Investing in stocks is a great way to grow your wealth. Of course, that’s only a good idea if you know what you are doing.
You need to pick the best stocks and invest in them strategically, mixing up your portfolio with companies in different sectors. There are just about 3,500 companies that are traded publicly on the stock market. That is a lot to choose from, especially if you aren’t sure exactly what to do.
If you have been paying attention to the Nasdaq or NYSE, you would know that as we entered 2020, markets were at an all-time high. Then, we got hit with a global pandemic that quickly changed the economy. Markets tanked in March and then rebounded again.
With this level of volatility, making sure you pick the right stocks can be an incredibly overwhelming and stressful process. This is especially true if you are just starting out and barely know the essentials.
So, how can you make sure that you are investing in the right companies for your future? Take a quick look at the seven best stocks of 2020.
What is investing?
Investing is the act of taking money to obtain an asset that will eventually turn a profit and even earn a dividend. The profit is made as the asset or stock certificate appreciates over time.
When an investment is made, it is not intended to be used immediately, but in the future after the investment has had time to generate profit.
Investing is most beneficial when you purchase an asset at a low price and sell it for a higher price down the road. A share of stock gains appreciation when a company’s revenue starts increasing. This will raise the value of the stock as the value of the company increases.
When you take investing seriously, you will earn a return that can provide financial stability in your retirement years.
How do I know what works for me?
It is a common practice in investing to invest in what you understand. You are putting your money at risk when you invest, so you should invest in something or in a sector where you have some experience.
If you don’t know anything about the company you are investing in, you won’t be able to separate the real news from the fake news which can play a large role in your decision-making process. You should also stay away from investment opportunities that are too complex and difficult to keep up with.
It is also important to start investing as soon as you can. The longer the money is invested, the more potential it has for growth. By starting early, you learn how to be patient with your strategies and will most likely see a better return in the future.
How can I start investing?
Getting started as an investor is probably way easier than you think. You don’t need to have a ton of money either!
If you have a little bit of money to invest but you don’t want to keep up with the investments yourself, you can use a robo-advisor. These are automated platforms that assist you in investing your money.
If you do prefer to take a more hands-on approach to investing, you might be interested in creating an online brokerage account so you can choose your own investments.
It doesn’t matter how you start investing, but you need to keep in mind that investing is long-term and you’ll get the greatest benefits by continuing to invest a consistent amount over time.
Classifications of stock
There are so many different choices you can make when you are investing your money. You can decide to buy stocks for value, new stocks, and growth stocks.
Let’s look at each of these categories to determine the seven best stocks to buy in 2020.
Best stocks for value
Value stocks are part of a factor-based investing strategy where you pick stocks that are trading for less than what they are normally worth. The most common way of doing this is measuring the ratio of the price to one or more fundamental business metrics.
The most common metric used is the price-to-earnings ratio. Usually, if a business is trading for cheaper than what it is worth, it will be measured by the price-to-earnings ratio.
The market value for value stocks is expected to rise quickly in price as it starts to return to the normal worth of the company.
OneMain Financial (OMF)
OneMain Holdings is a credit and insurance company that is priced fairly and conservatively. This stock trades for eight times earnings, despite expectations of around 12% compound annual growth for the next five years.
This company is also great for income investors, as it has a dividend yield of 9.4%. This company also pays special dividends to shareholders. The steady performance, fantastic dividend, and fair market valuation make this company a must-buy stock.
Verizon Communications (VZ)
Verizon is thought of as one of the best wireless phone companies in the country. It is expected to stay relevant for years to come. They offer cell phone service, wireless internet access, and data as these have all been essential utilities for quite some time now.
Verizon has been proven to provide the highest-quality service for a wireless network in five out of six US regions. Verizon pays a 4.3% dividend and has a modest price-to-earnings ratio of 13.6, making them a great company to add to your portfolio.
Best new stocks
New stocks are companies that are opening up their shares for public trading for the first time. Creating new stock in a company is a great way for them to raise capital.
Investing in a new stock can be scary because they don’t have any performance history. However, if you see the stock covered by a credit financial media source, chances are the price will be impacted positively.
Direxion Work From Home (WFH)
In 2020, the coronavirus has forced a lot of employees to work from their homes during the crisis. The Direxion Work From Home stock launched in June of 2020 and provides exposure to some companies that are likely to benefit from the work from the home trend.
WFH concentrates on companies that offer cloud technology, cybersecurity, online project management, document management, and remote communications. There are 40 companies represented by WFH. The opening price of this group of stocks was $50.08 and reached a high of $59.40 in September 2020.
This stock started back in 2016, so you can get a little bit of a taste for this company’s performance. It operates as an artificial intelligence digital platform that sells properties and casualty insurance.
It focuses mainly on renters and homeowners insurance ranging from homes to apartments and condos. Lemonade also provides pet health insurance. The company is currently up 17% from last year.
Best growing stocks
Growth stocks are stocks that have a substantially higher rate of growth than the current market. A growth stock will increase rapidly and much quicker, raising the income you earn from them quicker, too.
This type of investing means you will be investing in a business that you think will grow faster than others or faster than the market in general. One of the most commonly used growth metrics is called earnings per share. The price of the stock will rise as investors seek out in hopes to get a share of the future profits.
Quidel Corp. (QDEL)
This company is a diagnostic healthcare manufacturer that offers rapid diagnostic testing solutions and molecular diagnostic systems.
Founded in 1979, this company is the leader in making products that can help treat infectious diseases as well as reproductive health. This company has experienced a growth since last year of almost 250% with a value of about $56 in November of 2019 and a current value of $198.65.
Zoom Video Communications, Inc. (ZM)
Zoom has become increasingly popular this year as so many companies have transitioned to working from home. It is a communications technology company that provides a video platform with web conferencing services.
You can connect via video, voice, share content, and documents. You can access this app on your desktop, cell phone, or by calling a number to join by voice.
The stock price boomed this year, with a starting value of around $68 in January of 2020 and a current value of over $400.
Salesforce.com Inc. (CRM)
This is a cloud-based technology company, offering online solutions for customer relationship management for more than 150,000 companies. The cloud services are provided to both developers and customers to build and run business applications effectively.
This will allow businesses to properly manage their sales, marketing strategies, user engagement, analytics, and much more. The company started in January with a value of around $166 and has a current value of $249.51.
Investing your money is a great way to set yourself up for a nice future. You can make a profit on the money you invest especially if you invest a consistent amount consistently.
Choosing which businesses to invest in is a huge part of the success you will face in long-term investments. You will need to ensure you invest in companies that have a great track record.
These seven stocks are the best investments you can make as we end 2020. These companies all survived the intense economic downfall we experienced this year, and they even came out on top. Investing in these companies will put you in a solid financial position in the future.
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