The Best Thing to Buy for the Beginning Investor

One of the most popular questions I am asked by new investors is "What stock should I buy?"

I have only one answer to this question and it's the same answer today, as it was 20 years ago.

Before I talk about my answer, I want explain some things first.

While I would encourage anyone to get started with investing, you should leave most of the work to the pros.

Ignore the investing noise of people squawking on TV or on the internet telling you to but stocks off every kind.

9 times out of 10, they are trying to sell you something, or make money for themselves.

Don't fall for it. Many a newbie investor has gone bust chasing and following them.

If you're beginner or like 99% of the world who only has an elementary amount of investing knowledge or less, then trying to pick a stock is the wrong thing to do.

Why? Because most people don't have the time, the discipline, the knowledge, and other factors in buying stocks AND managing their stocks. Yes, you can always guess, you can listen to what other people do. You might get lucky and be right, but I would not advise it. Why - because it's plain risky.

There is no need to take unnecessary risks with your money.

Investing is risky enough. So play it smart.

As an example, What if you bought a cool tech stock you just heard about? You buy it, the stock sits in your account, and the next time you look up your account it's down 10, 20% or more or perhaps up the similar amounts. What do you do?

Finally, if you're going to make the leap into investing, whether its through a 401k at work (highly recommended to use), a Roth or Traditional IRA (highly recommend using), or even a personal account, you want to make money in something that's reliable, diversified, self-controlled, and easy.

In my opinion, the very best investment vehicle for beginners, novices, and people who don't care about the stock market but have to invest the funds somewhere (like in a 401k)

is an S&P 500 tracking fund mutual fund or etf. 

Most 401k plans offer an investment option that follows the SP500 Index. Outside of work accounts, there are a variety of options you can use - like an ETF (exchange traded fund) called SPY and others, or mutual funds investments that offer similar vehicles


The S&P500 Index is the benchmark for most money managers. And you can own that benchmark.

Why own the benchmark?

The primary goal of investment managers is to outperform the SP500 Index performance benchmark by the end of the year. 

90-95% of ALL money managers lose to this benchmark. Every year.

It's a diverse group of companies made into one investment. Diversification is good because if lessens risk.

The fee to own this product are at the lowest levels ever. Sometimes you might need to excuse .01-.02 of a percent out of your performance for management fees. It's worth it.

Compare that fee to Hedge Funds that charge 2% of your investment and alternative mutual funds that can charge 1% or more for their fees. They all (or most of them) fall into that underperforming the SP500 Index pool.

So, for beginners, if you do not know what to buy, start by investing in the benchmark.

One Final Thought

I read about people going "all in" when they invest in something. There is no need for that. Dividend your investment money into 12. A segment for each month of the year. Each month, buy your investments for that month only. Next month do the same.

The process is known as dollar cost averaging. It prevents you from investing all of your money at one particular time. I recommend having your brokerage setting this up for you and the leave it on cruise control .


Disclosure: I am no position in any positions mentioned. 

I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: My opinions and strategies of the are not intended to ever be a recommendation to buy or sell a security. The strategies I use have worked for me and it is 100% for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.