Boosted by strategic acquisitions and interest rate tailwinds

We recently published a list Top 10 Stocks for Beginners with Little Money. In this article, we’ll take a look at how JPMorgan Chase & Co. (NYSE:JPM) stacks up against other stocks for beginners with small capital.

“I think the best thing for most people to do is to have an S&P 500 index fund,” says Berkshire Hathaway’s Warren Buffett, who is the most successful investor not only of our time but of human history. Buffett made the remarks at his investment firm Berkshire Hathaway’s 2020 annual meeting, but it wasn’t the first time he’s shared similar thoughts. While most investment advisors and online stock analysts are probably bragging about “chasing alpha,” for the Oracle of Omaha, now worth $144.5 billion excluding Given his long-standing charitable giving, most people would be better off following the S&P.

Buffett has, in fact, held this view for years. In a 2017 interview with CNBC, he reiterated that “consistently” buying an index fund tied to the flagship S&P is “the thing that makes the most sense pretty much all the time.” Buffett added that an investor should persevere even in bad times, when “when you see bad headlines in the paper, you’re tempted to say, well, maybe I should skip a year or something.” Don’t give up, Oracle says, and “just keep buying,” because “the American business is going to do very well over time, so you know the investment universe is going to do very well.”

But there is another temptation that especially beginners in the stock market have to face: the rush for “alpha” and, by extension, wealth and riches. But according to Buffett, “the trick is not picking the right company, the trick is basically buying all the big companies through the S&P 500 and doing it consistently and at a very, very low cost,” because “you never want to get the impression that you can pick stocks.” This false belief carries the risk that a beginner will believe that they have an advantage over others when reality “just doesn’t work that way,” Buffett says.

However, just because you are a beginner with a small amount of money does not mean you cannot have great success. Wall Street, despite its flaws, has also produced titans of the investing world who started with little or nothing. One of the best examples of this fact is Ken Fisher of Fisher Investments. Fisher’s childhood did not make him a stranger to Wall Street, as his father Philip Fisher is one of the most important figures in Wall Street history. Fisher Sr. was the original Cathie Wood who popularized growth investing and sought to invest using a strategy called “scuttlebutt investing.”

Fisher Sr. discussed the strategy in his seminal work Common Stocks and Uncommon Profits (“one of the best investing books,” according to Buffett) and added that an investor should do in-depth research on a company, getting to know its executives and employees. While Fisher’s father is a Wall Street legend, Ken started his company with just $250 in 1979. As of the second quarter of 2024, the company had $229 billion in investments, according to its SEC filings, while Fisher’s net worth is $11.2 billion.

While $250 today is a far cry from the $250 that Fisher first started out with, technology is making it possible for today’s novice investors to invest with even less. One way to do this, if you’re feeling brave enough to ignore Buffett’s advice against stock picking, is to use fractional shares. Through them, a wide range of brokerages allow stock market newbies to invest in stocks from $1 to any dollar amount through features like cash share orders. Fractional investing also allows some of the smallest investors to gain exposure to big stocks, including Berkshire, whose Class B shares had a recent closing price of $689,287.

Finally, before we get to our list of the best stocks to buy for beginners with little money, another way for beginners to start with little money and grow their portfolio over time is through dividend stocks. These stocks offer beginner investors a stable and often regular payout over the long term. While everyone loves a stable income, the real magic of these stocks is the ability to reinvest those dividends to generate even more profits. The benefits of reinvesting dividends are clear when you look at the data. It shows that a $1,000 investment in the S&P would be worth $33,500 in 2022 without reinvesting the dividends. But if the dividends were reinvested, the final value would almost triple and be worth $93,000.

With these details in mind, let’s take a look at some of the best stocks to buy for beginners with little money. If you want to learn about special stocks that can give you a 100x return, check out our report on cheapest AI action.

Our methodology

To create our list of the best stocks to buy for beginners with little money, we first created a list of 20 stocks recommended by the financial media. We then sorted them by the number of hedge funds that bought the stock in Q2 2024 and selected the stocks with the most hedge fund investors.

Why are we interested in the stocks that hedge funds invest in? The reason is simple: Our research has shown that we can beat the market by mimicking the top stock picks of the top hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (See more details here.)

A group of business people discuss plans at a conference room table displaying the logo of a financial services company.

JPMorgan Chase & Co. (NYSE: JPM)

Number of hedge fund holders in Q2 2024: 111

JPMorgan Chase & Co. (NYSE:JPM) is the world’s largest private bank by total assets. Unlike regional U.S. banks, it benefits not only from a global presence in consumer and corporate banking, but also from a presence in lucrative investment and capital markets. This allows JPMorgan Chase & Co. (NYSE:JPM) to diversify its business and position itself as a leader in changing economic conditions. For example, between 2021 and 2023, when interest rates rose sharply, JPMorgan Chase & Co.’s (NYSE:JPM) revenue increased from an already significant $122 billion to $155 billion, or 27%. This is a sign of strong management, as mega companies are unable to post revenue growth by an average double-digit percentage. From the end of 2021 to the close of 2023, JPMorgan Chase & Co. (NYSE:JPM) shares are up 7.4%, while the stock is up 23% year to date. This latest gain reflects investor hopes for a rate-cutting cycle that could boost equity markets and provide significant catalysts for JPMorgan Chase & Co. (NYSE:JPM). However, if markets see a recession on the horizon, the stock could suffer as investors price in the potential for higher credit losses.

Vitava Fund mentioned JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2023 investor letter. Here’s what the fund said:

“Last spring, the United States went through a brief banking crisis that cost the lives of several smaller and mid-sized banks. One of these, First Republic Bank, with $230 billion in assets, went into receivership and was bought out by the largest U.S. bank, J.P. Morgan. The terms of the takeover were very favorable to JPM, and the fact that few, if any, other banks could have taken over First Republic Bank in its entirety in its current state while guaranteeing over $100 billion in deposits played a role. JPM could do it. It is not only the largest, but also the strongest U.S. bank by balance sheet, and, in our opinion, clearly the best-run. It came out of that crisis even stronger. We have been actively following the banking sector for 20 years in many countries around the world. We believe that a well-run bank can be a very good long-term investment, but it is better to focus on the best and highest quality. Banking is not a sector where it pays to trade quality for lower valuations. That is why we hold JPM.”

Total JPM takes 5th place on our list of the best stocks for beginners on a budget. While we recognize JPM’s potential as an investment, our belief is based on the belief that some AI stocks offer greater promise for higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than JPM but are trading at less than 5 times earnings, check out our report on cheapest AI action.

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Disclosure: None. This article was originally published on Insider Monkey.