Building your first portfolio can be very exciting. You get to read about a lot of companies for the first time and get your first taste of what the market is like. However, it can also be a very intimidating time. For most, the sheer amount of information can be overwhelming, making it difficult to decide which companies to include in the portfolio. In this article, I’ll discuss three top stocks that investors should consider, helping them get started on their financial journey.
Choose a reliable compounder of wealth
As you may have heard by now, the reason investing is such an excellent way to help you achieve financial independence is because the market allows you to compound your gains. Think of this as a snowball effect, gradually allowing your portfolio to pick up more size over time. As such, investors should look for companies that have shown a similar ability to compound returns over the long term. An example of such a company would be Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM).
Brookfield invests in and operates real assets. These are assets that have intrinsic values due to their physical properties. Examples include assets within the real estate, infrastructure, and utility industries. Brookfield’s CEO, Bruce Flatt, strongly believes that real assets will be a greater focus of investment firms in the future. By staying ahead of the curve, Brookfield should be able to see excellent returns over time. Brookfield stock has generated more than 4,500% since its IPO, but investors can count on it to continue growing steadily in the future.
Look for blue-chip growth companies
When newer investors look for growth, they often turn to smaller companies, which carry a lot of risk. However, there are blue-chip companies available that offer excellent growth potential. Take Shopify (TSX:SHOP)(NYSE:SHOP) for example. Over the past three years, no company listed on the TSX has managed to outperform the e-commerce company. In fact, Shopify’s 1,043% return (at the announcement of the 2020 TSX30) was nearly equal to the combined returns of the three next highest-ranked companies.
Although Shopify has managed to become Canada’s largest company by market cap, it has shown no signs of slowing down. Shopify reported year-over-year increases of 110% and 57% in its quarterly revenue for Q1 and Q2 2021, respectively. The company has also recently managed to acquire big-name customers like Netflix, which is sure to help it continue growing at a rapid clip over the coming years. If you’re looking for one growth stock to add to your portfolio, consider making that company Shopify.
Don’t forget to diversify
Diversification is a very important thing to consider as a new investor. There are many different ways you can help diversify your portfolio. Of course, there’s diversification within different industries. For example, if you have a lot of healthcare companies in your portfolio, then maybe consider increasing positions within the tech or utility spaces. However, you can also diversify geographically. This means that if you choose to hold Shopify as a position, consider picking up American tech stocks as well.
With that in mind, investors should consider Evolve FANGMA Index ETF (TSX:TECH). This is the first ETF that only holds the six American big tech companies. For those that are unfamiliar, this includes Facebook, Amazon, Netflix, Alphabet (Google), Microsoft, and Apple. The massive presence that those six companies have in everyday life is unmatched, making this an ETF that should provide stable growth for many years.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Jed Lloren owns shares of Apple, Microsoft, and Shopify. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Brookfield Asset Management, Facebook, Microsoft, Netflix, and Shopify. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, short January 2023 $1,160 calls on Shopify, and short March 2023 $130 calls on Apple.