In this piece, we will take a look at the 10 best stocks for beginners with little money.
“In my view, for most people, the best thing to do is own the S&P 500 index fund,” believes Warren Buffett of Berkshire Hathaway, who is the most successful investor not only in our time but also in human history. Buffett made the remarks at his investment firm Berkshire Hathaway’s 2020 Annual Meeting, but it wasn’t the first time he shared similar thoughts. While most investment advisors and internet stock analysts are likely to boast about ‘chasing the alpha,’ for the Oracle of Omaha, who is currently worth $144.5 billion excluding his charitable donations over the years, most people are better off tracking the S&P.
Buffett has, in fact, held this opinion for years. Speaking to CNBC in 2017, he reiterated that “consistently” buying an index fund linked to the flagship S&P index is “the thing that makes the most sense practically all of the time.” Buffett added that an investor should persist even during the bad times, when the “temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something.” Do not give in, says the Oracle, and “just keep buying” since “American business is going to do fine over time, so you know the investment universe is going to do very well.”
Yet, there’s another temptation that especially beginners to the stock market have to face. This is the rush to ‘alpha’ and by extension, wealth and riches. But according to Buffett, the “trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way,” since “you do not want to ever get the impression that you can pick stocks.” This false belief carries the risk of making a beginner believe that they have an edge over others, while the reality “just doesn’t work that way,” believes Buffett.
However, just because you’re a beginner with little money, doesn’t mean you can’t make it big. Wall Street, despite its flaws, has also produced titans of the investing world who started out with little to nothing. One of the best examples of this fact is Ken Fisher of Fisher Investments. Fisher’s childhood didn’t make him a stranger to Wall Street as his father Philip Fisher is one of the most consequential figures in Wall Street’s history. Fisher Sr. was the original Cathie Wood who popularized growth investing and sought to invest through a strategy called “scuttlebutt investing.”
Fisher Sr. covered this strategy in his seminal work Common Stocks and Uncommon Profits (“one of the great books on investing,” as per Buffett) and shared that an investor should conduct in depth research for a firm by getting to know its executives and employees. While Fisher’s father is a Wall Street legend, Ken started out his firm with just $250 in 1979. As of Q2 2024, the firm had $229 billion in investments as indicated through its SEC filings while Fisher’s net worth is $11.2 billion.
While today’s $250 is far from being similar in value to $250 when Fisher started his investing journey, technology enables today’s beginner investors to invest with even less money. One way to do so, if you’re feeling bold enough to ignore Buffett’s advice against stock picking, is to use fractional shares. Through these, a wide variety of brokerages enable beginners on the stock market to invest in stocks through as little as $1 and any dollar amount via features such as cash quantity stock orders. Fractional investing also enables some of the smallest investors to gain exposure to big ticket stocks, including Berkshire, whose Class B shares have a recent closing share price of $689,287.
Finally, before we get to our list of the best stocks to buy for beginners with little money, another way for a beginner to start out with little money and grow portfolio value over time comes through dividend stocks. These stocks offer beginner investors stable and often regular payouts over the long term. While everyone likes stable income, the true magic of these stocks is the ability to reinvest these dividends to generate even more returns. The benefits of reinvesting dividends are clear when we look at the data. This shows that a $1,000 investment in the benchmark S&P index would be worth $33,500 in 2022 without dividend reinvestment. But if the dividends were reinvestment, the final value nearly triple and would be worth $93,000.
With these details in mind, let’s take a look at some of the best stocks to buy for beginners with little money. If you want to learn about a special stock that might be able to deliver 100x returns, check out our report about the cheapest AI stock.
Pixabay/Public Domain
Our Methodology
To make our list of the best stocks to buy for beginners with little money, we first made a list of 20 stocks recommended by the financial media. Then, these were ranked by the number of hedge funds that had bought the shares in Q2 2024 and the stocks with the highest number of hedge fund investors were selected.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders In Q2 2024: 61
Comcast Corporation (NASDAQ:CMCSA) is a well established broadband and broadcasting service in the US. Its size and scale, as evidenced by cash and equivalents of $6.2 billion and receivables of $13.8 billion, means that the firm enjoys low operating costs due to economies of scale and a large market presence to help it weather economic downturns or headwinds. However, Comcast Corporation (NASDAQ:CMCSA)’s industries, i.e. media and internet, are being disrupted by continued advances in connectivity and entertainment delivery. For instance, traditional television channels are being overtaken by online streaming services, while broadband internet is now a different market courtesy of SpaceX’s Starlink satellite internet service and fixed wireless providers. These technologies threaten to make the future quite difficult for Comcast Corporation (NASDAQ:CMCSA), and key to its survival will be the firm’s ability to retain its user base by leveraging its scale for exclusive broadcasting rights. Average revenue per user (ARPU), net subscriber growth, subscriber retention, and growth in streaming are some key drivers of Comcast Corporation (NASDAQ:CMCSA)’s hypothesis.
Comcast Corporation (NASDAQ:CMCSA)’s management shared details of one exclusive broadcasting deal during its Q2 2024 earnings call:
“Our expectation is that soon an 11-year rights deal between ourselves and the NBA will be announced. We don’t believe that the resolution of matching rights will affect the package that we expect to be awarded. This package, which begins with the 2025-2026 season includes: 100 NBA games each regular season across NBC and Peacock, which is more than any other media partner and more regular season games than each existing partner has under the current rights deal; for playoffs, we will have first and second round games each year, exclusively on our national platforms and six NBA conference final series over the course of the term of the deal, which is more playoff games on average each year, than any other media partner; and exclusively for Peacock will be approximately 50 national regular season and post-season games, including National Monday Night games and doubleheaders.
Additional elements of the NBA package include the annual NBA All-Star Game and All-Star Saturday Night each season, the season opening NBA tip-off doubleheader each season, a special doubleheader on the MLK holiday, and Select NBA games in every NBA All-Star game on Telemundo. Beyond the NBA itself, we’re excited that our package includes WNBA, where starting in the spring of 2026, we’ll have more than 50 WNBA regular season and first round playoff games each season across Peacock, NBC and USA, and we’ll also have games in seven WNBA Conference semifinals and three WNBA Final series; for USA Basketball, we’ll have the rights to USA men’s and women’s games leading up to the Olympics and FIBA World Cup; Sky Sports will air all of NBCUniversal’s NBA and WNBA games in its markets; and finally, Xfinity will be the NBA and WNBA’s marketing partner in the video category.”
9. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders In Q2 2024: 65
PepsiCo, Inc. (NASDAQ:PEP) is a global brand name for carbonated beverages. Its strong brand recognition, considerable financial resources (cash equivalents of $10 billion), and global presence as evidenced by nearly 300,000 employees worldwide mean that PepsiCo, Inc. (NASDAQ:PEP) enjoys considerable economies of scale. This is key in the beverages industry, as along with innovative product ideas, volume shipped is a central tenet of any firm’s hypothesis. However, at the same time, the economies of scale also mean that PepsiCo, Inc. (NASDAQ:PEP) has to keep a tight grip on its costs since it is a key metric that investors watch. Any weakness on this part can translate into share price headwinds, and PepsiCo, Inc. (NASDAQ:PEP) has benefited from recent inflationary trends by raising prices that have allowed it to post a 30% absolute revenue growth between 2020 and 2023. Yet, the firm’s direct sales costs have grown by 32% while its operating costs have jumped by 28.5% making PepsiCo, Inc. (NASDAQ:PEP) walk a tightrope when it comes to margins. This rope might become thinner in the future as slowing inflation and sticky costs continue to pressure the firm’s margins.
Artisan Partners mentioned PepsiCo, Inc. (NASDAQ:PEP) in its Q1 2024 investor letter. Here is what the fund said:
“In the demographics/consumer trends theme, slowing sales volumes led us to focus more on services versus goods. As an example, we sold our position in food and beverage leader PepsiCo given slowing growth in its underperforming core beverage business, one which generates about 60% of revenues. Adding to the uncertainty of growth prospects beverages, PepsiCo was forced by local lawmakers and industry wholesalers to shift to a new distribution model during the rollout of Hard Mtn Dew, a new line of drinks that combines Mountain Dew with malt liquor.”
