When I first began investing, the biggest challenge was knowing which shares to buy. The stock market can feel like a maze, whether an investor is scanning the FTSE 100 in London or the S&P 500 in New York. Some companies are global giants, while others are smaller domestic names with strong growth potential.
For beginners, the right balance of stability, income, and diversification can make all the difference.
Looking back at my own portfolio, I realise the value of picking a handful of reliable names early on. These shares aren’t the most exciting or flashy, but they’ve provided a foundation I’ve built on over the years. Here are three options I think beginner investors might want to consider when building their first portfolio.
Lloyds Banking Group
Lloyds (LSE: LLOY) was one of the first shares I ever bought, and it’s remained a permanent feature in my portfolio. As one of the UK’s most prominent banks, it’s often seen as a bellwether for the wider economy.
From an income perspective, Lloyds appeals. The yield currently sits at around 4%, backed by 11 years of continuous dividend payments. Dividends are also covered two times by earnings, which helps provide a buffer. Profitability remains decent, with a net margin of 16.3% and return on equity (ROE) of 10.2%.
There are risks investors should weigh up. As a bank, it’s heavily tied to the domestic market and has limited exposure to international clients. It also faces growing competition from innovative online challengers such as Wise. If it fails to keep pace with digital banking trends, it could lose relevance.
Still, I think it’s worth considering for anyone seeking a mix of growth and income.
Tesco
Another stock I’ve always liked is Tesco (LSE: TSCO), the UK’s largest supermarket chain. It’s the definition of defensive. Even during the pandemic, demand stayed strong because people always need to buy food and essentials.
The supermarket giant has a solid record of paying dividends, averaging a yield of about 3.3% across eight years of payments. The payout ratio is a sensible 57%, and profitability looks strong, with an ROE of 13.7%.
The risks come from its balance sheet and competition. Tesco’s debt outweighs its equity, which could force the board to prioritise repayments over dividends if pressures mount. At the same time, budget retailers like Aldi and Lidl are nibbling away at its market share.
Despite that, Tesco’s brand strength and scale make it, in my opinion, a core stock to think about for stability in a starter portfolio.
Scottish Mortgage Investment Trust
Finally, for diversification, I’ve always thought Scottish Mortgage Investment Trust (LSE: SMT) is a fantastic option. It’s been running for over a century and gives exposure to a wide range of global stocks.
Holdings include US tech giants, Asian e-commerce players, and even private equity investments. Fees are comparatively low, making it a hands-off way to add global growth exposure.
But it’s not without risks. The trust is heavily invested in the US tech industry, and when that sector struggles, it tends to fall hard. The volatility was clear during the pandemic when valuations swung wildly. For cautious investors, that can be nerve-racking.
Still, for those looking to build long-term wealth and get instant global reach, I think it’s well worth checking out.
