Starting a stocks portfolio can be daunting. There are literally thousands of stocks we can invest in. Where do we begin?
The best approach, in my view, is to keep things simple and start by investing in some rock-solid companies that can be ‘core’ portfolio holdings. With that in mind, here’s a look at three stocks I’d buy if I was starting an investment portfolio today.
There are a few reasons I see Apple as a good beginner’s stock. For starters, the company is easy to understand. Apple makes money from selling iPhones, iPads, computers, and other hardware. It also makes money from services such as iCloud, Apple Pay and Apple Music.
Apple has a great growth track record and looks set to continue growing in the years ahead. This year, analysts expect the company’s revenue to rise nearly 30%.
Finally, the stock’s valuation is attractive. Apple trades on a forward-looking price-to-earnings ratio of 28, which seems reasonable to me.
One thing the beginner version of me would have to be aware of is that because the stock is US-listed, UK investors face foreign exchange (FX) risk. If a UK investor like me buys Apple shares and the pound strengthens, the investment is going to be worth less.
One reason I see ULVR as a good beginner’s stock is that it’s quite ‘defensive’ (i.e. lower risk) in nature. People tend to buy Unilever’s products no matter what is happening in the economy. As a result, it is not as volatile as some other stocks.
Another thing to like about Unilever is that it’s a reliable dividend payer with an attractive yield (currently around 3.4%). So, there are two potential sources of return here.
One risk to consider is that consumers’ tastes and preferences are always evolving. So, there’s no guarantee that Unilever’s brands will be as popular in the future as they have been in the past.
All things considered, I think the stock has an attractive risk/reward profile that would be good for the younger me.
Finally, I think Mastercard (NYSE: MA) is another top stock for beginners. It operates one of the largest payment systems in the world.
One thing I like about Mastercard is that, like Apple and Unilever, it’s an easy stock to understand. Everytime someone uses a Mastercard credit or debit card, it generates revenue.
Another thing I like about Mastercard is the long-term growth potential. Over the next decade, trillions of transactions are set to shift from cash to cards and electronic payments. Mastercard looks set to benefit.
One risk I’d consider here is that the valuation is quite high. Mastercard has a forward-looking P/E ratio of about 40. This doesn’t leave much ‘margin of safety.’ If future growth is disappointing, the stock could take a hit. It’s also listed in the US meaning there’s FX risk for UK investors. But there’s a lot to like about Mastercard, in my view. I see it as a great beginner’s stock.
Edward Sheldon owns shares of Apple, Mastercard, and Unilever. The Motley Fool UK owns shares of and has recommended Apple and Mastercard. The Motley Fool UK has recommended Unilever and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.