We recently published a list of 10 Best Stocks For Beginners With Little Money. In this article, we are going to take a look at where AT&T Inc. (NYSE:T) stands against the other 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.

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).

AT&T Inc. (NYSE:T)

Number of Hedge Fund Holders In Q2 2024: 71

AT&T Inc. (NYSE:T) is one of the three largest telecommunications services providers in America. It is also one of the oldest telecommunications companies in the US and was set up as American Telephone and Telegraph Compay (AT&T) in the late 1800s. This creates a double edged sword for AT&T Inc. (NYSE:T), just like it does for Comcast. For starters, it has allowed the firm to be a stable dividend paying stock. The firm’s sizeable trailing twelve month net income of $12.5 billion allows it to reward investors through dividends. AT&T Inc. (NYSE:T)’s dividend yield is 5.29%, and it was a dividend aristocrat until 2021 after which it had to cut dividends due to spinning off the Time Warner division. Yet, AT&T Inc. (NYSE:T)’s history also means that the firm has had to deal with the ghosts of its past. Its shares tanked by 12% in 2023, for their lowest value since 1993 after a WSJ report revealed that AT&T Inc. (NYSE:T) left toxic lead cables buried underground. While the firm has tried to assuage investor worries, it could see significant headwinds in the future if growing US government pressure forces it to make amends. Additionally, AT&T Inc. (NYSE:T) has to ensure that it leads in fiber deployments and wireless postpaid subscribers, as a shifting internet industry impacts the telecommunications sector.

AT&T Inc. (NYSE:T)’s management commented on these key business areas during the Q2 2024 earnings call:

“The durable trends in 5G and fiber are being driven by more than the solid individual execution within each business. We believe the success of our fiber business is driving growth in mobility and vice-versa as consumers increasingly prefer to purchase mobility and broadband together as a converged service. For example, today, nearly four out of every 10 AT&T Fiber households also choose AT&T as their wireless provider. As a result, our share of postpaid phone subscribers within the AT&T Fiber footprint is about 500 basis points higher than our national average. In our fiber business, we continue to achieve key penetration milestones faster than we anticipated and considerably faster than the fiber providers that do not operate wireless networks based on publicly available data.

A key reason for the strong performance is our ability to sell fiber to our mobile customers. Additionally, we’re able to reach new broadband customers through our substantial mobile distribution channels. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale. Over time, we expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as standalone operations. While our convergent strategy began with a focus on our owned fiber footprint, we also see attractive opportunities to expand the availability of AT&T Fiber, and our converged offers outside of it.”

Overall T ranks 8th on our list of the top stocks for beginners on a budget. While we acknowledge the potential of T as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than T but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.