The best stocks are not penny best stocks to buy now or cheap growth stocks, which are best suited for speculators. The best stocks are those with excellent earnings and dividend payout records year after year. Why try to pick the single best stock when you can buy a list of the best stocks in a single transaction? Here’s how to invest without second thoughts.
Traditionally the best stocks (equities) are called blue chips because they are at the top of the stack in terms of excellence: long-term growth in earning per share and in dividend payments. As an investor these are the equities you want to buy and hold for long term profits. They rarely double or triple in value in a year, but as a group blue chips are as reliable and investor-friendly as stock investing gets.
It’s easy to find a list of these best stocks. They are the 30 components of the Dow Jones Industrial Average (the Dow), and many are household names. Examples include American Express, Exxon, General Electric, IBM, Microsoft, and Wal-Mart. Any of these blue chip names would make a good addition to your investment portfolio, but why try to pick the best stock among them when you can own the whole package in just one transaction?
If you make just one stock investment go with the blue chips and buy shares in symbol DIA, a stock fund (ETF) that holds the 30 Dow components and trades in the market like other equities do. You can buy or sell 10 shares or thousands for $10 a transaction online with a discount broker. Plus, you can monitor this stock investment while driving home from work or while surfing the news channels on TV. If the Dow was up, so was DIA, because it tracks this blue chip market average.
Now, let’s say you want to broaden your investment horizons to include 500 of the best stocks of the largest corporations in America. Your best stock investment would be SPY, which tracks the S&P 500 Index. It too is a stock fund, an exchange traded fund called an ETF.
With either of the above you own a small part of a large portfolio of large-cap equities. If you like to trade the market, both are good vehicles. If you want a long term investment that’s easy to follow and never under performs the market, you’ve got it. DIA and SPY track the major indexes, and as such they ARE the market. You won’t get lucky and double your money overnight here, but you won’t get blindsided by a bad profit report either.
Stock investing is easier than ever when you take equity selection out of the equation. All that’s left to ponder is market timing. Another advantage of the two best stocks above: you can add to or subtract from your position by simply buying and selling shares on the internet. When the market looks cheap, buy more. When equity prices have gone up too far too fast, lighten up.
Or, if you want to just buy and hold, either ETF can be the best stock investment to do this with. Over the long term equities have returned on average 10% a year. What easier way could there be to play the averages? A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.