At the height of the last bull market circa 2007, 65% of Americans were invested in the stock market, whether through individual stocks, mutual funds, ETFs, and 401ks and IRA’s. Everyone, it seemed, had stocks to buy.
Today, that number’s down to 52% despite the fact the bull market that started back in March 2009 is now almost nine years old. You would think everyone would have a piece of the pie.
Interestingly, while fewer Americans are investing in stocks, those who seem to be using some different platforms to get the job done. According to Hearts & Wallets, 46% of households with assets between $100,000 and $5 million used self-service financial firms in 2014, up from 40% three years earlier.
While I don’t have more recent data, I’m sure that number’s either gone up or remained about the same in the years since. Even when people use a full-service financial advisor, 25% of also use one or more self-service firms.
So, if you’re a new DIY investor looking to start playing the markets, here are seven stocks to buy that should help you get off to a successful start to your investing career.
Stocks to Buy: Vanguard FTSE All-World ex-US ETF (VEU)
Before we jump into the stocks to buy for your new portfolio, I thought I’d make sure that you had some exposure to stocks outside the United States. While the S&P 500 provides plenty of options from 11 different sectors, you don’t want home-country bias to stand in the way of better long-term results.
Simply put, U.S. equities aren’t always the best-performing stocks available. Sometimes, international stocks in both developed and emerging markets do better than U.S. stocks and vice versa.
To get that exposure I’ve chosen the Vanguard FTSE All-World ex-US ETF (NYSEARCA:VEU), an ETF that’s got significant size with $19.6 billion in total assets; reasonable fees charging 0.11% annually, and a sufficient number of holdings at 2,598.
The median market cap of the stocks held in VEU is $32.0 billion which means you’re getting investing in larger, more stable companies. However, it’s always good to have some risk when investing in equities, so 19.3% of the portfolio goes toward stocks in emerging markets like India, China, and Brazil.
To make things easy, I would suggest a 40% weighting for VEU with 10% for each of my six stock recommendations that follow.
Stocks to Buy: Apple (AAPL)
If you’re a new DIY investor, you don’t want to go too far afield investing in companies that you aren’t familiar with or whose business you don’t understand. For example, if you’re new to picking stocks you probably don’t want to own a biotechnology company that’s losing money but is developing a great new drug.
For that reason, I’m starting you off with Apple Inc. (NASDAQ:AAPL), a company that needs no introduction. Its products are in high demand, and you never know what it’s next going to bring to market. Just recently, it introduced the Apple iPhone X, the most expensive iPhone it’s sold since it launched the iPhone a decade ago.
According to an online survey done by Statista immediately after the September 13 launch of the iPhone X, 34% of the respondents said they were going to buy the new phone. That’s more than double the number of people planning to buy the Apple TV 4K (15.5%) and Apple Watch Series 3 with cellular (12.1%).
I believe that the third edition of the watch is a game changer now that it isn’t tethered to your iPhone, but consumers obviously are most excited by the iPhone which is a good thing considering it accounts for so much of the company’s overall revenue.
Stocks to Buy: Church & Dwight (CHD)
There’s a good chance you’ve never heard of the name Church & Dwight Co., Inc. (NYSE:CHD) before but you’re probably very familiar with the products it sells. They include Arm & Hammer baking soda, Trojan condoms, OxiClean stain remover, Xtra laundry detergent, L’il Critters multi-vitamins, Arrid deodorant and Orajel pain relief to name a few.
The most amazing thing about CHD stock is the fact that it’s delivered positive annual returns for shareholders every year since 2007. A $10,000 investment in September 2007 is worth more than $55,000 today. Up 13.7% year to date through September 14, it’s looking like a sure thing to notch a 11th consecutive year of positive returns.
Church & Dwight grows its business through a combination of developing new products and by acquiring other favorite brands that it can grow by leveraging its global distribution. It completed its most recent acquisition in early August paying $1 billion for Waterpik, known for its water flossers and showerheads.
If you’re new to DIY investing, you couldn’t ask for a more reliable stock.
Stocks to Buy: Facebook (FB)
Whether you use its products or not, Facebook Inc (NASDAQ:FB) is a stock you’ve just got to own because Mark Zuckerberg’s brilliant mind’s created an advertising powerhouse that likely can’t be stopped.
InvestorPlace contributor Luke Lango recently called FB his favorite stock of the next five years, an opinion I can comfortably stand behind.
“The company essentially owns the mobile and social media spaces, two spaces which have been and will continue to be on fire,” wrote Lango September 15. “There is just far too much to like about the Facebook growth story to ignore the fact that Facebook stock is trading at a huge discount to its peers.”
Late last year, I suggested that Facebook stock should be at the top of any investors watchlist but did caution that its investment returns were slowing. Well, Mark Zuckerberg must be reading my stuff, because Facebook stock’s bounced back in a big way in 2017, up 48.6% year to date through September 14.
As crazy as my idea was for Facebook to start paying a dividend, if it continues to keep growing revenues and profits at the pace it currently is, it will have $20 billion in free cash flow within the next 2-3 years. Free cash flow is the bucket from which dividends are paid.
Whether it does or doesn’t, Lango’s right; you have to own Facebook stock.
Stocks to Buy: Starbucks (SBUX)
Starbucks Corporation (NASDAQ:SBUX) is a company that continues to push the envelope even as it gets bigger and bigger and that’s a big reason why SBUX stock’s averaged an annual return of 18.7% since it went public on June 26, 1992, almost three times the performance of the S&P 500.
I consider Howard Schultz, Starbuck’s executive chairman and former CEO, one of the most brilliant business people on the planet. Although he stepped out of the chief executive role in April, he started the ball rolling late last year to eventually hire Rosalind Brewer as its chief operating officer September 6.
Brewer, who becomes the first woman and African American at Starbucks to hold such a high position, was CEO of Sam’s Club when she met Schultz in Bentonville and the pair hit it off. Schultz made her a board member in January; she resigned from Sam’s Club a month later. Current Starbucks CEO Kevin Johnson got to know Brewer serving together on its board, and by July he began pushing for her to get back to full-time work.
The incoming COO is another great hire by a company that seems to find and develops talent like few businesses in America.
You don’t have to like Starbucks coffee to like SBUX stock.
Stocks to Buy: 3M (MMM)
Because I’m addressing new DIY investors, I wanted to keep the stock selection focused on companies whose products and services most people use or whose businesses are very simple to understand. 3M Co. (NYSE:MMM) is an example of the former.
While you’re probably very familiar with its Scotch tape, Post-It notes, Scotch-Brite lint rollers, and many of the other consumer products produced by the company, these are a tiny piece of its overall business.
In its latest quarter, for example, its consumer products segment had $1.1 billion in sales, just 14% of its overall revenue and the smallest revenue generator amongst its five operating segments.
The best part about 3M’s business is that all five of its operating segments have healthy margins making it very easy to keep paying dividends. It’s able to generate these healthy margins by devoting its entire focus to science. Scotch tape might be the ultimate product produced but its the time in the lab researching and understanding the science behind the product that keeps the company innovating for growth.
Take some time and go through all of its businesses. You’ll see that its business is a lot more complicated than it looks but in a good way.
Stocks to Buy: Berkshire Hathaway (BRK.B)
You might no all of the businesses owned by Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) but you would have to be living under a rock not to know its founder and CEO, Warren Buffett.
The most amazing thing about the Oracle of Omaha is that even though he’s worth more than $60 billion, 95% of it was earned after his 60th birthday. That’s the power of compounding and an excellent eye for quality investments.
In March 2016, I called Berkshire Hathaway the finest holding company in the world. My thinking, then, and no different today, is that you get ownership in the world’s cheapest actively-managed mutual fund where it pays you to invest billions instead of the other way around.
Not only that but if you’ve got any inclination to invest in a passive S&P 500 ETF, which Buffett recommends for most investors, I’d suggest you buy the ETF and some Berkshire Hathaway shares because, since 2000, BRK stock’s outperformed the index in 11 out of 17 years. Since 1965, it’s more than doubled the index.
What can I say about Warren Buffett that hasn’t already been stated? Not much except that if you can only own one stock, this is it.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
