The old saying of “it takes money to make money” doesn’t apply to investing anymore. The democratization of Wall Street now allows investors with as little as $50 to invest in stocks to buy.
Even better, the elimination of transaction fees means all of your money is being put to work for you as soon as you buy a stock. No longer do friction costs eat away at your buying power. And there has never been a better time to invest.
Numerous free, online tools are at every investor’s fingertips, and more information is freely available now more than ever before. It makes sifting through the thousands of publicly traded stocks to buy as easy as it has ever been.
Yet investors still need to use caution. Just because you can buy a stock doesn’t mean you should. Particularly investors with little money to spare need to ensure they are putting their cash to work in businesses that will grow an initial grubstake into a formidable nest egg down the road.
If you only have $50 available, and you don’t need the money for bills or emergencies, then the three stocks to buy below are a great place to begin your investment journey.
AT&T (T)
Telecom giant AT&T (NYSE:T) is the first stock to buy with your $50. Going for less than $20 a stub at the moment, AT&T is ringing up growth. The stock is up 15% over the past year. But add in its dividend that yields a generous 6% annually, and AT&T’s total return surpasses 24%.
Chief Financial Officer (CFO) Pascal Desroches told an industry conference recently the telecom finds itself in “a really unique position.” According to Fierce Wireless, AT&T owns both its wireless and fiber networks allowing it to undercut the pricing of the competition.
“Our cost per bit over time, because we own both networks, will be lower than our peers,” the industry site quotes Desroches words.
AT&T is targeting 30 million fiber locations by the end of 2025. It already reached 27 million in the first quarter after recording 252,000 net additions. It was the 17th consecutive quarter of over 200,000 net adds.
T stock trades at a deep discount going for 10 times earnings, 8 times estimates, less than twice its sales and a bargain-basement 6x free cash flow (FCF). It makes AT&T a stock to buy today.
Bank of America (BAC)
One of the country’s biggest banks, Bank of America (NYSE:BAC) is an institution that is actually benefiting from the current high interest rate environment. Because it boosts net interest income, banks don’t mind too much that the Federal Reserve is dragging its feet on cutting rates.
Yet, that’s not to say banks are unaffected by high rates. Bank of America saw its unrealized losses on loans spike as the Fed raised rates at an unprecedented rate. However, because most of those losses are unrealized and they sit in its held-to-maturity portfolio, it means the bank can probably recover most or all of their value by the time they mature. After initial concern about the losses, the market went all-in on the bank.
Bank of America stock is rollicking higher, up 20% year-to-date (YTD) and over 40% greater than where it stood a year ago. While BAC stock’s price-to-earnings ratio of 14 is higher than it was last year it is within the range it has traded in over the past decade. Similarly, its price-to-book of 1.2 is up but also within historical norms.
As shares go for $40 a pop today, Bank of America is a stock to buy with your $50 bill.
SPDR Portfolio S&P 500 ETF (SPLG)
If you can scrape together just $15 more to invest then I recommend SPDR Portfolio S&P 500 ETF (NYSEARCA:SPLG), an exchange-traded fund (ETF) that mimics the broad market index.
Run by State Street (NYSE:STT), which launched the very first ETF back in 1993, SPLG is one of several S&P 500 ETFs in the family but arguably one of the better options. Although State Street already has the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY), it offers SPLG because it offers slightly cheaper expense ratios than the competition. Also, where SPY, Vanguard S&P 500 ETF (NYSEARCA:VOO) and S&P iShares Core S&P 500 ETF (NYSEARCA:IVV) all trade over $500 a share, SPLG goes for $65 a share as of this writing.
Investing in an S&P 500 ETF is a great way to start your investment journey. It offers instant diversity across the 500 biggest stocks on the market as well as across industries, all at a relatively low expense ratio. Just buying the index fund would be a perfect investment strategy for most investors and you can forego the trouble of trying to find individual stocks to buy.
On the date of publication, Rich Duprey held a LONG position in T stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
