If you are new to the stock market, you are probably wondering which stocks to start with. With well over 15,000 listed companies in the world, this can be a little daunting. Fortunately, the One Financial CFD platform narrows the list down to about 450 of the largest and most reliable companies.
To help you narrow the choices down even more, we have listed a few criteria you can use to find shares for investing or trading. For US stocks, you can use the FinViz stock screener and for other markets, you can try the Reuters screener. We have also listed a few beginner stocks and shares that every trader or investor should get to know.
Choosing stocks for investing
When choosing stocks to invest in, you should consider the following criteria:
- Market capitalization: Larger companies are more stable and have more reliable earnings. When starting out you should choose companies worth at least $2 billion.
- Debt: If a company gets into trouble and has a lot of debt, its future will be in doubt. Look for companies with assets worth at least twice the company’s liabilities.
- Volatility: If a company’s share price is very volatile, it signifies uncertainty. Unless you know a lot about the company, it’s best to avoid volatile stocks.
- Trend: It’s often tempting to buy stocks that have fallen a lot. However, if you don’t know a lot about the company, you really don’t know how far the price can fall. It’s best to wait until a solid uptrend is in place and the price is above the 200-day moving average.
- Brand and industry: When you are a beginner in shares investing, it is best to stick to companies you know and understand. A good place to start is the brands you know and use or companies in the industry in which you work.
Choosing stocks to trade
The following criteria can be used to select the best beginner shares for active trading:
- Volume: Liquidity is essential when you are trading actively. Higher volumes mean lower spreads and you will be able to enter and exit the stock easily. Look for stocks with active daily volumes of more than one million shares. Stocks with a market capitalization of $2 billion or more are also more liquid.
- Volatility: Unlike investing, when you are trading you want to see volatility. An increase in volatility and volume means the market is paying attention to stock and a larger move may be on the horizon.
- News: Stocks usually offer trading opportunities for a few days after news about the company is released. This can be news about financial results, product releases or potential corporate action. It must, however, be news that can have a material impact on the company’s value.
- Technical levels: Look for companies that are testing major support and resistance levels, trend lines or moving averages. When this happens, the stock will eventually either break the price level or reject it. Once this happens a sharp move will often occur.
Good beginner stocks to invest in
If you are still unsure where to start, the following four stocks are worth having on your watchlist. This selection includes two very solid growth companies, an oil stock with plenty of volatility, and one of the most reliable companies in the world.
- Apple (AAPL): Apple is the largest company in the world and has one of the strongest brands. The company is in the process of diversifying from hardware to services like streaming movies and online games. This means there may be some volatility in the next few years, which will be great for traders. A substantial correction will also create an opportunity for long term investors.
- Amazon (AMZN): Amazon didn’t win the race to become the world’s first trillion-dollar company, but it may be in the running to be the first company worth two trillion dollars. Amazon’s e-commerce business has reached a point where no other company can compete with it. It still has a lot of room to grow, and it has a very profitable cloud business to fund that growth. It’s possible that Amazon will be better for traders than for investors in the next few years—however, it’s a company every investor should learn about and watch.
- Exxon Mobile (XOM): Exxon is the world’s largest oil and gas company. Oil and gas companies are controversial, but there are two things we can be certain of. Firstly, the economy will always need energy of some type. And, secondly, the oil price will always be volatile due to the number of factors influencing supply and demand. For this reason, XOM is a great stock to trade and should remain so for a long time.
- Unilever (UN, UL): If you are just getting started and are nervous about volatility and uncertainty, then Unilever is a great stock to own. This is not the most exciting stock on the market, but it is one of the most reliable. Unilever produces and distributes hundreds of products from soap and toothpaste to tea, salad dressing, and ice cream. It also operates in nearly every country in the world. This is one of the most diversified businesses you can invest in, so there will be very few surprises.