Yahoo Finance I’m an Investing Expert: 3 Stocks for First-Time Investors Using a $100 Tax Refund
Say that you have just received a letter from the IRS. Within the letter is a check for $100 — your tax refund.
You now want to invest this $100, but you are a novice investor with limited knowledge of the stock market. There are many options you can take if you are unsure of what your next steps will be.
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GOBankingRates has compiled potential avenues for investment that would help a beginner investor grow a portfolio.
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Index Funds
With a small amount of money to invest such as $100, it may be safer to put your money towards index funds, rather than investing in stock. Index funds are a low-risk investment that provide an easy way for beginners to develop their understanding of the stock market.
“This is far simpler, especially for a beginner with a modest budget, than placing bets on individual companies, because with an index fund, the risk (and your money) is spread out among a large number of companies, rather than living and dying by the fortunes of just one,” said Armine Alajian, CPA and fractional CFO of the Alajian Group Inc.
Index funds allow novice investors to dip their toes in the pool of investing without risking their funds on a company whose future performance is unknown.
It is a passive form of investment, and though not as adventurous as watching the market and investing based on trends, index funds are a strategic way to invest.
If you choose to not invest in index funds, you can instead invest your $100 into stocks. Blue chip company stocks, specifically, can be beneficial for beginner investors.
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Blue Chips
If you do choose to invest individually, it is best to look for companies that are financially secure and can weather the storm of a fluctuating economy.
“Investing is all about taking risks, in my mind — but only calculated risks,” said Diego Acala, owner of Alpha Stocks Lab, which specializes in investing. “For a first-time investor, go with big companies.”
Blue chip companies, large companies that have proven stability, are perhaps one of the best options for a new investor.
There are many blue chip companies that are potential options for novice investors. Here are three blue chip stocks in different industries fit for beginners.
Berkshire Hathaway
A multinational holding company headed by Warren Buffett — perhaps one of the most prolific investors in history — Berkshire Hathaway, is a stable blue chip stock that beginner investors may consider for their portfolio.
A company like Berkshire Hathaway, which owns businesses in a range of industries spanning the globe, will most likely be stable for a long awhile.
Pepsi
Pepsi, a worldwide leader in both the beverage and snack industry, is another blue chip stock that would be a good place to start with just $100. Pepsi’s brand portfolio contains snack brands such as Tostito’s and Lay’s, making Pepsi a safe investment option that covers multiple industries.
Microsoft
Microsoft is perhaps most notable for their wide range of products in the technology space, such as computers, operating systems and its ownership of large gaming corporations and the social media site LinkedIn.
Beginner investors may look to Microsoft for its stability and leadership in the technology industry. This blue chip stock has potential for growth as innovative technologies continue to be developed by Microsoft.
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This article originally appeared on GOBankingRates.com: I’m an Investing Expert: 3 Stocks for First-Time Investors Using a $100 Tax Refund
