Best Stocks for Beginners with Little Money

Investing in stocks is one of the best ways to preserve (and enhance) wealth, but it comes with a few prerequisites. ‘It takes money to make money’ is a famous saying in business and nowhere is this statement more true than in the stock market. To earn money from stocks, you first need to have cash to purchase shares and the financial security to sit back and wait for them to grow. 

The stock market is a rich person’s playing field, but that doesn’t mean you can’t start small. Starting with a limited amount of capital has some unique advantages. When you’re small, a big mistake isn’t an earth-shattering error and learning about markets is easier when the stakes are low. But starting small can also be challenging when the hot stocks have two, three, or even four-digit share prices. In this article, we’ll discuss some of the stocks and ETFs beginners with little money can invest in and how to manage a diversified portfolio with minimal cash.

Quick Look at Best Stocks for Beginners:

• Blue Chip Stocks
• Dividend Stocks
• Exchange-Traded Funds (ETFs)
• Technology Stocks

Blue Chip Stocks

Blue chip stocks are the established giants of the stock market. These large, well-known companies are financially stable, consistently turning profits, and form the base of countless ETFs and mutual funds. While they may not offer the high-risk, high-reward potential of some smaller stocks, blue chips are known for their reliability and potential for steady growth over time. They're a good option for investors seeking stability and a long-term wealth-building approach.

Blue chip stocks might be safe investments, but they often have high share prices and may not be attainable to beginners with little money. Here are some blue chip stocks with share prices that don’t resemble a mortgage payment. 

Pfizer (PFE) 

Pfizer is one of the world’s leading pharmaceutical companies, developing and selling prescription drugs and vaccines for various health conditions. While not a high-growth option, Pfizer is considered a stable and well-established company with a history of paying dividends (currently yielding over 6%). This makes it a potentially good choice for investors seeking long-term stability and income. Despite having a $150 billion market cap, shares are under $30 at this time.

AT&T (T)

Dividend Stocks

Dividend payers can be good stocks for beginners with limited funds for a few reasons. First, you’ll get a dual cash stream since not only can the stock price increase over time, but you also receive regular (usually quarterly) dividend payments. Dividends can be reinvested for more compounding or used as income. Additionally, dividend-paying stocks tend to be established, stable companies less risky than growth stocks. Beginners who may not have a large capital cushion to absorb losses can benefit from the security of dividend stocks.

Verizon Communications (VZ) 

Like AT&T, Verizon is a US-based telecommunications giant providing wireless service, internet access, and entertainment. Verizon is a mature and financially strong company known for its reliable network and history of sharing its profits with investors through dividends. This makes Verizon a potential option for beginners seeking stability and income from a well-established firm in the communication industry. The stock currently has a market cap of $173 billion, and its dividend yields an impressive 6.47%.

Bank of America Corporation (BAC)

Exchange-Traded Funds (ETFs)

ETFs are ideal for beginners with limited cash since they provide instant diversification at a very affordable price. An ETF is a basket of stocks with a single theme, like a specific sector or market cap size. This spreads your investment across multiple companies, reducing risk compared to putting all your cash into an individual stock. Even with limited funds, you can build a diversified portfolio using ETFs. Plus, many ETFs trade for a similar price as a single stock, making them accessible for beginners starting small. Here are a couple of low-cost options for beginners.

iShares Treasury Floating Rate Bond (TFLO) 

First Trust Nasdaq CEA Cybersecurity ETF (CIBR)

CIBR is another basket of securities packaged into a single wrapper, but instead of government bonds like TFLO, this ETF invests solely in cybersecurity stocks. CIBR has 32 stocks in its portfolio, including some of the biggest names in cybersecurity, like CrowdStrike Holdings and Palo Alto Networks. The ETF pays a very tiny dividend and depends on the stock price appreciation of its holdings for profitability. Shares are just over $50 apiece, an affordable way to get exposure to an innovative stock sector.

Technology Stocks

Tech stocks can be exciting for beginners; however, it's crucial to understand the give and take of this volatile sector. Tech can offer explosive growth but also carries more risk than established companies. Be prepared for potential ups and downs. With limited funds, invest a small portion you can afford to lose and focus on long-term growth potential. Investing in tech requires due diligence through company and market trend research. Here are a pair of tech stocks with affordable share prices to consider.

Pinterest Inc. (PINS)

Pinterest is a social media platform with a massive user base and a unique niche in the industry. Despite its user base, PINS is still a relatively new entrant, and the social media landscape is competitive and always evolving. PINS shares can be volatile, but the stock has been in an uptrend for over a year and has nearly doubled in price since August 2023. The price is under $50, but it may not stay there long.

SNAP (SNAP)

SNAP is the company behind the popular Snapchat social media app, which went public in 2017 and had a meteoric rise in 2021 when shares jumped from $20 to $80. However, SNAP shares have suffered since the end of 2021, and the stock is back under the $20 mark. However, tail winds could be on the horizon thanks to a potential TikTok ban, and SNAP has rallied over the last three months. Despite a market cap of over $28 billion, the shares are still just over $16 as of this writing.

What Makes a Good Investment for a Beginner with Little Money

Smart investing is crucial for building a secure financial future. And even if you’re a beginner with limited capital to invest, starting small is still better than not starting at all. But markets can be complicated, and you’ll want to understand how stocks work before putting money into them. Here are five investment factors to consider as you get started.

• Affordability: You don’t need a huge windfall to get started; just enough cash to buy one share in your preferred company. Many online stock brokers cater to beginners with minimal initial capital. Even with small contributions, you can grow your money steadily with intelligent investing and careful planning. 

• Diversification: Spreading your money across different stocks or asset classes (like bonds) reduces risk. Diversification helps minimize potential losses since you’ll have a variety of investments at once, not just a single stock or two.

• Liquidity: Access to your money might be critical, and not every investment option provides the same level of liquidity. For example, stocks and ETFs can be sold anytime the market is open, but mutual funds trade shares after the market closes. Some small-cap stocks may have limited share counts, so we’ve only included highly liquid companies on this list.

• Low Fees & Expenses: Fees, commissions, and costs can affect your returns. Focusing on low-cost investment options like index funds or highly liquid stocks can maximize your profit potential with limited funds.

• Dividend Yield: Some stocks and ETFs pay dividends, which are quarterly payouts to shareholders from the company’s retained earnings. Beginners can include investments with a strong dividend yield in their portfolios to provide a regular income stream. However, always research the company’s financials and ensure its dividend payout rate is manageable.

Choosing the Right Brokerage for Beginners

Which brokerage should you choose for your first investments? The answer depends on your goals and investment plans. For example, if you build a simple, diversified stock portfolio, you might not need a broker with options trading, wealth management, or other advisory services. But you’ll likely want a stockbroker with charting tools, a sophisticated platform, and access to derivatives like options or futures to advance beyond traditional assets.

When choosing your first brokerage account, consider the following factors:

• Fees and Expenses: Most brokers offer commission-free stock and ETF trading, but that doesn’t mean everything is free from costs. Compare the fee schedules of different brokers and ensure you aren’t overpaying for services you won’t use or features you don’t need.

• User Experience: Consider a paper trading or demo account to test the brokerage platform before investing real cash. Different trading platforms have different features and tools, some of which may be more intuitive than others. Give your broker a test drive before investing.

• Learning Resources: If you’re a beginner, you’ll want a broker that has some research material so you can learn about stocks, markets, and other asset classes. Investing is a lifelong learning experience, and you’ll want to be versed in not just terminology but also market news and company reports.

Frequently Asked Questions

Best Stocks for Beginners with Little Money Methodology

The selected stocks were chosen based on their share price being around $50, with a mix of well-known names and stocks considered slightly safer investments than others.