9 Safe Stocks for First-Time Investors

Learn how to invest in stocks step by step.

You’ve likely heard that investing in stocks and bonds is a good way to diversify your portfolio. The stock market in particular is one of the best places to turn assets into wealth over the long term.

If you simply put money into regular savings accounts or invest in a certificate of deposit, you might not make enough in returns to stay ahead of inflation. So, keep stocks front and center when you start thinking about making your first investment.

Consider putting safety first as a newbie investor so you can build a strong base for your personal finances. It’s not easy to learn how to invest in stocks — much less the best stocks — but you can do it. Time and patience are required when you’re learning investing for beginners.

What to Look for When Buying Stocks for the First Time

Picking stocks should not be an impulse decision. Looking for the best stocks to buy can be time-consuming and challenging, but research is crucial to investing success. When you purchase a stock, you buy a slice of a corporation. So evaluating a stock is the same as examining a business.

Keep this in mind when investing for any reason, whether you’re dealing with your regular accounts or retirement accounts. Make sure you pick safe investments. In general, you want to look for a company that:

  • Grows revenues steadily
  • Has viable plans for continuing growth
  • Has a good position within the market
  • Has a stock that is fairly priced
  • Might pay out some of its earnings to shareholders as dividends

You can find this information by checking out the corporate web page and corporate press releases from the company; these sources should provide some insights. Also, look at corporate filings with the U.S. Securities and Exchange Commission. Finally, review research on websites like Value Line and Nasdaq.

Keep in mind that stocks might meet all of the qualifications of a safe investment one day, but not the next. Corporations are not always stable. Valuations change as investors bid up the prices of stocks, and even good companies go bankrupt.

The following stocks are some of the safest investments available right now. All of them have been around for some time, and most offer a dividend payment that will give you a cash flow. These are typically larger, well-known companies, which tend to be less volatile than smaller, younger companies.

Note that the price-earnings ratios fluctuate and might have changed since publication of this story. And remember that no matter which stocks you choose, investing will expose you to some risk. The stock market will go up and down in price, even with safe stocks. But here are nine of the safest stocks if you’re a first-time investor.

Check Out: The Stocks First-Time Investors Should Avoid

1. Berkshire Hathaway (BRK.A and BRK.B)

Adam Schwab, a chartered financial analyst and director of investments at American Enterprise Group in Des Moines, Iowa, recommended Berkshire Hathaway, Warren Buffett’s well-known baby.

Berkshire is a bit like a diversified mutual fund with ownership in many diverse, well-managed businesses. Insurance is the cornerstone, although the company also owns Wells Fargo as well as interests in American Express, Coca-Cola, IBM and many other stock market stalwarts. The P/E ratio for Berkshire Hathaway’s two classes of stock is 21.45 for both BRK.A and BRK.B.

2. Chevron (CVX)

Investor Arie Goren of Seeking Alpha recommended this major oil company. With Chevron, you get exposure to energy operations, including refining, gasoline and all aspects of the industry.

Currently, with energy prices in a slump, a new investor can buy shares in Chevron on sale. With a dividend yield of 3.62 percent, you also get a nice cash flow. Its P/E ratio is 38.71.

3. Microsoft (MSFT)

Microsoft is an important technology company with a history of growing dividends, giving the investor a path to higher payouts. As a leading player in an important industry, Microsoft is a solid stock for the first-time investor. Investment advisor Bachar Samawi of Seeking Alpha recommended this company. The P/E ratio for Microsoft is 29.08.

Related: 10 Top Stocks of 2017

4. PepsiCo (PEP)

PepsiCo is a household name that dates back more than 50 years, and its stable of brands include well-known names such as Frito-Lay, Doritos, Quaker and Pepsi. Seeking Alpha recommended Pepsi as a long-term holding. The company offers a 2.81 percent dividend and has a P/E ratio of 22.92.

5. 3M (MMM)

“Dividend aristocrats” are companies that have been increasing annual dividends every year for at least the past 25 years. One of these companies is 3M, which makes tape, library systems, elastic bandages, Post-it notes and Scotch-Brite cleaning supplies.

Chartered financial analyst Stephen Simpson recommends 3M. Simpson noted in his Seeking Alpha article that 3M “remains committed to a program of continuous cost improvement and reinvestment and additional M&A seems like a likely use of capital.” The P/E ratio is 26.74 for 3M.

6. Dover (DOV)

Dover is one of the most important companies you’ve never heard of. Dover earns a spot on this list due to its long history of steady performance. William Stamm of Seeking Alpha noted that Dover has increased its dividend consistently for 60 years running.

Dover focuses on four areas:

  • Refrigeration and food equipment
  • Energy
  • Engineered systems
  • Fluids

With this type of broad diversification, the company has a foothold in many industries. Dover’s P/E ratio is 22.30.

7. Mastercard (MA)

Mastercard is a revenue-generating machine, and a top pick of many stock analysts, according to Nasdaq. The Mastercard business model claims a payout every time a transaction is funneled through its network. Mastercard is also participating in new mobile payment platforms. The P/E ratio for Mastercard is 36.08.

8. Starwood Property Trust (STWD)

This high-yielding commercial real estate investment trust is a top pick of Brad Thomas, a Forbes real estate investor.

“We believe that the floating-rate loan portfolio will outperform in a rising interest rate environment, and the company is well-positioned as a special service provider,” Thomas said. The P/E ratio for Starwood Property Trust is 12.21 and the dividend yield is 8.88 percent.

Read: Small-Investment Options When You Have Less Than $500

9. Apple (AAPL)

Apple is a favorite of Wall Street analysts, with 23 of the 29 analysts tracked by Nasdaq recommending either a “buy” or “strong buy” on the stock. The company makes popular products like the iPhone, iPad and Apple TV. Apple’s P/E ratio is 17.78.

How to Buy Stocks for the First Time

Buying stocks is easy for first-time investors. Use an online discount broker, such as TD Ameritrade, Schwab, Fidelity or E*Trade. Choose one that requires a minimum investment you can afford and check out trading costs as well. You can apply online or call the company and a representative will walk you through the process.

After you pick your stocks, you can make either a market order or a limit order. When you make a market order you request to purchase a stock at the prevailing market price.

When you make a limit order, you request to purchase a stock at a limited price. For example, if you want to buy stock at $60 a share and the stock is currently trading at $70, the broker would wait to buy the shares until the price meets your limit. If you have any questions, an online discount brokerage firm representative will walk you through the entire process.

Stock Market Tips for Beginner Investors

Before investing in stocks, improve your chances of success. Follow these tips:

  • Diversify. Invest in stocks from a variety of industries so that when one industry is having trouble, another one will be healthy, propping up your overall portfolio.
  • Watch valuations. If you overpay, even the best stock is no winner.
  • Tune out the noise. Avoid checking prices and news on your stock every day. It will make you crazy, causing you to doubt yourself and possibly to trade too much. Don’t let your own fears or the fears of others cause you to act irrationally.
  • Invest for the long term. Don’t expect your stocks to increase in value immediately. Pick good stocks and hold for the long term.

Find Out: The Secrets to Become a Great Investor

Final Advice Regarding Stocks for the First-Time Investor

Your work is not complete after you purchase a stock. Instead, you need to actively monitor the investment. Periodically, gather current information about the company. Visit the corporate website, look at company news and check the P/E ratio. Read what management is saying about the company.

Check the fundamentals of the stock every quarter. Look at the reasons you purchased the stock. Make certain your initial assumptions are still valid. If you bought the stock based on an Asian expansion and the company is pulling back from those plans, reconsider your stock purchase. Don’t be afraid to sell if the stock turns out to be a big disappointment, if your initial evaluation was wrong or if the stock tumbles and doesn’t look like it will improve.

Investing in the stock market requires research, study and ongoing monitoring. Over time, you’ll earn income from stock dividends and increase your assets with capital gains. And don’t worry — on occasion, all investors experience a loss.

Next Up: 20 Worst Mistakes Rookie Investors Make

Barri Segal contributed to the reporting for this article.

Figures are accurate as of Oct. 24, 2017.