Investing in stocks is simple as more companies have simplified the process and allow beginners to open an account through a website or mobile app.Common stocks allow stockholders to vote on company issues, but most of the time stockholders receive one vote per share. Several companies also give stockholders dividend payouts – these payouts typically change based on the company's profitability. Adding stocks in a portfolio means that you own a small percentage of a company that should increase its growth and value. Beginning investors should note there are two ways to make money from stocks: dividend payments and selling stocks when the share price goes up.How to Invest in StocksInvesting in stocks can be done in many ways. If you would like to form a strategy and manage your own investments, you can open a brokerage account. If you're unsure about where to start, consider opening an account with a robo advisor who will do the work at a lower cost. For those who want more guidance about their retirement plans, turning to financial advisors might be a good solution.For beginners who do not want to do the legwork in managing their portfolio or who are new to investing, a robo advisor could be a great first step, says Rick Swope, vice president of investor education at E-Trade, a New York-based brokerage.The portfolios managed by robo advisors typically consist of exchange-traded funds aligned to an investor's goals, risk tolerance and time horizon. ETFs also provide diversification at a lower cost."Young investors who are just starting out should look to simple solutions like robos and when investors graduate to more complex financial needs, like estate planning, they may turn to the services that a financial advisor can provide," he says.The number of companies offering brokerage accounts has increased, including banks such as Ally Bank. Some brokerage companies provide a simplified version such as Robinhood where investors can buy and sell stocks, ETFs, options and cryptocurrency from a mobile app for free. Although Robinhood doesn't offer trade options for mutual funds or foreign stocks. Stocks can also be purchased in individual retirement accounts such as a traditional or a Roth IRA. This allows investors to grow their retirement money in a tax-deferred account.Competition has spurred many brokerages to slash commission fees, which can add up quickly if you buy and sell stocks, mutual funds or ETFs frequently. Robinhood is not the only company that does not charge commission fees. Starting in October, Interactive Brokers is providing an unlimited number of commission-free trades on U.S. exchange-traded stocks and ETFs along with no account minimums or inactivity fees."Investing has become much easier," says Steve Sanders, executive vice president of marketing and new product development at Greenwich, Connecticut-based Interactive Brokers. "More of your hard-earned money will go straight toward your portfolio and not toward paying fees. I think this will be extremely helpful for beginning investors as well as others who like to save money."How Much Money Should You Invest in the Stock Market?Since many brokerages such as TD Ameritrade do not require a minimum amount to open a trading account, you can start investing with even $100.Discount brokers are a boon for beginners with little money, who are looking to get stock market exposure with smaller portfolios. But a discount broker does not typically provide advice or analysis. Many of these brokers do not require a minimum amount to start an account while some have a low beginning threshold of $1,000. Building a diversified portfolio is the priority for beginners who should consider adding index funds that capture the broader market, Swope says. Mutual funds and ETFs are the easiest solutions since they own hundreds to thousands of stocks and are less volatile than individual stocks. ETFs tend to have low minimums, allowing investors to spread their first $10,000 between a few funds and gain access to a variety of areas in the market, he says."A mix of ETFs, mutual funds and individual stocks can provide even broader diversification between investment vehicles," Swope says. "Bottom line: If you're just getting started, keep it simple."Good Stocks to Invest in for BeginnersChoosing the right stock can be a fool's errand, but investing in high-quality stocks such as blue chips and dividend-yielding ones are often good strategies. One reason investors opt for blue chips is because of the potential for growth and stability and because they produce dividends – these include companies such as Microsoft (ticker: MSFT), Coca-Cola Co. (KO) and Procter & Gamble Co. (PG). Coco-Cola, for example, generates a dividend of 2.9%, and the stock is less volatile as its share price has hovered between $44 and $55 during the past 52 weeks. Dividends can generate much-needed income for investors, especially higher-dividend ones.Another thing for beginners to consider is diversification. Diversifying your stocks and not concentrating on one sector is another advantage. One other tip is to be consistent. An investor's best bet is to invest consistently such as socking away $400 a month.The habit of saving and putting away money regularly is the single biggest decision "young people can make to ensure a good life down the road," says Ron McCoy, president and CEO of Florida-based Freedom Capital Advisors. Automatic investing can help remove the need to make decisions about when and how much to invest, creating consistent investing habits, Swope says. Automatic investing takes advantage of dollar-cost averaging, which often mitigates portfolio volatility over several decades."Instead of investing a lump sum all at once, investments are made incrementally with the same amount at regular intervals on a fixed and automatic schedule," he says.Dollar-cost averaging is a great way to accumulate long-term wealth because you are always the same number of shares which can be beneficial if you're buying during a downtown and paying a lower price before the stock rebounds, says Chris Osmond, chief investment officer at Prime Capital Investment Advisors."This strategy also helps remove emotion because you're systematically investing in a long-term plan," he says.The news cycle about a company's stock performance can be overwhelming. Instead, remove the short-term noise, so you can maintain perspective of your strategy for the long run, experts say."The secret with investing is to remove emotion," Osmond says. "When emotion is removed from the equation, an investor is less likely to sell and buy at the most inopportune times."Billionaire Warren Buffett, a legendary investor, advises people to buy and hold stocks for several decades instead of selling and re-buying them constantly. At a minimum, the stock should be one that an investor would own for at least 10 years, he advises.
Microsoft
Amazon staying strong.
Despite some broad market weakness, Amazon.com (ticker: AMZN) is once again within a stone’s throw of a $1 trillion market cap after reporting blowout fourth-quarter numbers. Amazon's stock price gained more than 7% on better-than-expected sales and cloud revenue. Earnings per share were particularly strong, exceeding consensus analyst estimates by more than 60%. Amazon’s big quarter has reassured the market that the company is still making the right calls on investing in its business. Even at nearly a $1 trillion market cap, Bank of America analyst Justin Post recently listed 10 things he still loves about AMZN stock.
Online retail and cloud businesses are still young.
Amazon’s online retail business has been around for decades. The company's cloud business known as Amazon Web Services, or AWS, isn’t brand new either. But while both these businesses are large and well-established at this point, Post says they are both still relatively early in their growth stages. Global e-commerce gross merchandise volume was $3.2 trillion in 2019, up 19% compared with 2018. Post is projecting another 18.5% growth in 2020. Post projects global e-commerce penetration can more than double from 11% today to more than 25% over time. He estimates AWS cloud revenue could also grow to $57 billion by 2021.
Amazon’s customers are loyal.
A recent Bank of America survey found 58% of online shoppers start their search on Amazon compared with just 25% that start with Google, which is under the parent company Alphabet (GOOG, GOOGL). In addition, Post found 34% more respondents indicated they are using Amazon’s platform more today than a year ago compared with respondents who said they are using it less. That increased-to-decreased usage ratio is better than any other company included in the survey and demonstrates Amazon's positive momentum. Finally, 30% of shoppers surveyed said they complete between 76% and 100% of all online shopping on Amazon, up from 26% a year ago.
Prime usage is rising.
Not only are Amazon’s Prime membership numbers and membership revenue growing at an impressive rate, Bank of America found 75% of current Prime users say they are “unlikely” or “very unlikely” to cancel their membership. Only 6% of Prime members said they are likely to cancel in the next year, down from 8% a year ago. Prime members spend an average of $1,704 per year on Amazon compared with $491 annually for nonmembers. Finally, 24% of Prime members intend to spend more on Amazon in 2020 compared with 7% who plan to spend less.
Grocery is a growth catalyst.
Post says the grocery market is worth $750 billion annually, but its online penetration rate is currently just 4%. Amazon recently eliminated its $15 per month Amazon Fresh fee for Prime members in select cities. The fee cut comes as Amazon has also been expanding its one- and two-hour Fresh delivery services. It also plans to launch a new grocery store in Los Angeles in 2020. Post says Amazon has a significant opportunity to take advantage of its massive customer base, its established supply chain and its physical infrastructure to ramp up grocery delivery over time.
Free one-day delivery.
One of the biggest reasons for the positive market reaction to Amazon’s fourth-quarter earnings is that the company proved that its aggressive investments in free one-day delivery will not weigh down profits. Post projects more than 50% of the total items sold on Amazon could be eligible for the one-day delivery service by the end of 2020. While Walmart (WMT) and other competitors are attempting to keep pace with Amazon on one-day shipping, Post says Amazon’s wide selection of offerings, particularly among lower-cost items, differentiates AMZN from its competition. Post says Amazon will eventually optimize one-day eligible items to maximize margins.
AWS is the cloud leader.
Post says Amazon’s AWS cloud business is the single best large-scale growth opportunity in the tech sector. He estimates AWS has a $300 billion addressable market. Post says Microsoft Corp. (MSFT) is a legitimate cloud competition for AWS, but Amazon’s dominant market share in the space gives it a significant first-mover advantage. In fact, Post projects $45 billion in AWS revenue in 2020, more than the revenue of Microsoft’s Azure and Google Cloud combined. As the high-margin revenue for AWS grows, it should beef up the company’s overall margins in time.
Retail margins rebound.
One-day shipping investments have eaten into Amazon’s non-AWS margins, and Post says that trend will likely continue in the first half of 2020. In the fourth quarter, Amazon’s North American profit margins dropped from 5.1% to 3.5%. But by the second half of the year, Post says these investments should begin to normalize while Amazon’s high-margin AWS and advertising businesses add $2.5 billion and $2.2 billion in operating profits in 2020, respectively. Not only will this boost in margins improve earnings, but it will also give Amazon financial flexibility to potentially invest in its next growth initiatives.
Revenue trends are positive.
In addition to its high-growth AWS business, Post says Amazon has been consistently adding revenue from its other businesses. From 2011 to 2016, Amazon added between $10 billion and $20 billion in incremental non-AWS revenue per year. Even without including Whole Foods numbers, that incremental revenue gain jumped to $30 billion in 2017 and $33 billion in 2018. Post is projecting another $37 billion in non-AWS incremental revenue in 2020, but he says there is upside to that estimate given the relatively strong growth in holiday season e-commerce sales trends in recent years, including 18% growth in 2019.
Amazon is increasing fulfillment capabilities.
Post says Amazon’s heavy investments in building up its fulfillment infrastructure have created several opportunities for the company in the years ahead. He says last-mile delivery capabilities should boost sales of underpenetrated categories such as beauty, personal care, pet care, food and other home goods. Amazon is focusing on improving its shipping service. It is also improving its customers’ shopping experience and reducing costs by scaling and optimizing its business. According to logistics consultant MWPVL International, Amazon has nearly quadrupled its total number of distribution facilities since 2015. Post estimates Amazon’s distribution infrastructure grew by 34% in 2019.
Expansion of luxury retail items.
Amazon has had lackluster results in previous attempts to break into luxury fashion, but the company is now reportedly working with at least 12 luxury brands in developing a new platform dedicated exclusively to luxury retail items. Post says the luxury platform will be a separate section of Amazon.com and will allow retailers to have more control over the style and layout of their sites to maintain and cultivate their brand images. Chinese e-commerce giant Alibaba Group Holding (BABA) is generating success with its Tmall Luxury Pavilion, BABA's dedicated site for high-end brands. Post says luxury retail is a “significant category” for Amazon to tap.
10 great reasons to buy Amazon stock:
Online retail and cloud businesses are still young.Amazon’s customers are loyal.Prime usage is rising.Grocery is a growth catalyst.Free one-day delivery.AWS is the cloud leader.Retail margins rebound.Revenue trends are positive.Amazon is increasing fulfillment capabilities.Expansion of luxury retail items.
Amazon staying strong.
Despite some broad market weakness, Amazon.com (ticker: AMZN) is once again within a stone’s throw of a $1 trillion market cap after reporting blowout fourth-quarter numbers. Amazon's stock price gained more than 7% on better-than-expected sales and cloud revenue. Earnings per share were particularly strong, exceeding consensus analyst estimates by more than 60%. Amazon’s big quarter has reassured the market that the company is still making the right calls on investing in its business. Even at nearly a $1 trillion market cap, Bank of America analyst Justin Post recently listed 10 things he still loves about AMZN stock.
Online retail and cloud businesses are still young.
Amazon’s online retail business has been around for decades. The company's cloud business known as Amazon Web Services, or AWS, isn’t brand new either. But while both these businesses are large and well-established at this point, Post says they are both still relatively early in their growth stages. Global e-commerce gross merchandise volume was $3.2 trillion in 2019, up 19% compared with 2018. Post is projecting another 18.5% growth in 2020. Post projects global e-commerce penetration can more than double from 11% today to more than 25% over time. He estimates AWS cloud revenue could also grow to $57 billion by 2021.
Amazon’s customers are loyal.
A recent Bank of America survey found 58% of online shoppers start their search on Amazon compared with just 25% that start with Google, which is under the parent company Alphabet (GOOG, GOOGL). In addition, Post found 34% more respondents indicated they are using Amazon’s platform more today than a year ago compared with respondents who said they are using it less. That increased-to-decreased usage ratio is better than any other company included in the survey and demonstrates Amazon's positive momentum. Finally, 30% of shoppers surveyed said they complete between 76% and 100% of all online shopping on Amazon, up from 26% a year ago.
Prime usage is rising.
Not only are Amazon’s Prime membership numbers and membership revenue growing at an impressive rate, Bank of America found 75% of current Prime users say they are “unlikely” or “very unlikely” to cancel their membership. Only 6% of Prime members said they are likely to cancel in the next year, down from 8% a year ago. Prime members spend an average of $1,704 per year on Amazon compared with $491 annually for nonmembers. Finally, 24% of Prime members intend to spend more on Amazon in 2020 compared with 7% who plan to spend less.
Grocery is a growth catalyst.
Post says the grocery market is worth $750 billion annually, but its online penetration rate is currently just 4%. Amazon recently eliminated its $15 per month Amazon Fresh fee for Prime members in select cities. The fee cut comes as Amazon has also been expanding its one- and two-hour Fresh delivery services. It also plans to launch a new grocery store in Los Angeles in 2020. Post says Amazon has a significant opportunity to take advantage of its massive customer base, its established supply chain and its physical infrastructure to ramp up grocery delivery over time.
Free one-day delivery.
One of the biggest reasons for the positive market reaction to Amazon’s fourth-quarter earnings is that the company proved that its aggressive investments in free one-day delivery will not weigh down profits. Post projects more than 50% of the total items sold on Amazon could be eligible for the one-day delivery service by the end of 2020. While Walmart (WMT) and other competitors are attempting to keep pace with Amazon on one-day shipping, Post says Amazon’s wide selection of offerings, particularly among lower-cost items, differentiates AMZN from its competition. Post says Amazon will eventually optimize one-day eligible items to maximize margins.
AWS is the cloud leader.
Post says Amazon’s AWS cloud business is the single best large-scale growth opportunity in the tech sector. He estimates AWS has a $300 billion addressable market. Post says Microsoft Corp. (MSFT) is a legitimate cloud competition for AWS, but Amazon’s dominant market share in the space gives it a significant first-mover advantage. In fact, Post projects $45 billion in AWS revenue in 2020, more than the revenue of Microsoft’s Azure and Google Cloud combined. As the high-margin revenue for AWS grows, it should beef up the company’s overall margins in time.
Retail margins rebound.
One-day shipping investments have eaten into Amazon’s non-AWS margins, and Post says that trend will likely continue in the first half of 2020. In the fourth quarter, Amazon’s North American profit margins dropped from 5.1% to 3.5%. But by the second half of the year, Post says these investments should begin to normalize while Amazon’s high-margin AWS and advertising businesses add $2.5 billion and $2.2 billion in operating profits in 2020, respectively. Not only will this boost in margins improve earnings, but it will also give Amazon financial flexibility to potentially invest in its next growth initiatives.
Revenue trends are positive.
In addition to its high-growth AWS business, Post says Amazon has been consistently adding revenue from its other businesses. From 2011 to 2016, Amazon added between $10 billion and $20 billion in incremental non-AWS revenue per year. Even without including Whole Foods numbers, that incremental revenue gain jumped to $30 billion in 2017 and $33 billion in 2018. Post is projecting another $37 billion in non-AWS incremental revenue in 2020, but he says there is upside to that estimate given the relatively strong growth in holiday season e-commerce sales trends in recent years, including 18% growth in 2019.
Amazon is increasing fulfillment capabilities.
Post says Amazon’s heavy investments in building up its fulfillment infrastructure have created several opportunities for the company in the years ahead. He says last-mile delivery capabilities should boost sales of underpenetrated categories such as beauty, personal care, pet care, food and other home goods. Amazon is focusing on improving its shipping service. It is also improving its customers’ shopping experience and reducing costs by scaling and optimizing its business. According to logistics consultant MWPVL International, Amazon has nearly quadrupled its total number of distribution facilities since 2015. Post estimates Amazon’s distribution infrastructure grew by 34% in 2019.
Expansion of luxury retail items.
Amazon has had lackluster results in previous attempts to break into luxury fashion, but the company is now reportedly working with at least 12 luxury brands in developing a new platform dedicated exclusively to luxury retail items. Post says the luxury platform will be a separate section of Amazon.com and will allow retailers to have more control over the style and layout of their sites to maintain and cultivate their brand images. Chinese e-commerce giant Alibaba Group Holding (BABA) is generating success with its Tmall Luxury Pavilion, BABA's dedicated site for high-end brands. Post says luxury retail is a “significant category” for Amazon to tap.
10 great reasons to buy Amazon stock:
Online retail and cloud businesses are still young.Amazon’s customers are loyal.Prime usage is rising.Grocery is a growth catalyst.Free one-day delivery.AWS is the cloud leader.Retail margins rebound.Revenue trends are positive.Amazon is increasing fulfillment capabilities.Expansion of luxury retail items.