Stock Market for Beginners: Tips and Tricks to Choosing the Best Stock

Selecting the best stocks to invest in is a difficult task, made more complicated by personal variables like risk tolerance, profit targets, and how much a person has to invest. 
We discuss the stock market for beginners, different types of stock and various ways in which they can be purchased, the importance of considering risk when investing, and some brokers offering registration rewards. Let's take a look.

Different Types of Stock

One of the first hurdles in the stock market for beginners is choosing which types of stock they want to purchase. There are several different kinds, each with unique characteristics. Some of the most common and widely traded stock types include:

Blue-Chip Stock

Blue-chip stocks are larger-than-average companies with a lengthy and successful track record. Some examples include Microsoft Corporation (MSFT), Apple Inc (AAPL), and Walmart (WMT).

Blue-chip stocks are generally more stable and, as such, can be great stocks to buy for beginners as they involve less risk. However, their value can still be heavily impacted by economic factors like inflation or global events like war.

Moreover, blue-chip companies typically have less room for growth than companies with a smaller market capitalization, reducing average potential returns.

Dividend Stock

Dividend-paying stocks are a special type of asset that provides holders with consistent income. They are some of the best stocks for newbies and experienced traders as they pay a portion of the company's profits to holders, affording people a certain amount of revenue per share without selling.

When investing in stocks that pay dividends, it's essential to check how frequent payouts are (usually quarterly or annually) and the yield offered (ranges from around 0.5% to 10% on average). Costco Wholesale (COST) and the Coca-Cola Company (KO) are popular dividend stocks.

It can be easy to get drawn in and base your investments solely on dividend yield. However, dividends equate to only a fraction of a stock's value, so it's important to keep fundamentals like annual growth rates in mind, too.

Penny Stock

Penny stocks are low-value companies with a price per share of under $5. They are considered high-risk, high-reward investments, often lack a consistent track record, and are highly speculative.

Penny stocks are popular with traders aiming to make significant returns. However, as the companies tend to be unproven and without a consistent track record, they can experience substantial drawdowns, which can lead to significant losses.

While blue-chip and dividend stocks are often well-known companies that have traded for years, penny stocks are often unknown companies that are venturing into emerging sectors like AI. Some popular penny stocks include Ocean Power Technologies, Inc. (OPTT) and Bit Digital (BTBT).

ESG Stock

Younger investors consider Environmental Social Governance (ESG) companies to be some of the best stocks to invest in right now. ESG stocks consist of companies that focus on the environment, ethics, and social justice. ESG stocks also focus on green initiatives more than the average company.

However, some companies skew data regarding ESG efforts to draw in investors, so performing ample research is crucial before deciding whether to invest in ESG stocks.

Growth Stock

Growth stocks grow at a faster rate than the market average and can be excellent choices for people getting into stocks. They often do not offer dividends and are suited to those looking to grow their portfolio with minimal management. Examples of growth stocks in recent years include Tesla Inc. (TSLA), Amazon Inc. (AMZN), and Meta Platforms (META).

That said, just because a company has performed well in the past doesn't mean it will continue doing so. So, while a stock may appreciate quickly, its growth rate could fall, leading to poorer-than-expected returns.

Different Options for Purchasing Stock

There are a few different ways for people to buy into stocks. Two of the most popular options are purchasing in an individual company or investing in an index fund containing a bundle of companies.

Purchasing an individual stock can benefit people who believe in a particular company and don't want exposure to the broader sector. However, some consider index funds the best way to invest in stocks for beginners due to the lower risk and guaranteed diversification.

Individual Stock

When buying into stocks, it's best to take care during the selection process and to only buy stock in companies you can wrap your head around.

Investing in stocks of an individual company is akin to purchasing a small percentage of ownership in a business. Your investment will rise or fall in value based on the company's performance. Let's look at some good stocks to buy into right now.

Apple (AAPL)

Apple is the largest company in the world, with a market capitalization of over $3.6 trillion at the time of writing. It's a global technology company and is best known for consumer products and software like the iPhone, MacBook, and App Store.

Apple is considered a blue-chip and growth stock due to its consistent outpacing of the market in terms of returns. However, the company also falls under the category of dividend stock as Apple pays shareholders an annual dividend of 0.42%, equal to around $1.

Nvidia (NVDA)

Nvidia is one of the best stocks to buy now in terms of recent performance. The company produces consumer and enterprise Graphics Processing Units (GPUs) for gaming, visual effects, and Artificial Intelligence (AI) usage. It's up 198.04% over one year, largely due to its production of AI chips.

Nvidia falls into multiple stock categories: dividend, blue-chip, and growth. Due to its carving out a well-defined space in the rapidly growing AI sector, Nvidia is considered by many to be one of the top 10 stocks to invest in right now.

Index Funds

Index funds enable people to invest in a variety of assets without opening positions for individual companies. They typically mirror a particular fund or market segment, like AI or the S&P 500.

In an index fund, the fund manager purchases the underlying stocks using money investors provide. Exchange Traded Funds (ETFs) are another type of fund containing a bundle of assets, but they can be traded directly on an exchange, while index funds must be provided directly by the fund company.

iShares Core S&P 500 (IVV)

The iShares Core S&P 500 is an example of an index fund. It is managed by iShares manages and contains the top 500 US-listed companies weighted proportionately to market capitalisation. The companies making up the most significant percentage of the iShares Core S&P are Apple, Nvidia, Microsoft, and Amazon.

A challenging aspect of investing is diversification, yet it's highly important for risk management. As such, some consider index funds to be one of the best ways to invest in the stock market for beginners as they offer simplicity and intrinsic diversification.

Vanguard Total Stock Market (VTI)

The Vanguard Total Stock Market ETF is similar to the S&P 500 but tracks the performance of every company listed in the US stock market instead of solely the top 500. While the fund comprises businesses of all sizes, it still affords greater weighting to larger companies.

As the Vanguard Total Stock Market ETF accounts for every listed company, it's a solid measure of the market's performance. As such, it can be one of the best stocks to invest in for people who don't want exposure to a specific company or sector. However, its performance can vary substantially.

Which is the Right Choice?

When you learn how to invest in the stock market, you'll understand that there is no single best stock to purchase now. Instead, the best company to invest in will be one that matches your risk tolerance and that you understand and believe in.

When selecting which stocks to buy now, considering how much risk you want to take on is crucial. For instance, younger people generally prefer to invest small sums prefer high-risk, high-reward strategies, while older people often invest their retirement funds and prefer low-risk, low-reward assets.

Low Risk

Low-risk assets have a strong track record, offer consistent returns, provide resilience during economic downturns, and experience minimal drawdowns. As such, low-risk assets are suited to people trying to preserve their wealth and grow their portfolio size in a slow but safe manner.

The S&P 500 and Berkshire Hathaway Inc. (BRK.B) are two good stocks to buy now. Both are well-diversified and offer consistent growth with little volatility.

• The S&P 500 comprises the top 500 largest US companies by market capitalisation. It's one of the best stocks for beginners as it encompasses a broad range of sectors and has provided consistent but low returns over many years.
• Berkshire Hathaway Inc. is a company owned by Warren Buffett. In contrast to most other companies, Berkshire Hathaway is effectively an investment vehicle, owning many other brands and stocks, making it well-diversified and low-risk but difficult to understand for beginners.

Medium Risk

Investors wishing to make a moderate profit without taking on too much additional risk will find medium-risk assets well-suited to their needs. These stocks may experience some volatility but offer more significant returns potential to investors.

• The NASDAQ 100 Technology Sector Index is a great choice as it maintains diversification while providing exposure to the technology sector, which can experience large price movements, but tech companies can be quite volatile.
• Costco Wholesale is a strong choice for people wishing to invest in a single company. As a big box retailer, it does well during periods of hardship. Moreover, its dividend yield provides regular income. However, Costco faces competition from E-commerce stores, increasing risk.

High Risk

High-risk stocks are generally best suited to those who can afford to take on more liability for the prospect of greater returns. These companies are usually in emerging markets, are more concentrated, and often lack a lengthy track record.

• The iShares MSCI Emerging Markets Small-Cap ETF comprises small market capitalisation companies in emerging industries. As such, it offers high potential rewards at the expense of volatility.
• MicroStrategy Inc. is another example of a high-risk stock. The company creates business intelligence solutions, but its founder, Michael Saylor, leverages it to buy Bitcoin. The company holds around 402,100 BTC, meaning its performance is closely tied to the crypto market.

Best Places to Start Investing in Stocks

Selecting a broker is one of the most crucial tasks for people learning how to invest in stocks. Choosing a platform offering a good variety of assets, charting tools, and low fees is essential but can be time-consuming, especially for stock market newbies.

However, STIC Cashback has partnered with leading brokers to create a solution. Investors can be rewarded for registering with a selection of brokers. They can put the reward toward their first stock purchase or withdraw it as crypto or cash.

STIC Cashback

To take advantage of STIC Cashback's promotions, you will need to register for an account by providing an email, password, nationality, and phone number.

You can then head to the 'Broker Partners' section, choose a platform to sign up for (consider fees, minimum deposits, available stocks, etc.), and click 'Register.'

The 'New registration' screen will have a link to your chosen broker. Complete the registration process, including verification, and return to the 'New registration' screen to register your new trading account and earn your reward.

Some of STIC Cashback's top-rated brokers offering sign-up rewards include firms such as FXGT, FinPros, and FxPros.

Summary

Although some people feel that investing is out of their reach, it's accessible to everyone. We've explained the stock market for beginners, discussed different types of stock, reviewed various risk levels, and shared some of the best stocks to invest in.

However, it's crucial to keep in mind that there is no single best investment for everyone. You should tailor your investing decisions to your personal preferences and risk tolerance. There are thousands of stocks and indexes on the market, so you'll always be able to find one that matches your requirements.