Best stocks for beginners of July 2024
Updated 9:00 a.m. UTC July 4, 2024
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The best stocks for beginners in 2024 are companies with recognizable brands and products that are consistently profitable and generate steady or growing revenue.
If you’re new to investing, it’s best to focus on buying high-quality stocks of recognizable companies with sound financial fundamentals and easy-to-understand business models.
We selected the best stocks for beginners based on upside potential, positive net income for at least four of the past five years, easy-to-understand business models, market capitalizations, earning potential and “buy” consensus recommendations.
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Best stock for beginners
- Broadcom (AVGO).
- JPMorgan Chase (JPM).
- UnitedHealth (UNH).
- Comcast (CMCSA).
- Bristol-Myers Squibb Co. (BMY).
Compare the best stocks for beginners
Methodology
The best stocks for beginners included above all trade on a major U.S. stock exchange and meet the following criteria:
- Consensus analyst recommendation of “buy.” A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
- A market capitalization of at least $100 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a greater market cap. Small and mid-cap companies with market capitalizations typically either don’t have a leadership position in their particular market or don’t operate in industries that are large enough or that have enough long-term growth potential to generate market-leading returns for investors.
- An Altimeter overall grade of at least a B. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top percentile of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
- Positive net income in at least four of the past five years. The best companies are consistently profitable, meaning new investors don’t have to track the company’s financial performance too closely. Screening for profitability in at least four of the past five years doesn’t penalize companies that were temporarily unprofitable during COVID-19 economic shutdowns in 2020.
- Easy-to-understand business model. There are plenty of excellent companies out there in industries such as cutting-edge technology, advanced biotechnology, complex finance and other specialty fields. Unless you have personal expertise in any of these areas, a beginner should stick with stocks that have relatively easy business models to understand.
Why other stocks didn’t make the cut
Plenty of stocks out there will produce market-leading returns over the long term but may not be the best investments for beginners.
New investors shouldn’t rush into investing without preparation or a plan.
Owen Murray, director of investments for Horizon Wealth Advisors, says new investors should first consider factors like risk tolerance and time horizon. Beginners shouldn’t hesitate to get help as well.
“In my opinion, a significant risk inexperienced investors face is their own unrealistic short-term expectations that their investments should always make money. Having a long-term perspective is key,” Murray says.
If a company has a complicated business model that is difficult to understand, a novice investor may not know how to properly interpret the company’s financial results and the health of its balance sheet. Many other stocks with significant upside also come with a high risk of failure, making them inappropriate investments for new investors looking to build a long-term nest egg.
The best stocks for beginners are companies with recognizable brands and products that are consistently profitable and generate steady or growing revenue.
Final verdict
New investors should focus on high-quality stocks of companies that have sound financial fundamentals and easy-to-understand business models.
Among the stocks selected for best stocks for beginners, semiconductor company Broadcom ticks a lot of boxes. It has a strong valuation, a reasonable price-to-earnings ratio and is relatively low risk.
Broadcom has a strong financial performance that is also well-positioned for further growth.
Frequently asked questions (FAQs)
The booming popularity of commission-free trading apps like Robinhood (HOOD) has made stock trading more accessible than ever to new investors. With just a little bit of extra cash, anyone can download an app, open an online brokerage account and invest in billion-dollar companies in a matter of minutes.
Many commission-free brokers offer trading accounts with no account minimums that allow investors to trade fractional shares of stocks. You can start investing with as little as a dollar by opening up an account with brokers such as Robinhood, Fidelity or InteractiveBrokers.
Investors should avoid extremely volatile stocks, companies that are not listed on a major exchange, companies with complex business models or penny stocks (stocks that trade for less than $5 per share). The best stocks for beginners are high-quality stocks of companies that have recognizable brands and products and sound financial fundamentals.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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