Looking for the best stocks to invest in today? You’re in luck. We’re going to go over some timeless strategies you can use to find hot stocks to buy at any time, but first we need to cover a few ground rules. Many investors just want to be told which stocks to buy, as if stocks were lottery tickets that guaranteed winnings. Unfortunately, that’s not the case. Don’t worry – we’re going to give you something much better.
Maybe you came to this page looking for the best stocks to buy right now. Were you expecting a list of stocks you could load up in your brokerage account?
We’ll get to the good stuff, but there are a few things you need to understand first. If you still want to be told exactly which stocks to invest in, we’ll get there. Bear with me for a few minutes. You’ll be glad you did.
If you pay attention to these simple lessons, you’ll have a much better shot at building a stock portfolio that actually yields the returns you want. You know what they say – give a man a stock tip, he makes a small profit. Give a man a stock trading strategy and he profits for life.
Rules to Find the Best Stocks to Invest In
In the world of investing, there’s a misconception that all you need is a few good stock picks. If a wise investor tells you which stocks to buy, you can make a killing and retire early. Unfortunately, that’s rarely the case (as we’ll explain later). Even the best investors in the world have losing stock picks. Don’t believe me? Look what happened to Warren Buffett’s investment in Kraft Heinz over the past year:
The stock lost half of it’s value in the past year. If you had invested $10,000, you would have less than $5,000 today. If you had invested $100,000, you would have less than $50,000.
Don’t get discouraged. It’s possible to achieve exceptional returns but you need to follow a few golden rules of investing.
Rule #1: Don’t Follow Stock Tips Blindly
The first rule of successful investing is that you shouldn’t follow a stock pick blindly. If someone tells you about a good stock to buy, you still need to do your own research. The markets are volatile and even the best stock picks can fail under certain circumstances.
Rule #2: Set Your Investment Goals
Every investor has a unique financial situation. We all have different investment goals, strategies, and timeframes. If you want to invest in stocks that yield the results you’re looking for, you need to create your own personal goals. Some investors prefer income-generating dividend stocks while others prefer high-risk/high-reward momentum stocks. There is no “one-size-fits-all” solution. We’ll discuss some strategies you can start using today, but first, let’s look at the last two rules.
Rule #3: Personalize Your Stock Picks
Once you have an investment goal, you should choose stocks that help you achieve that goal. For example, if your goal is to build a portfolio of stocks that generate income, you should be looking at dividend stocks. If your goal is to build a safer portfolio of stocks, you should look for stocks that have lower volatility.
Regardless of your investment strategy, you should be able to differentiate between stocks that meet your investing criteria and stocks that don’t. If you ignore your goals and chase stock tips wildly, you will pay the price.
Rule #4: Manage Risk
Last but not least, you need to have a plan for managing risk. A risk management strategy keeps your portfolio safe and helps you avoid the ugly downturns in the stock market. You cannot control the market itself, but you can control how you react to it.
Think about your risk threshold and create a plan accordingly. For example, if you don’t want to lose more than 5% on any individual stock, you can set stop losses to limit your downside.
Let’s look at a quick example of why this matters. Below is a chart of Apple’s stock over the past year.
Notice anything interesting? The stock swings from $220 down to $150 and back to $220. If you had a $22,000 investment in AAPL at the end of 2018, it would have been worth only $15,000 by the beginning of 2019. Of course, Apple recovered, but that’s not always the case.
You need to think about the amount of risk you can stomach. If wild swings in your capital make your stomach turn, you should adhere to stricter risk management rules.
Alright, enough doom and gloom. You know the four golden rules of investing; it’s time to discuss some of the best stocks to invest in.
What Are the Best Stocks to Buy?
When choosing the best stocks to buy, you need to consider your timeframe. In the example above, we saw that AAPL experienced massive fluctuations over the past year. For an investor with a one-year time horizon, the stock was a bad buy at $220 but a great buy at $150. For investors with a longer term horizon, the results are yet to be seen.
Now, let’s get to the good stuff. We won’t be covering the specific stocks you should buy today because hot stocks change by the week. Don’t worry, we won’t leave you hanging either. If you stay tuned, you’ll learn about a few resources you can use to find winning stocks over and over again. In fact, one of the resources we’re going to share has provided stock picks that beat the S&P 500 for the past 20 years.
In order to choose the stock picks that are right for you, you need to choose your strategy. It’s not overly complicated. You just need to think about your time horizon and risk threshold. Here are some popular categories.
Best Dividend Stocks
The best dividend stocks have two key characteristics:
- High dividend yields
- Low volatility
A dividend yield is the percentage paid to an investor every year. For example, if a stock has a dividend yield of 5%, your investment will return 5% in dividend income every year. If you invested $10,000 into a stock with a dividend yield of 5%, you would make $500 in yearly dividend income.
Of course, dividend income is just one piece of the puzzle. You want to make sure your initial investment is protected as well. A 5% dividend means very little if your stock is down 10% on the year. This is why you need to look for dividend stocks with low volatility. A low volatility stock experiences less price fluctuations, meaning you get to enjoy your dividend income without seeing wild swings in your portfolio.
Not all dividend stocks are created equal. Let’s look at a quick comparison
American Airlines has a dividend yield of 1.3%. Not only is this yield relatively low, the stock is also down over 10% over the past year.
Compare that to CIM, which has a dividend yield of 10.44%% and has remained flat over the past year.
Which stock would you rather hold in your portfolio? I know my answer…
Best Long Term Stocks
Many investors are looking for longer-term stock picks. This group of investors is likely saving for retirement. They don’t care what the stocks do this year or the next as long as they provide respectable returns in the next decade or two. If this is your investment style, there’s good news and bad news.
First, the good news. The broad stock market has always gone up in the long run. Even if you got caught in the dot-com bubble or 2008 financial crisis, you would have a nice return today. As they say, time heals all wounds.
If you choose large cap companies with sustainable business models, you’re likely to do well in the long run.
The bad news is that not many investors have the foresight to predict which stocks will do well twenty years from now. A “long term” investment strategy does not excuse you from managing your positions. A “buy and hold” strategy is not the same as a “set and forget” strategy. As a diligent investor, you should always pay attention to your portfolio.
If you’re looking for long term stocks, you’ll want to think about companies that can stand the test of time. If you don’t have the patience to do the research, you can get recommendations from a stock pick service that regularly updates their forecasts.
Best Growth Stocks
The idea of finding hot growth stocks can be exciting. You’ll often hear investors making comparisons to today’s leading companies. “This stock is liking getting in on Amazon twenty years ago.”
Growth stocks are exciting because they can yield phenomenal returns and they don’t necessarily carry additional risk. The trick is finding the right companies.
If you’re like most casual investors, you don’t have time to read industry research reports, analyze competitive landscapes, and scrutinize the financial statements of growth companies. Fortunately, there are services that can do this for you. For example, Motley Fool’s Rule Breakers service finds the companies set up for the best growth opportunities.
You may be hesitant to pay for a service that provides stock picks. After all, there’s so much information available for free on the internet. In my experience, you get what you pay for. Who would you be more likely to trust: the guy giving stock picks to get more hits on his website or a team of professionals with a proven track record? Personally, I always choose the latter.
Assuming an investment service is reasonably priced, the cost of admission is likely to be covered by a boost in portfolio returns. Just look at the Motley Fool’s returns since inception:
Best Penny Stocks
The world of penny stocks is teeming with myths and misinformation. Many investors with smaller portfolios believe that they need to find “cheaper” stocks if they have less capital to play with. That simply isn’t true. A $10 stock can go to $100 just as easily as a $1 stock can go to $10.
The price of a stock doesn’t matter as much as the percentage returns.
So, should you avoid penny stocks entirely? Not necessarily…
I personally got my start in the world of penny stocks. I’m not just talking about stocks under $5; I’m talking about the stocks that trade for fractions of a penny. I managed to generate exceptional returns, so I’m not opposed to penny stock investments, but there’s one caveat.
Penny stock markets are cyclical. This means that penny stocks can be super hot one year and dead the next. I learned this firsthand as I made a killing my first year and watched the well run dry the next. Just look at the chart below:
This is a 7-year chart of a popular penny stock and it looks similar to the charts of many of its peers. The spikes represent great trading opportunities. Everything else is either boring or a slow ride to the bottom.
If you want to find the best penny stocks, look for volume. Stocks with volume have low liquidity and are less likely to provide exceptional returns.
Best Day Trading Stocks
Chances are, you’re looking to invest for the long term, but we respect our fellow day traders here as well. If you’re looking for the best stocks to day trade, prepare to make the search a part of your daily process.
The best day trading stocks change every single day. Day traders aim to take advantage of momentum and volatility in the market. A stock that’s hot today may be boring tomorrow. That’s not an exaggeration. I could list out today’s hottest day trading stocks in this post and the list would be irrelevant by next week.
If you want to become an active trader, you need to learn how to scan for stocks. You can use online scanning tools like Trade Ideas and EquityFeed to scan for stocks that are making big moves. These types of scanning platforms use real-time market data to find the best trading opportunities every single day. The keyword here is “real-time.” The market moves fast and if traders want to keep up, they need access to fresh information every single day.
The Best Stocks to Invest In Right Now
Are you still looking for the best stocks to invest in today? Hopefully you’ve learned that you need more than just a simple stock pick to get the investment returns you desire. You need to be purposeful, diligent, and risk-cautious. Of course, if you made it this far in the post, we don’t want to leave you hanging either.
We’ve reviewed over 100 financial services and we’ve seen it all. We’ve heard bold claims that range from ridiculous to outright unethical. After researching hundreds of different companies, we can confidently recommend the following services:
- Best Stock Picks – Motley Fool
- Best Growth Stocks – IBD Leaderboard
- Best Day Trading Stocks – Investors Underground
If you’re looking for tools, brokers, and robo-advisors, we recommend: