The word capitulate means to give up or stop trying. It’s easy to see how this would apply to trading, especially considering the current market...
Being a new investor can be daunting. However, if if you invest on your own, with an early investment, you can build a healthy portfolio. This TradingSim article will help guide investors that want to pick stocks on their own. This article will also have the top five stocks that investors can pick when they invest on their own.
In this volatile bear market and “corona-conomy”, you may be hesitant to invest on your own. If experienced financial planners can lose money on Wall Street, then many inexperienced investors may feel intimidated.
However, now may be the best time to invest on your own. With many stock prices falling, there is an opportunity to buy stocks at more affordable prices. You don’t have to be an experienced day trader to invest on your own. It can be beneficial to invest on your own.
When people invest on their own, they can start with a small amount like $50. You can also put in larger amounts like $1,000. Financial planner Jeff Rose notes that investing on your own can pay off if you act early.
“Opportunity cost is that unseen payoff you miss out on because you’re busy doing something else,” said Rose.
If you have a 401k retirement account, you’re already investing on your own. The retirement accounts put your money into are invested in stocks and ETFs that develop more income. The 401ks are tax-free as long as you don’t make early withdrawals.
Financial expert Jeff Rose also spoke about the importance of investing in 401k retirement accounts.
“You can think of it as the answer to the question, how much more would I be ahead if I chose a different path? In my own young life, the biggest opportunity cost — or financial mistake — was not opening a Roth IRA when I was 18 or 19 years old,” said Rose.
401ks are a great way to start investing on your own with an arranged list of stocks, ETFs, and mutual funds.
In addition to 401ks, direct stock plans are an option to invest on your own. Direct stock purchase plans allow investors to purchase stock directly from a company. Many major companies like Exxon Mobil offer direct stock plans.
Investors can buy stocks once or on an automatic recurring basis through a transfer agent. The transfer agent buy or sell shares on a set basis on behalf of the company. The agent also tracks the records and transactions for the investor.
When investors invest a fixed amount every quarter or so, they are dollar-cost average investing stocks. When dollar-cost averaging, investors buy more shares when the price of a stock is low. Conversely, they buy fewer shares when a stock’s price rises.
Direct stock purchase plan fees vary according to the company. There may be initial setup account fees and automatic investment fees as well. In addition to those fees, you also have to pay fees when you sell stock shares as well. When investing on your own, you can directly buy shares of companies through stock purchase plans.
If you want to trade on your own, dividend reinvestment plans (DRIPs) are another investment option. When you invest in stocks that pay dividends through retirement plans, you can take the money from that payment and reinvest in the stock market. Once you sign an agreement with a company, you can reinvest the dividends to earn more money.
DRIPs can lead to compounding returns if you take dividends to reinvest them. If you keep reinvesting your dividends, you can increase your profits over the long-term instead of taking cash in the short-term. Some benefits are commission-free transactions and discounted stock share prices.
For example, if you buy Ford(NYSE:F) stock at $5 a share, you can get a dividend of $0.50. In this example, Ford’s stock will rise 10% and the dividend will rise $0.05% every year.
If you invest $20,000 when the stock price is $20, you can end up with 1,000 shares. At the end of the first year of investment, your dividend payout would be $500. If you reinvest that sum, after three years, you can increase your investment from $20,000 to $28,471.
If you don’t want to use financial advisors but still want help picking stocks, you can still use robo-advisors to help with these plans. Robo-advisors are digital programs like Betterment and Wealthfront that help investors pick stocks. After you answer a questionnaire, the automated investment manager chooses stocks and ETFs that match your financial goals. They can also rebalance your portfolio
Investing on your own can be more affordable with robo-advisors. While human financial advisors can charge a 1% expense fee for trades, robo-advisors can charge less. Robo-advisor fees can be just 0.25%.
Robo-advisors can lower tax liabilities for investing on your own. Robo-advisors can help investors write off tax losses as well. Through tax-loss harvesting, you can sell a losing investment, general capital losses, and claim those losses to get a tax credit.
Rees Mason is a Merrill Lynch wealth advisor. She noted that robo-advisors can be combined with financial analysts’ advice to invest.
“The younger generation demands a higher level of value and want to understand exactly what they’re paying for. I don’t worry about robo-advisors because technology is used in tandem with human advice. Technology can make us more efficient and it’s great for people when they’re first getting started,” said Mason.
When investing on your own, robo-advisors can be a good guide.
While investing in a 401k is helpful, the stocks aren’t always your choice. If you invest on your own, you can have more control over your stock picks. You can also choose stocks that you are following closely. For example, if you’re a follower of Apple’s products, investing in Apple stock can be a good choice for investing on your own.
Investing on your own can help you save money. Stockbrokers and brokerage firms are very expensive. If you invest on your own, you can save thousands of dollars a year in brokerage fees.
In addition to saving you money, investing on your own gives you more hands-on financial knowledge. By studying a company’s quarterly revenue reports, balance sheets, and financial analysis blogs like TradingSim, you can get more information on how stocks are performing before you invest.
While investing on your own, there are downsides to investing on your own as well. Monitoring the stock market takes up hours of time and you may not have that much time to watch Wall Street.
In addition to not having time for active investing, investing on your own can lead to more emotional investing as well. Because you’re more heavily invested and not passively invested, you’re more likely to trade stocks more recklessly. Panic buying and selling based on Wall Street volatility can hurt your portfolio.
Financial planners can add objective advice if you need extra help and guidance. However, investing on your own can be beneficial if you have enough discipline and time.
When you’re investing on your own, you have to consider your financial goals. If you want to purchase a home, you will have to be disciplined and invest a greater sum of money. However, if you want to just make short-term gains, you can invest a smaller amount of money.
Considering your financial goals are also pivotal if you want to make the most of your money. If you want to have money for retirement in the future or have a shorter-term goal, investing on your own is crucial if you want to meet your financial goals.
When you invest on your own, there are many precautions to take. Here are just a few things that you need to remember when you trade stocks by yourself.
The Robinhood app has made it even easier to invest on your own. Noah Whinston, a Robinhood trader, said that the app makes trading more interesting.
“Robinhood feels very gamified. The act of trading stocks was boring for a really long time, and even today, if you do it through Charles Schwab, it would seem boring. Robinhood makes it feel frictionless and fun and easy, and it can be very, very addicting,” said Whinston.
Investing on your own can be advantageous if you have available funds to risk. The trading app has democratized trading and made it much easier to start trading stocks.
Barstool Sports founder Dave Portnoy has made day trading more popular with his flamboyant social media posts. He touts his success as a trader. Portnoy also says he’s a better investor than legendary investor Warren Buffett.
“I’m not saying I had a better career. … He’s one of the best ever to do it,” he said. “I’m the new breed. I’m the new generation. There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact,” said Portnoy.
Many traders say that with trading apps, they can find success. While investing on your own, you should proceed with caution.
While Portnoy and other traders say that investing on their own is a fun game, there are downsides to investing on the Robinhood app as well. Tyler Grant, a Robinhood user, says Portnoy has helped some new traders get into investments.
“His legacy is going to be the fact that he got people who realized they can get in the game and get in the game really cheaply,” said Grant.
However, Portnoy recently lost $220,000 on the E-Trade trading app. His rant about the loss on social media got him banned from the site.
“I’m down $220k now! Now I think I have to bankrupt E-Trade. I think I have a vendetta against E-Trade,” said Portnoy.
Eric Balchunas, a financial expert, noted that low-cost index funds are a good option for investing on your own.
“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds,” said Balchunas. “More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads.
Barclays analyst Ryan Preclaw said Robinhood’s returns aren’t as perfect as they seem.
“More Robinhood customers moving into a stock has corresponded to lower returns, rather than higher. “And while it’s true that many high-return stocks have had a substantial increase in retail ownership, low-return stocks have also had a big increase.”
While Portnoy and other day traders are touting their gains in the stock market, financial experts advise caution. Lauren Simmons, a former stock trader at the New York Stock Exchange, says investors should make sure they meet certain criteria before they invest on their own.
“It’s not just about investing in the market, but what is your wealth confidence overall? Do you have money in retirement? Do you have an emergency fund?” asked Simmons.
She also advises independent traders to ask more questions about their financial stability before they invest.
“Do you have savings? Credit card debt? Student loan debt? If you have any of the above, conversations about the stock market shouldn’t be coming out of your mouth. We are reaching historic highs again, and we are in a global pandemic,” said Simmons.
Even though many day traders are discounting the expertise of expert investors like Warren Buffett, that may not be a wise choice. Eric Balchunas, a financial analyst with Bloomberg News, noted that low-risk investments may be best if you’re investing on your own.
“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds. More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads,” said Balchunas.
Balchunas also wants traders to understand that they will learn about how to trade stocks from trial and error.
“And it’s very likely Robinhood’s day traders will arrive at the same conclusion at some point. Whether it ends in laughter or tears, it will be an education they can use for the rest of their lives,” said Balchunas.
When you’re investing on your own, conducting research, assessing your financial needs, and choosing low-risk options may be your best choice.
These five stocks are a top choice if you want to invest on your own.
Microsoft(NASDAQ:MSFT) is a value stock that is a relatively stable choice for investing on your own. The established tech stock that has performed well during the COVID-19 crisis. Because of Microsoft’s cloud services, the corporation had a better-than-expected Q3 2020. Microsoft CEO Satya Nadalla spoke about the positive results.
“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security – we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything,” said Nadella.
“Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” added Nadella.
Amy Hood is chief financial officer at Microsoft. In a statement, she spoke about the positive revenue report.
“In this dynamic environment, our sales teams and partners executed a solid third quarter, with Commercial Cloud revenue-generating $13.3 billion, up 39% year over year,” said Hood.
“We remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth,” added Hood.
In its most recent Q4 2020 earnings report, Microsoft continued to have strong revenue. Nadella spoke about Microsoft’s Q4 2020 positive results.
“We delivered record results this fiscal year, powered by our commercial cloud which surpassed $50 billion in revenue for the first time, up 36% year over year. The last five months have made it very clear that digital tech intensity is key to business resilience,” said Nadella.
If you’re investing on your own and want an expert analysis to help make a decision, many are bullish on Microsoft stock. Dan Ives from Wedbush praised Nadella’s decision to close Microsoft stores to focus on its cloud technology.
“This is a tough, but smart strategic decision for (CEO Satya) Nadella & Co. to make at this point. The physical stores generated negligible retail revenue for MSFT(Microsoft) and ultimately everything was moving more and more towards the digital channels over the last few years,” said Ives.
“That said, in this COVID-19 environment this was the right time for Redmond to rip the band-aid off and close the stores strategically speaking,” added Ives.
If you’re investing on your own, it’s key to pick an established stock that advances with new tech. When investing on your own, traders can buy Microsoft stock.
Google(NASDAQ: GOOG) parent Alphabet is another stock that is a solid choice if you’re investing on your own. The search engine giant has a well-performing stock. Google’s Q1 2020 revenue totaled $41 million. Google CEO Sundar Pichai noted that the tech giant’s stock is performing well because of its wide usage during the COVID-19 pandemic. In a statement, Pichai touted its growth in a statement.
“Given the depth of the challenges so many are facing, it’s a huge privilege to be able to help at this time. People are relying on Google’s services more than ever, and we’ve marshaled our resources and product development in this urgent moment,” said Pichai.
Google’s ownership of YouTube also makes the stock a top stock if you want to invest on your own. Pichai noted that the video-sharing site added to Google’s profits.
“We are now adding roughly 3 million new users each day and have seen a 30-fold increase in usage since January. There are now over 100 million daily Meet meeting participants,” said Pichai.
With Google’s strong Q1 performance, many financial analysts see Google stock as a buy if you want to invest on your own.
Canaccord Genuity analyst Maria Ripps noted that Google stock is a buy because of its cloud computing growth.
“We see Google likely benefiting as the pandemic could be a tailwind for ad budgets shifting online, momentum in Google Cloud supporting consolidated growth, and Other Bets providing optionality for patient investors,” said Ripps.
In her note to clients, she also noted that Google is a buy because of its strong balance sheet.
“This, coupled with prudent expense management, a strong balance sheet, and share repurchases, gives us comfort around Alphabet’s ability to successfully withstand this near-term disruption,” wrote Ripps.
If you want to invest on your own, Google is a strong stock with impressive returns.
Apple (NASDAQ:AAPL) stock is another good choice if you want to invest on your own. The tech giant had a successful Q2 2020 with revenue of $58.3 billion. That’s a 1% increase from a year ago.
Apple’s CFO, Luca Maestri, noted that Apple’s robust device sales helped drive the company’s profits.
“Our active installed base of devices reached an all-time high in all of our geographic segments and all major product categories. We also generated operating cash flow of $13.3 billion during the quarter, up $2.2 billion over a year ago,” said Maestri.
Apple also had strong guidance for its future earnings.
“We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy,” said Maestri.
Because of Apple’s strong Wearable device sales and positive guidance for Q3 2020, many financial experts day the stock is good pick if you’re investing on your own.
Morgan Stanley lead analyst Katy Huberty thinks that Apple stock is a buy if you want to invest on your own. She wrote in a note to clients that Apple has diverse revenue streams beyond iPhones that will help drive the corporation’s growth.
“Investors are coming to realize that Apple may not be as dependent on significant iPhone cycles to sustain growth as they once thought, and that the ecosystem Apple has created is differentiated and worthy of a platform valuation multiple,” wrote Huberty.
Amana Mutual Funds agrees that Apple stock will continue to climb. The fund company notes even though iPhone sales are down, Apple’s successful Services division makes the stock a buy.
“Despite slowing iPhone sales, Apple’s services businesses have developed into meaningful contributors to revenue, with highly attractive margins,” wrote Amana Mutual Funds in a note to clients.
If you want to invest on your own, Apple is a stable stock that will offer steady returns.
Pharmaceutical stocks are great options if you want to invest on your own. The corporation’s stock surged after announcing a $2 billion deal with the government to produce a COVID-19 vaccine. Pfizer will deliver 100 million doses of the vaccine for free to patients if the vaccine is approved. Health and Human Services Secretary Alex Azar spoke about the Operation Warp Speed program.
“Through Operation Warp Speed, we are assembling a portfolio of vaccines to increase the odds that the American people will have at least one safe, effective vaccine as soon as the end of this year,” said Azar in a statement.
“Depending on success in clinical trials, today’s agreement will enable the delivery of approximately 100 million doses of vaccines being developed by Pfizer and BioNTech,” added Azar.
In addition to this deal, Pfizer profits increased in its last earnings report. Despite the coronavirus crisis, the corporation saw growth in its biopharmaceutical division.
“Our strong performance in the first quarter highlights the resiliency of our business even during the most challenging times. The Biopharma business grew 12% operationally, driven by strong performances from many key brands,” said Pfizer in a statement.
Pfizer had an optimistic outlook for the remainder of 2020. Chief financial officer Frank D’Amelio spoke about the guidance for the rest of the year.
“Despite the impact of COVID-19, 2020 is still expected to be a transformational year for Pfizer. Following the pending close of the Upjohn-Mylan transaction, New Pfizer will be positioned to deliver revenue and adjusted diluted EPS (earnings per share) growth that is expected to be among the industry leaders,” said D’Amelio.
“New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” added D’Amelio.
Mizuho Securities analyst Vamil Divan rated Pfizer stock as a top choice if you want to invest on your own. Divan noted in a letter to clients that investors were hopeful about the potential Pfizer COVID-19 vaccine.
“We had several discussions with investors today on the back of the initial data, with much of the discussion focused on the commercial potential for a successful SARS-CoV-2 vaccine, ” wrote Divan.
“The company has mentioned that it will look to price a potential vaccine in line with other commercially-available vaccines, suggesting to us a potential blockbuster commercial opportunity, depending on the vaccine’s clinical profile and the ultimate competitive landscape,” added Divan.
If you want to invest on your own, Pfizer is a top choice for traders.
When people were quarantined, Netflix views-and shares- rose. The streaming giant’s stock would be a good choice if you want to invest on your own. In its Q2 2020 earnings report, Netflix reported an increase in revenue to $6.15 billion. The company’s chief financial officer, Spence Neumann, spoke about the growth in Netflix subscribers during the worldwide shutdown.
“We have to look at it in the context of what just happened in Q2. And we just added 10 million members, which is the largest growth we’ve ever had in a second quarter,” said Neumann.
Neumann also noted that the growth in subscriber numbers comes from international members.
“So it’s very broad-based, and you can see that these members are coming in from everywhere in the world, a few million each in APAC[ Asian and Pacific American countries] and EMEA[ Europe, the Middle East, and Africa] and U.K. and then a couple of million in Lat Am[Latin America]”.
With a mostly positive revenue report, Morgan Stanley’s Benjamin Swinburne says that Netflix should do well once it increases its production overseas for the company’s programming.
“Finally, with the majority of Netflix’s production occurring outside the U.S. combined with massive efforts to re-imagine production in a post-COVID world and selectively acquiring third party content, 2021 original deliveries should be higher than 2020 for the year and in each individual quarter,” wrote Swinburne in a note to clients.
Swinburne also wrote in a note to clients that the second half of 2020 will be good for Netflix with its high-profile available content.
“The first half of 2021 might face tough comparisons, but the second half should bring a stronger content slate than what will be seen this year, ” added Swinburne.
In addition to Morgan Stanley, Jefferies analyst Alex Giaimo also recommends Netflix stock if you want to invest on your own. In a note to clients, he touts the company’s subscriber growth.
“While the stock ran a bit faster than near-term fundamentals could support, let’s not lose sight of the fact that Netflix just added ~26 million subscribers in six months,” wrote Giaimo.
Giaimo also notes that Netflix’s subscriber growth may slow down when live sports returns. However, the company’s positive cash flow makes the the stock a good pick for investors.
“Subscriber growth will slow significantly in 2H20[the second half of 2020], but cash in the door now is better than cash in the door three months from now,” wrote Giaimo.
Because of Netflix’s increased viewership and cash flow, the streaming company’s stock is a top choice for investing on your own.
If you’re investing on your own, you can overcome your fears and doubts to perform well in the stock market. You can simulate trades on TradingSim to perfect your strategy or read TradingSim blogs to get investing insight. With patience, research, and maybe even help from other investors, you can find the best stocks for you.