Let’s say you received a letter from the IRS with a check for $100, your tax refund.
So you want to invest that $100 now, but you are a beginner investor with limited knowledge of the stock market. If you are not sure what your next step will be, there are many options you can choose from.
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GOBankingRates has compiled a list of investment vehicles that could help beginner investors grow their portfolios.
Index funds
If you have a small investment, such as $100, it may be safer to put your money into an index fund rather than investing in stocks. Index funds are a low-risk investment and offer an easy way for beginners to gain an understanding of the stock market.
“Index funds are much easier than betting on individual companies, especially for beginners with a small budget, because they spread the risk (and capital) across a large number of companies. You’re not at the mercy of the fate of one company,” says Armin Arajan, CPA and fractional CFO at Arajan Group.
Index funds allow novice investors to dip their toes into the world of investing without taking on the risk of putting their money into companies whose future performance is unknown.
Index funds are a passive form of investment and are less adventurous than watching the market and investing based on trends, but they are a strategic way to invest.
If you don’t want to invest in index funds, you can instead invest $100 in stocks, especially stocks of blue-chip companies, which can be beneficial for beginner investors.
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Blue Chip
If you choose to invest as an individual, it’s best to look for companies that are financially stable and can weather volatile economic storms.
“For me, investing is about taking risks, but only calculated risks,” said Diego Acala, owner of Alpha Stock Labs, a firm that specializes in investing. “If you’re making your first investment, you should invest in big companies.”
Blue chip companies, large businesses with proven stability, are probably one of the best options for new investors.
There are many blue-chip companies that are potential options for beginner investors, and here are three blue-chip stocks across different industries that are suitable for beginners.
Berkshire Hathaway
Berkshire Hathaway, the multinational holding company led by arguably one of the most prolific investors in history, Warren Buffett, is a solid, blue-chip stock that beginner investors can consider adding to their portfolio.
A company like Berkshire Hathaway, which operates across many industries around the world, will likely remain stable for a long time.
Pepsi
A global leader in both the beverage and snack industries, Pepsi is another great stock to start with with just $100. Pepsi’s brand portfolio includes snack brands such as Tostito’s and Lay’s, making it a safe investment option that covers multiple industries.
Microsoft
Microsoft may be best known for its wide range of products in the technology sector, including computers, operating systems, and ownership of the major gaming company and social media site LinkedIn.
Novice investors may look to Microsoft for its stability and leadership in the technology industry, and as the company continues to develop innovative technology, this blue-chip stock is likely to grow.
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This article originally appeared on GOBankingRates.com: I’m an Investment Expert: 3 Stocks for Beginners to Invest in with Your $100 Tax Refund
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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