conversion, Russell has advice for those account holders. She urges them to consult a financial advisor to understand the tax consequences.

“Not everyone is going to benefit from a backdoor Roth IRA,” said Russell. “Before you move forward, make sure you understand the tax consequences and know what you’re getting into. The rules of a backdoor Roth contribution are often oversimplified.”

How long should a person wait to open a backdoor Roth?

While there are different times to wait to use a backdoor Roth IRA strategy, some financial experts say that there is no one special time. Christine Benz, Morningstar’s director of finance, said that account holders don’t have to wait too long to have a backdoor Roth IRA.

“But I think that there’s starting to be a consensus view that you don’t have to wait very long at all. In the past, there was some worry that, well, has the IRS really blessed this maneuver,” said Benz.

“But now I think that tax experts such as Ed Slott, for example, who focuses a lot on IRAs, thinks that you can do it pretty quickly, that you don’t have to wait very long,” added Benz.

“And the beauty of that is that you can get the money working in long-term assets,” said Benz.

In addition, Benz notes that “because you are not worried about any capital appreciation and taxes due between the time of funding and conversion.”

How can people open a mega backdoor Roth IRA?

In addition to a backdoor Roth IRA, there is a mega backdoor Roth IRA. That account is like a backdoor Roth on steroids. In a mega backdoor Roth, people who have a 401k that allows after-tax contributions. With a mega backdoor Roth IRA, high-income people can contribute up to $37,000 to a Roth. After an after-tax contribution to a traditional IRA, the IRA can be converted into a backdoor Roth.

However, with a backdoor Roth IRA, an employer’s 401k may have to return the excess contribution. Some employers state that high-income IRA holders can’t save more than lower-income account holders.

Mark Luscombe is a principal analyst with Wolters Kluwer Tax & Accounting. He explained how Congress made that rule.

“Congress decided that, if they were going to give tax breaks for employer-sponsored retirement plans, those companies could not discriminate against lower-compensated employees,” said Luscombe.

What are the tax implications of a mega backdoor Roth IRA?

Myra Wealth management advises clients on the tax implications of a backdoor Roth IRA.

“If your after-tax contributions have grown before you do the in-service rollover, you will be subject to tax when you roll over those funds. If you are doing the transfers frequently, then your tax bill should not be significant,” said Myra.

“Some companies allow you to roll over as frequently as every pay period. If your employer does not allow in-service withdrawals, you can still do the Mega Backdoor Roth but you will have to do it when you leave the employer, in which case you are likely to have some taxable earnings and possibly a larger tax bill,” added Myra.

How can a person get out of a backdoor IRA?

If a person wants to get out of a backdoor IRA, they can have another option. Morningstar’s Christine Benz explained how to get out of a backdoor IRA.

“They can recharacterize the conversion–that is, switch the newly converted Roth assets back to Traditional IRA status, which effectively undoes the conversion and any tax implications associated with it. After that, they could hang on to the Traditional nondeductible IRA or remove the pretax assets from the IRA kitty by rolling them into an employer’s plan as described above and then have another go at a backdoor Roth IRA,” said Benz.

Benz notes that people should use caution before changing their IRAs.

How do backdoor Roth IRA’s affect families?

If a person wants to make a conversion to a backdoor Roth IRA, there may be an impact on an account holder’s heirs. Dara Luber is the senior manager of retirement product at TD Ameritrade. Luber noted that the recent passage of the SECURE Act have changed how beneficiaries inherit IRA’s.

“A big piece of the SECURE Act is changing how nonspouse beneficiaries inherit IRAs,” said Luber. “Before, you could take distributions over a lifetime, but now you have to do it in 10 years, creating a potentially bigger tax bill for heirs.”

While there are original tax liabilities, there could a lessened burden for an account holder’s beneficiaries.

“The original owner takes the tax hit, but when they pass, the taxes are already paid,” said Luber. “It could be attractive for those who want to get rid of the tax bite on behalf of their children.” The kids must take RMDs but get to skip the taxes.

Financial expert Bill Bishoff noted that the current environment will provide a tax break for some account holder.

“If you do a Roth conversion this year, you will be taxed at today’s “low” rates on the extra income triggered by the conversion. And you will avoid the potential for higher future tax rates (maybe much higher) on all the post-conversion income and gains that accumulate in your new Roth account. That’s because Roth withdrawals taken after age 59½ are totally federal-income-tax-free, as long as you’ve had at least one Roth account open for more than five years when withdrawals are taken,” said Bishoff.

If you leave your Roth IRA to an heir, he or she can take tax-free qualified withdrawals from the inherited account as long as it has been open for more than five years.

How do backdoor Roth IRA’s impact heirs’ taxes?

If an account holder wants to ease their heirs’ burden, a backdoor Roth conversion could be key. David Robinson is the founder of RTS Private Wealth Management. He said that the backdoor Roth IRA can help a person’s beneficiaries.

“A Roth conversion might be a good option, not only to minimize heirs’ tax burden but also to sustain the growth of your retirement nest egg,” said Robinson.

Financial expert Jeff Brown notes that certain considerations must be considered before heirs can inherit an IRA.

“Basically, the decision hinges on the same issue that confronts all TIRA[ traditional IRA] investors: tax brackets now and in the future. Because tax must be paid on converted sums, it boils down To paying tax at today’s rates by converting to a Roth, or paying at a future rate by keeping the TIRA,” said Brown.

He noted that if an heir will earn more than an account holder, then a Roth IRA can make sense.

“If the heir is likely to be in a higher tax bracket than you are today, a conversion could make sense. You’d pay at today’s low rate so your heir would not have to pay at a higher rate later. If the heir’s rate is likely to be lower than yours, it probably would make sense to keep the TIRA,” wrote Brown.

Will there be an increase in backdoor Roth IRA’s?

Ryan P. Costello is a financial expert. He believes that with this economic volatility, many more people will open Roth IRAs.

“The percentage of our clients that do Roth conversions is going to increase dramatically this year,” said Costello.

Certified financial planner David W. Mullins said that Roth IRA’s can help owner make better tax planning.

“What this means to the owner is potentially more efficient tax planning in retirement, more time for the account to keep growing and a larger nest egg to pass on,” said Mullins.

Henry Luong Hoang is a certified financial planner. He suggests that people who want to pass money on to heirs should pick a Roth IRA.

“As a hedge, if you have the ability to pay reasonable tax rates to convert your IRA today, there is a very low chance you will regret future tax-free distributions,” said Hoang.

Which five stocks are best for a backdoor Roth IRA?

If a person wants to invest their backdoor IRA into stocks, there are five stocks that could be a good choice for account holders. Here are some choices for investment.

1. Amazon

Amazon(NASDAQ: AMZN) stock is a golden stock to invest in with a Roth IRA. Amazon had a phenomenal Q2 2020 as many people are ordering more goods online. The online behemoth had a whopping $89 million in revenue in Q2 alone.

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

Amazon CFO Brian Olsavsky said the company is still expanding and will increase inventory in the future.

Amazon stock is a top choice for backdoor IRA investment

“As we move into Q3, we need to build more inventory for Q4. We’ve got our hands full on that challenge, but we’ve got a really good team that’s been working very hard probably since late February on this issue,” said Olsavsky.

Amazon is the top stock for people who want to invest their backdoor Roth IRA’s.

2. IBM

In addition to Amazon’s strong showing as a growth stock, IBM(NYSE:IBM) is a strong dividend stock for IRA investment. IBM’s 4% dividend makes it a relatively reliable stock for IRA investment.

IBM’S chief financial officer Jim Kavanaugh spoke about the results.

“Our balance sheet remains strong and we continue to have ample liquidity. The external dynamics we saw in March continued into the second quarter with varied impacts by region and industry. As we discussed in April, we are not immune to the macroeconomic environment. But our client and our portfolio mix provide some stability in our revenue, profit and free cash flow,” said Kavanaugh.

IBM stock good for backdoor Roth IRA investment

IBM’s cloud technology helped the company’s revenue rise 30% in Q2 2020. Kavanaugh spoke about that growth.

“In cloud and data platforms, revenue was up 30%. This reflects the synergy of bringing IBM and Red Hat together as we standardize on Red Hat OpenShift as our hybrid cloud platform and modernize our software portfolio to run on it,” said Kavanaugh.

“This quarter, we had good performance across Red Hat, including amplified bookings growth in the 30 underpenetrated countries where IBM has helped Red Hat expand go-to-market efforts over the last year. And with further cloud pack traction this quarter, clients are embracing a hybrid cloud strategy and increasingly leveraging the OpenShift container platform,” added Kavanaugh.

IBM is a top stock for people who want to delve into IRA investment.

3. AT&T

AT&T(NYSE:T) is another dividend stock that people can invest in to increase their IRA. With a strong 7% dividend yield, AT&T is a good choice for account holders. John Stankey, AT&T’s CEO, spoke about the results.

“Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet,” said Stankey.

AT&T is also a strong stock because of its cash flow.

“Our resilient cash from operations continues to support investments in growth areas, dividend payments and debt retirement. We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” said Stankey.

4. Microsoft

With 25 years of being a top stock, Microsoft (NASDAQ: MSFT) is a stock that many people can choose for their IRA. Microsoft’s Q2 2020 earnings show that the stock is still a solid choice for investors. CEO Satya Nadella spoke about Microsoft’s positive results.

“We are innovating across every layer of our differentiated technology stack and leading in key secular areas that are critical to our customers’ success. Along with our expanding opportunity, we are working to ensure the technology we build is inclusive, trusted and creates a more sustainable world, so every person and every organization can benefit,” said Nadella.

Amy Hood, Microsoft’s chief financial officer said cloud technology helped Microsoft maintain its high revenue.

“Strong execution from our sales teams and partners drove Commercial Cloud revenue to $12.5 billion, up 39% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

5. Coca-Cola

If investors have a backdoor Roth IRA, Coca-Cola( NYSE: KO) is a top stock as well. Legendary investor Warren Buffett invests in this established company with a 4% yield. While the pandemic shut down Coca-Cola’s profits for a while, the revival of the economy may help Coca-Cola be sold at re-opening restaurants. CEO James Quincey was optimistic about the beverage company’s future.

Coca-Cola stock a good pick for backdoor IRA investment

“In many ways, the future is coming at us faster than ever. We are embracing the changes and pivoting our business to take advantage of new opportunities. We are poised as a system to accelerate our transformation to return to driving growth in years to come,” said Quincey.

Coca-Cola is a robust stock for IRA investment.

Backdoor Roth IRA’s can help people save and grow money

Backdoor IRA’s can be a useful tool for high-income people. The accounts can help people save more and pass on their heirs. If people want to find to find stocks to invest in with their IRA’s, TradingSim can help investors. By practicing stock trades, IRA holders can help find the best stocks for their backdoor Roth IRA’s.

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

Why do people put off investing?

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

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

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

1. Starting investing early gives people time to build wealth

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

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

Staring investing early in ETFs can help build wealth

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

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

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

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

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

Compound interest helps increase profits

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

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

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

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

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

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

Starting to invest early can help young people meet financial goals

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

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

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

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

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

2. Investing early leads to automatic savings

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

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

Regular 401K contributions help build wealth

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

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

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

Starting to invest early can involve picking value stocks like IBM

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

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

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

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

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

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

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

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

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

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

Financial experts notes growth of trading apps in starting investing early

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

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

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

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

Acorns lets people use spare change to start investing early

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

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

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

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

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

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

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

Stash another app that enables early investing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financial experts advise people to do research before starting investing early

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

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

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

Diversified portfolio pivotal to start investing early

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

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

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

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

What should new investors have in a diversified portfolio?

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

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

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

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

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

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

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

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

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

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

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

6. Starting to invest early leads to patience and profits

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

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

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

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

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

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

Starting to invest early shouldn’t involve timing the market

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

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

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

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

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

Millennials saving more as they start investing early

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

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

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

Financial experts advise long-term strategy to start investing early

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

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

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

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

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

7. Starting to invest early can lead to early retirement

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

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

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

Starting investing early can help start FIRE

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

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

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

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

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

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

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

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

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

Investing early can lead to financial security in crises

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

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

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

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

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

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

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

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

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

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

Starting investing early is key to financial freedom

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

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

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

Why should people start investing?

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

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

What financial terms should investors know?

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

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

What platform should beginning investors choose?

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

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

How much money is needed for investing for beginners?

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

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

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

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

Should investing for beginners follow the stock market?

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

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

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

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

What taxes do investors pay for stocks?

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

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

What options are best for investing for beginners?

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

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

Bonds often a safer investment for new traders

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

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

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

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

Corporate and municipal bonds another way to invest

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

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

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

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

Stocks and bonds can lead to diversified portfolio

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

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

CD’s another low-risk way to invest

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

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

ETFs another option for investing for beginners

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

401 K’s are common entryway for investing for beginners

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

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

What criteria should be included for stocks for new investors?

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

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

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

1. Berkshire Hathaway is top stock for investing for beginners

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

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

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

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

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

Berkshire Hathaway stock the best stock for investing for beginners

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

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

Berkshire Hathaway is a buy for financial experts

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

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

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

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

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

2. AT&T

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

AT&T has high dividend payout to investors

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

AT&T a top stock for investing for beginners

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

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

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

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

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

3. Google

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

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

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

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

Google stock is key stock for investing for beginners

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

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

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

4. Apple

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

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

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

Apple stock a good stock for investing for beginners

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

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

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

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

5. Amazon is key stock for investing for beginners

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

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

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

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

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

6. Microsoft

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

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

Microsoft stock is robust for investing for beginners

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

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

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

7. Visa

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

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

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

International growth make Visa a top stock for investing for beginners

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

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

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

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

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

8. Disney an established stock for investing for beginners

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

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

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

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

Disney+ makes stock solid choice for new investors

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

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

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

9. AbbVie

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

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

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

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

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

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

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

10. Clorox a good defensive stock for investing for investors

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

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

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

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

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

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

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

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

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

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

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

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

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

Investing for beginners requires time and research

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

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.

Value stocks can seem like a bargain to investors, but can become a valuable part of an investor’s portfolio. This article will explain what value stocks are, how they differ from growth stocks, and how TradingSim can help investors find the top 10 value stocks to invest in.

What is a value stock?

A value stock is a bit like a stock on sale. Value stocks tend to trade at lower prices than other stocks. In addition to being cheap, value stocks tend to have less-than-average growth than other stocks. They also tend to have low valuations in relation to earnings and cash flow.

Value investing can be a great choice for risk-averse investors who want to slowly wade into the investing waters. Value stocks also tend to have dividend payments to investors every quarter. Also, with the Dow Jones in such volatility, these value stocks could be a safer alternative to faster-paced growth stocks.

How is a value stock different from a growth stock?

Here are some differences between growth stocks and value stocks. The comparison of value stocks versus growth stocks shows vast differences.

Growth stocks usually

have high valuations. Tech stocks, like Amazon (NASDAQ:AMZN), often have a sky-high valuation in the billions. Amazon has a record-shattering $1 trillion valuation.
have high P/E ratios. Growth stocks usually have a P/E ratio of 16 and higher. Netflix’s ( NASDAQ:NFLX) P/E ratio has skyrocketed to trading for 86 times its earnings.
steadily rising stock prices. Growth stocks like Zoom ( NASDAQ:ZM) have stock prices that surged 200% above its listed IPO price of $ 36 per share.
strong growth rate. Many growth stocks have better-than-average projected future earnings. Growth stocks also tend to outperform the overall S&P 500.
more available cash flow. Easily available cash flow is usually a sign that a company has a growth stock.
don’t pay dividends to investors. Growth stocks from corporations tend to reinvest money back into corporations. They don’t usually offere quarterly dividends to investors.
many growth stocks are in tech or other growing industries. Teledoc (NYSE: TDOC) is a growth stock that rose 18% just over the past month. The telehealth company is successful because of its innovation in medicine. Teledoc’s stock is also performing well because of its timely use by patients during the coronavirus crisis.
riskier for investors. Growth stocks can rise higher than the overall market, but can fall faster into a bull trap when the market declines into a bear market as well.

Value stocks are less volatile than growth stocks

In contrast to growth stocks, value stocks usually

have low price-to-earnings ratios (P/E). Value stocks, like MetLife(NYSE:MET) have a rock-bottom P/E ratio of 5.10. Life insurance stocks often have a low P/E ratio below 16.
have a slower growth rate in more established industries. Growth stocks tend to increase quickly in innovative new fields. Tech stocks, like Tesla (NYSE: TSLA) especially, may have wild swings on the stock market because of production issues ( or Elon Musk’s comments). However, value stocks usually grow at a slower pace and are in industries that have been around for decades. BP(NYSE:BP) is a giant in the oil industry and is a value stock with less drastic change in its stock price.
pays dividends to investors. In addition to BP, another oil stock, Chevron (NYSE: CVX) is a high-paying dividend stock. Chevron pays investors a 7.5% dividend to investors.
are undervalued. Semiconductor maker Qualcomm(NYSE: QCOM) has undervalued stock because it’s overlooked, but will be vital to the future. Even though Qualcomm stock is in the $66 range, the stock should rise soon. Since Qualcomm is making chips that will be used in 5G technology, the corporation’s stock will likely benefit from this in the future.
are less risky than growth stocks. Value stocks are usually less volatile and have steady returns for investors. Even though IBM (NYSE:IBM) stock has dropped, the stock is still a solid value stock. IBM is moving into cloud computing with its acquisition of software company Red Hat. The stock will likely remain a safe bet for investors who are looking for value stocks.

Top 10 Value Stocks for Investors

For investors that want low-risk investing , this value stock list has venerable stocks that have high-yield dividends. Here are 10 stocks that are some of the top value stocks to add to a portfolio.

1. Berkshire Hathaway

Warren Buffett is the OG investor and his Berkshire Hathaway (NYSE:BRK-A) and (NYSE:BRK-B) is the top value stock on Wall Street. The Oracle of Omaha has been choosing stocks since the Beatles were a new group. His conglomerate has chosen some of the best value stocks to invest in, and Buffett’s corporation itself is a must-pick stock.

Berkshire Hathaway started in 1929, but didn’t become a viable company until Buffett took over the corporation in 1965. His investment strategy was to buy undervalued companies, then let them grow. As a result of value investing, Buffett’s fortune has grown to almost $70 billion.

Former hedge fund manager Whitney Tilson says Berkshire Hathaway is a top value stock because of Buffett’s wise choices.

“I’m being even more conservative because I’m not factoring in the value Warren Buffett will likely create as he puts his $128 billion cash hoard to work amidst this chaos: buying back his own stock in size, buying other stocks, and negotiating deals with desperate companies,” said Tilson.

“It’s an incredible collection of high-quality businesses… it’s run by the greatest investor of all time… and it has the ultimate, Fort Knox-like balance sheet: $128 billion in cash and short-term investments, $19 billion in bonds, and roughly $200 billion in liquid, blue-chip stocks,” added Tilson.

This TradingSim chart shows Berkshire Hathaway’s trajectory the week of March 19, 2020.

Berkshire Hathaway has a low P/E ratio of 5.46, which makes the company’s undervalued shares a value stock for investors. While most value stocks offer dividends, Berkshire doesn’t. Buffett noted that he’d rather reinvest in his companies to improve the efficiency of his investments. For investors interested in value investing, Berkshire Hathaway is a must.

Buffett only buys stocks he likes for the long haul

Berkshire Hathaway is a value stock because of its investment in other blue-chip stocks. Buffett is known for his quotes about cautious, long-term investing. One quote about long-term investing is especially timely with the stock market slowing down now:“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Buffett also loves to quote Benjamin Graham, the father of value investing. “Long ago, Ben Graham taught me that price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down,” said Buffett.

Buffett doesn’t just chase trading trends. He only invests in companies he believes in for a long time. Even though his stock picks may seem too safe, they pay off in the long run. His recent $549 million investment in Kroger grocery stores in February has been very savvy. The recent run on grocery stores like Kroger during the COVID-19 pandemic has made Berkshire Hathaway’s investment a good buy. Buffett has the Midas touch when it comes to picking stocks. His time-tested value investing in top corporations make Buffett’s Berkshire Hathaway a top value stock.

2. Apple

One of the value stocks that Berkshire Hathaway invests in is Apple (NASDAQ:AAPL). The tech giant is a value stock because of its lower-than average P/E of 20. For the largest tech company in the world, Apple is ironically undervalued compared to other tech stocks like (NASDAQ:FB). Even though Apple is a tech company, it’s also seen as a hardware company since it produces iPhones and Apple Watches.

The company has a hallmark of a value stock, strong earnings reports. Apple’s last earnings report saw the company earn a record- shattering $91.8 billion. Apple’s ample cash glow gives the stock a characteristic of a growth stock. However, the company’s $58.9 billion in cash flow in fiscal year 2019 helped pay its $14.1 billion dividend payout to investors. That’s an impressive 6.5% yield. Apple is a reliable value stock that investors should add to their portfolio.

Coronavirus will impact Apple, but stock will bounce back

The COVID-19 crisis has hit every corporation, especially Apple. Many Chinese factories that make Apple devices have been shut down in February. However, the pandemic is slowing in China and factories are starting to reopen. Apple is also set to launch its 5G iPhone in the fall, which should help Apple stock recover from its current losses. Apple recently noted that even though iPhone sales are down in China, there is still growth in sales in other countries. This TradingSim chart shows the volatility in Apple’s stock.

“Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations, ” said Apple.

Wearables make Apple a value stock

Even though Apple stock is currently down, Apple devices are still going strong. Many homebound people are Facetime on their iPhones and iPads to stay connected to each other (and to the games they’re addicted to playing). Apple Watches and other wearable device sales rose 17% in 2019. The ability of Apple to innovate in technology gives value investing in Apple a benefit to investors.

Craig Johnson, chief marketing technician at Piper Sandler, said Apple is still a value stock because of customer loyalty. He noted that even through the last economic downturn 10 years ago, customers still bought iPhones.

“People are still going to step up and they’re going to buy the iPhone. You know, when this gets relaunched and gets released for the 5G iPhone, they’re going step up and buy it. We saw the iPhone get released in 2007 and 2008 in the middle of the crisis there. Consumers still were able to open their wallet and buy these things,” said Johnson.

Apple can withstand the current market volatility and COVID-19 crisis because of its ample cash flow, innovative new products, and a devoted customer base.

3. Coca-Cola

Another value stock Buffett believes in is Coca-Cola( NYSE:KO). Buffett owned the stock since hip-hop was a new category of music. The soft drink company is a value stock because of its high dividend and its steady cash flow. Coca-Cola made billions by selling its soda. Then the corporation pivoted to sales from water and low-calorie drinks and increased sales. The beverage company’s earnings for Q4 2019 were $9.07 billion and the stock rose 22% over the past year. However, CEO James Quincey noted that Coca-Cola has been negatively impacted by the coronavirus pandemic.

“The supply chain is creaking around the world. There are flash points when it’s getting a little harder to get ingredients through, whether it’s delays at the borders, the big changes in channel mix,” said Quincey.

The corporation also noted that the 2020 guidance would be impacted by restaurant closures and sport events cancellations. Coca-Cola sells many of its beverages in dining establishments and during games.

“[S]ince our last guidance update, local market policies and initiatives to reduce the transmission of COVID-19 have significantly increased. These initiatives include the direction to refrain from dining at restaurants,” said Coca-Cola.

However, Quincey noted that Coke’s workers are “doing a great job at adapting” to the changes brought on by COVID-19.

Coca-Cola dividend consistent for investors

The company’s dividend may be small at 3.5%, but it’s very consistent. The dividend has risen for an astonishing 57 straight years. For a value stock that proves that slow and steady investment pays off, investors should choose Coca-Cola.

4. ExxonMobil

In addition to Coca-Cola and Apple, ExxonMobil ( NYSE:XOM) is an established value stock for investors for many reasons. One reason investors can pick ExxonMobil to implement their value investing is its well-paying dividend. ExxonMobil had $6.6 billion in free cash flow last year. The oil corporation paid $14.6 billion in dividends to investors in 2019. Like many value stocks, ExxonMobil is an undervalued stock that has a high-yield dividend of $3.48 per share. That’s an impressive 9% dividend for investors.

ExxonMobil will survive oil crisis

ExxonMobil has been hit by two crises. The ups and downs of the stock market has affected the Dow Jones overall. However, oil companies have been rocked by the decline in oil prices. Saudi Arabia is overproducing oil to drive down prices and spite rival producer Russia.

As a result, the volatility of the stock market and oil prices have dropped to about $30 a barrel. ExxonMobil CEO Darren Woods announced that ExxonMobil will reduce capital expenditures to reserve its cash flow.

“Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term. We will outline plans when they are finalized,” said Woods. This TradingSim chart shows ExxonMobil’s stock trajectory over the past few weeks.

Despite the reduction in spending, Woods said ExxonMobil will survive the current uncertainty in the oil industry. With refinery expansion around the world, ExxonMobil is poised to recover from this current setback.

“We are confident that we will manage through these challenging times by taking deliberate action to keep our people safe, our environment protected and our company strong,” said Woods.

ExxonMobil is a value stock before oil companies recover

ExxonMobil is a bargain value stock for investment. Investors could buy the stock while the oil industry is in turmoil. Then they could reap the benefits when the economy and oil industry recovers. Oil will likely bounce back above $30 a barrel if Saudi Arabia compromises with Russia and other oil-producing countries in OPEC ( Organization for Petroleum Exporting Countries) to reduce its oil output. If the economy recovers, the oil company will rebound and ExxonMobil will remain a value stock.

5. Johnson & Johnson

Just as ExxonMobil has been an established stock for almost a century, Johnson & Johnson (NYSE:JNJ) is another value stock with longevity. The multinational corporation has been around for a century and has been a reliable stock for value investors. The company’s stock pays a healthy 2.6% dividend and increases every year. The corporation has survived a scandal about asbestos in their talcum powder to remain a value stock. For investors that want a safe value stock, Johnson & Johnson is a safe pick-especially in the wake of the coronavirus outbreak.

Johnson & Johnson stock rises on coronavirus vaccine hopes

The world’s biggest healthcare product producer is racing to create a vaccine for COVID-19. The company has signed a $1 billion deal with the U.S. government to create 1 billion doses of a possible vaccine for the respiratory disease. Johnson & Johnson CEO Alex Gorsky expressed optimism that the company can create an effective vaccine to slow the disease.

“We have very good early indicators that not only can we depend on this to be a safe vaccine base but also one that will ultimately be effective based on all the early testing and modeling we’ve been doing. This is a bit of a moonshot for J&J going forward, but it’s one we feel is very, very important for use to be doing at this period in time,” said Gorsky.

Johnson & Johnson stock the week of March 19

Johnson & Johnson said in a statement that it “is committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use.”

The hope of a vaccine has raised investors’ confidence in the stock. Johnson & Johnson stock has jumped 8% as a result of the news. Johnson & Johnson’s stock shows that an established company can weather any storm and persevere. By providing medical devices and other badly needed products during this health crisis, Johnson & Johnson has proven to be a value stock that will withstand Wall Street volatility.

6. JP Morgan Chase

Just as Johnson & Johnson is a health product institution, JP Morgan Chase (NYSE:JPM) is a banking institution that has a value stock. Chase’s P/E ratio is 8.68, making it an undervalued stock that’s perfect for value investing. Chase had a positive earnings report in Q4 2019 with profits of $8.52 billion. CEO Jamie Dimon said in a statement that the company can withstand Wall Street’s ups and downs.

“While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year,” said Dimon. This TradingSim chart shows the volatility of Chase stock during the week of March 19.

Chase stock has also been helped by the Federal Reserve injecting $1 billion into banks as part of the Fed trying to revive the economy. With that security, Chase can loan more to customers. Customers themselves will need to take out loans more than ever with the struggling economy. Before the coronavirus crisis, Chase was opening more branches and investing more in banking apps. Now the bank can be an option for consumers during this time of economic uncertainty. Chase is a top value stock for investors looking for a solid bank stock to add to their portfolios.

7. Walmart

While many banks have value stocks, the nation’s biggest retailer also has a reliable value stock. Walmart(NYSE:WMT) has succeeded by selling many essential products and become a value stock because of its strength during the COVID-19 crisis. The nation’s largest big-box store was a top stock to financial experts like Jefferies analyst Christopher Mandeville. Even before the coronavirus pandemic, Mandeville praised Walmart for its financial strength.

“WMT[Walmart] exhibited just how well the company is leveraging its physical scale/digital presence and financial stamina to push the boundaries of retail, using innovative tech and learnings from abroad. With clear momentum in grocery and a sustainable productivity loop in place, WMT[Walmart] now pivots to better general merchandise, one item alongside enhanced fulfillment practices that is critical to long-term e-com success,” said Mandeville.

Walmart thrives during COVID-19 outbreak

After the COVID-19 outbreak,Walmart has become an essential resource by staying open during the pandemic.

Walmart CEO Doug McMillon noted that the corporation has seen e-commerce sales grow by 35% over the last few months.

“We continue to see good traffic in our stores. We’re growing market share in key food and consumables categories, especially with its online grocery delivery service. including fresh,” said McMillon.

Goldman Sachs analyst Kate McShane noted that Walmart will help customers by keeping stores open and by delivering groceries as well.

“In the short term, we expect demand to remain robust, even if panicked buying subsides, given the companies’ mix of essential/grocery. Further, these stores will likely remain open (versus over half of retail in the U.S. that is currently closed), even in states that have “shelter in place” rules,” said McShane.

Walmart dividend makes stock attractive to investors

Like many value stocks, Walmart has a well-paying dividend for investors. Walmart’s payout to investors tops 2% and has steadily increased for an impressive 47 years. Walmart’s consistent dividend payouts make the retailer’s stock a stable value stock for investors.

8. AT&T

AT&T(NYSE:T) is another top pick for value investors. The telecommunications company has been a great value stock. The corporation is a “dividend aristocrat” that consistently raises dividend for investors every year. The current yearly payout to investors is a hefty 6.5%.

AT&T also will keep many of its stores open during the coronavirus pandemic. The corporation said that it’s critical for customers to stay connected during the quarantine orders nationwide.

“Connectivity is always essential to our customers — doctors and nurses, first responders, governments, banks, grocery stores, pharmacies, and others delivering vital services.”It’s even more critical during a public health crisis that’s challenging everyone. In fact, as a critical infrastructure provider, AT&T views it as our civic duty to step up and keep our customers and communities connected,” said AT&T.

5G technology and streaming could help AT&T stock

The lastest Wi-fi technology could also help boost AT&T stock. 5G technology will soon come to many phone customers that subscribe to T-Mobile ( which is owned by AT&T) could benefit from having 5G devices. With faster streaming on devices, AT&T could have a lock on the 5G market once the technology takes off.

In addition to 5G technology, AT&T stock could rise once it enters the streaming wars. The corporation plans to launch HBO Max, which will fan favorites like Friends and The Boondocks. When the service debuts in May, HBO Max could help AT&T stock grow if gains a lot of viewers. AT&T stock could rise after launching the streaming service. AT&T stock could be ideal for value investors looking for a long-established stock pick.

9. Disney

Just at AT&T is evolving to meet new communications needs, Disney is adapting to new forms of entertainment. The entertainment conglomerate has been struggling during the COVID-19 crisis because of the closure of its theme parks. However, Disney+has been a bright spot for the corporation. The streaming service has attracted 28.6 million subscribers since its launch in November. The international expansion of Disney+ in Europe should help the corporation’s earnings in the long run. Minal Modha, consumer research lead at Ampere Analysis, noted that Disney has to appeal to kids that love Frozen 2 and adults who want to binge watch Star Wars: The Mandalorian.

“It will now be key for Disney to ensure it retains these customers with a mix of new Disney Plus originals and new release movie titles,” Modha said in a statement. “Furthermore, while there is still room for growth among both the two core demographic groups, it will be imperative for Disney Plus in the longer term to broaden out its content offering to appeal to a wider audience.”

Hulu, another Disney-owned streaming service, is also an area of growth for the company with 30 million subscribers. Even though many sports events are canceled, ESPN+ still has 6 million subscribers. With many people being quarantined, Disney’s popular movies can enjoy a greater audience and possibly increase its stock price.

Disney dividend is no Mickey Mouse amount

Disney can be a daily stock pick for investors because of its ability to withstand the current Wall Street volatility. The corporation’s dividend payout is consistent for investors. Because Disney’s net income grew to $10 billion in 2019, its dividend payout to investors is 1.8%. While that figure is smaller than other companies’ yields, it’s still a steady increase year after year. Disney stock is a top stock pick for value investing.

10. Weight Watchers

Another value stock may be the least likely. Weight Watchers(NYSE:WW) isn’t just for your fluffy Aunt Margaret anymore. The company has grown from a weight-loss company predominately for women to a wellness company for all genders. Since Oprah purchased 5 million shares of Weight Watchers, the company has added 6 million more subscribers. “The Oprah effect” of her magic touch helping businesses has helped Weight Watchers.

Weight Watchers has also evolved because of its new marketing campaigns to reach more male customers. DJ Khaled has become a spokesperson and another one- big male superstar, that is- is aligning with the brand. The Rock joined Oprah on her Weight Watchers tour to promote the rebranding of the corporation. The revamp to focus more on holistic health instead of weight loss appears to have worked. Chief Financial Officer Nick Hotchkin, said that tour helped drive Weight Watchers awareness up with potential customers. The success also drove the corporation’s earnings up to $29 million in its last earnings report.

“We believe this high visibility has had a halo effect well beyond those who are in the audience.In addition, the tour helped reinforce our brand transformation, showing how WW is your partner in both weight loss and wellness. Member recruitment so far in 2020 has been well above the prior year, as expected, and is reflected in revenue and earnings growth guidance for full year 2020,” said Hotchkin.

Weight Watchers may benefit after quarantine

With many people cooped up inside and stress eating during the quarantine, Weight Watchers could benefit after the nationwide quarantine ends. When the COVID-19 crisis passes, people will be eager to be more active and become healthier. Morgan Stanley analyst Lauren Cassel says that Weight Watchers could add more subscribers after the end of the nationwide quarantine.

“Once the ‘cocoon’ phase ends and shelter in place measures are raised, we[Morgan Stanley] see WW as a potential beneficiary of changes in consumer behavior. We anticipate a heightened focus on health, wellness, and weight loss after weeks of gym closures, stress eating, and limited physical activity.”

In addition, Cassel said that “the extent to which existing subscribers are currently showing greater interest and spending more time engaging with the app during the cocoon phase could lead to better retention curves for these subscribers over the medium term, which we incorporate into our $47 Bull case valuation. Bottom line, we think WW’s value proposition is actually stronger post-COVID-19 than it was before,” Cassel said.

“WW’s value proposition is actually stronger post virus than it was before”, said Cassel.

Weight Watchers stock the week of March 19

The wellness company has had its stock rise 17% last week while the S&P only gained 11%. Weight Watchers can be an affordable option for investors who want to cash in on wellness.

Weight Watchers stock is a bargain for investors

The wellness company is undervalued and is selling for only 8 times its earnings. The stock will likely continue to rebound and be a great pick for value investing. Unlike other value stocks, Weight Watchers stock doesn’t pay a dividend. However, Weight Watchers stock is a value stock that investors can choose if they want a stock that is capitalizing on the wellness trend.

Value stocks are safe stocks in volatile stock market

Value investing may seem boring, but can pay off in the long run. In this time of economic instability, value investing can be a great way for investors to build a slow and steady growth in their portfolios. Growth stocks and cryptocurrencies may get more attention, but value stocks can stand the test of time. For investors taking a long-term view and that can exercise patience, value stocks are a safer option.

Diversification is key in value investing

Even though many value stocks are in similar established fields, there is still room for diversification. Value investing can consist of investing in life insurance stocks, bank stocks, and even tobacco stocks. Altria (NYSE:MO) is a long-established stock that offers a strong dividend. By diversifying a value stock portfolio, investors can get bigger returns in their investments. If the bank industry is struggling, diversification in another field can help create a healthier portfolio.

Conduct research before investing in value stocks

Research is important to find the best stock for investors. By using TradingSim’s analysis and trading simulations, investors can find the best value stocks for them. Investors can take advice from Warren Buffett, but ultimately have to decide for themselves what value stocks are best for them. With TradingSim’s charts and guidance, value investing can be rewarding- and maybe even profitable.

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