21 Jun 2021
[Top 3] What are the top three stocks you would recommend for a first-time investor to look into?
Hi everyone I am a fresh grad (no debt, enough emergency savings) looking to buy my very first stock. I already have some money in Stashaway but would like to start doing individual stock picking. Which companies would you recommend I look into? Thank you!
It's a great idea to get your feet wet - buying your first stock makes you not just financially invested but emotionally invested too and will encourage you to learn more. In which case, I would recommend buying a small amount of any company that you like and are interested in. What are the products and services that you value most in your life? Who makes them?
That said, if you want to accumulate a large position over the long term or even profit from short trades, then it may be risky to keep spending money on your first whim and you would be best to regularly buy into (i.e. "dollar cost average") some broad exposure product like market or industry ETFs, as others have recommended. That way, you don't need to be great at picking stocks right away.
If you do want to learn about individual stock picking, then this has been my approach:
1) Start with a goal, e.g.
Be receiving a regular income of X within Y years
Accumulate assets worth X in Y years
Grow my savings by X% over Y years
2) Form a strategy to try and achieve the goal
% allocations between growth stocks and income (i.e. dividend-paying) stocks
% geographical allocations
% sector allocations
% asset allocations
% size allocations
% currency allocations
3) Execute the strategy
Select criteria against which to evaluate stocks that fit with your strategy
Learn to use a screener to find stocks
Learn to evaluate stocks based on your criteria and using tools like Yahoo Finance, MacroTrends, etc. My approach is "what question should I ask about this kind of company to check if it fits my strategy?" e.g.
Is revenue growing? check quarterly revenue charts
Are earnings growing? check quarterly net income charts
Is equity growing? check shares outstanding and shareholder equity charts
Is cashflow growing? check price to free cashflow trends
Are dividend payments sustained and growing? check dividend history and dividend yield trends
Is the stock price growing? check stock price chart
How is the level of debt? check debt-to-equity chart
Can the company cover its debt? check EBITDA chart
How is the profitability? check assets vs. liabilities, ROE/ROA/ROI chart, check net margin trend, check earnings-per-share (EPS) trend
How does all of the above compare to industry averages?
What is the fair value today? Do a DCF calculation
If the answers are good, buy it
If the answers are really good, keep buying it
Regularly check back in to re-evaluate and make decisions based on the relevant data
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Hi there anon, you can check out our article here that covers 3 easy-to-understand beginner stocks in the US market. The stocks are Adobe, Apple, and Autodesk.
That article also has a link to another piece covering 3 beginner Singapore stocks if you wish to invest locally.
Hope this helps and all the best in your investing journey!
I second Maximilian's recommendation on Square. Its Cash App is a good play on the booming...
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