After a remarkable start to the year for the Canadian and U.S. stock markets, beginning investors may be drawn in by the hype surrounding the red-hot Nasdaq 100 exchange or various tech-focused exchange-traded funds (ETFs).
To many new investors looking to put their first couple of dollars to work, it’s been all (or at least mostly) about the generative artificial intelligence (AI) boom and its impact on the broader economy. Indeed, AI is an exciting technology, and it’s hard not to want to invest in the companies behind ChatGPT or its impressive rivals.
Regardless, it’s still possible for new investors to lose a great deal of money by betting on firms on the absolute cutting edge of today’s impressive generative AI innovations. It all comes down to the price you pay for a stock.
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Following the herd into a hot stock could end in tears
Bubbles may be more apparent in the later stages, especially when investors stop taking into account the fundamentals and earnings. That said, bubble bursts can be really tough to time with any degree of precision. For new investors, you don’t need to place a bet on what you do not understand. As the great Warren Buffett once put it, investing is a game with “no called strikes.”
You don’t need to swing unless you’re absolutely 100% comfortable with doing so! At the same time, you shouldn’t seek to time the markets. Investing “after” a crash is easier said than done. And if you’re a beginner, odds are a crash will strike and recover faster than you can hit the buy button — that is, if you’re still up for buying as the selling bloodbath hits.
While market valuations today aren’t “steals” by any stretch, I see considerable value in the TSX Index, a market that’s lagged the U.S.-based S&P 500 and Nasdaq 100 so far this year. In this piece, we’ll check out one stock that looks like an intriguing value pick-up for investors who want to get started but don’t want to run the risk of getting caught up in the AI hype.
CN Rail: Boring and beginner-friendly
CN Rail (TSX:CNR) stock looks like a better fit for new investors who just can’t deal with the extreme volatility to be had in the overheated AI tech scene right now. The company transports goods across great distances, a business that has remained the same over the span of decades. Indeed, freight trains have been around over 100 years ago, and they’ll probably not be a relic of the past come 2124.
With the stock recently dipping close to 8% from its all-time high, the dividend yield has swelled just above the 2% level again. And though CN looks rather untimely, it strikes me as one of those boring businesses that’s a great fit for new investors, given the below-average degree of market risk (0.66 beta) and the long track record of slow-and-steady appreciation.
For instance, the stock has risen 143% in the past 10 years. It’s not incredible by any means, but it’s solid for new investors seeking to invest wisely rather than speculate on the hottest thing in the hottest sector.
