Investing for Beginners: Buy What You Know

Congratulations! Taking on the stock market can be a daunting task. But it doesn't need to be that way. By starting with companies you already know, investing for beginners is much more manageable. Let's take a look at four familiar companies that you could start your portfolio with today.

Disney (NYSE: DIS  )

Source: mydisneyadventures, via Wikimedia Commons.

Most people associate Disney with two things: its amusement parks and its movies. Although those two are certainly parts of Disney's empire, they actual only account for 44% of its business.

Instead, the biggest part of Disney's success comes from its media networks: the Disney Channel, ABC, and ESPN. ESPN and the Disney Channel, in particular, are big hits around the world. So when you buy shares of Disney, you're buying a part of all these things: the TV stations, the theme parks, the movies, and the toys sold from the movies.

An added bonus of investing for beginners is the realization that some companies pay you to own their stock. It's called a dividend. Disney paid its shareholders $0.75 for every share they owned last year.

Coca-Cola (NYSE: KO  )


Source: Hariadhi, via Wikimedia Commons.

Ask anyone who has done extensive travelling and they will tell you: Coke's brand is everywhere. In fact, Interbrand -- a company that studies the value of brands internationally -- says that Coke's brand alone is worth almost $78 billion. That's the largest of any company in the world.

And Coke owns a lot more drinks than just its signature Coca-Cola products. Sprite, Fanta, Fresca, Vitamin Water, PowerAde, Dasani, Honest Tea, and Odwalla juices are all owned by Coke. As long as the world is thirsty, Coke should be doing just fine. And like Disney, Coke plans on paying its shareholders a dividend -- in the latter's case, $1.12 in 2013.

Google (NASDAQ: GOOGL  )

Source: Antonio Zugaldia, via Wikimedia Commons.

It would be hard to find someone who hadn't found the answer they were looking for by "Googling it." The company is synonymous with Internet searches, but it also has lots of other products you are familiar with: Gmail, Google maps, YouTube, and the Android operating system on smartphones.

Google makes most of its money by displaying advertisements alongside your searches. Companies are willing to pay big bucks to advertise with Google because Google has collected so much information on us that it is able to send the right ads to the right users at the right time. That's valuable stuff. And with the company always looking for ways to innovate -- like Google Glass -- this stock is a solid bet for your future.

eBay (NASDAQ: EBAY  )

Source: Denis Grgecic Valput, via Wikimedia Commons.

A lot of people think that eBay is all about online auctioning, and that its business is slowly being taken away by Amazon. People who think that are wrong on two levels.

First, eBay's auctioning format is fundamentally different than what Amazon offers. And business from eBay's auctioning site is doing quite well: Over the last two years, revenue from the site is up 30%. 

The second reason people don't quite understand eBay is because they don't realize that the company owns PayPal. The online payment option is safe, easy, and effective. As more and more people use PayPal, eBay gets paid a small sum from each transaction. Those small sums add up: Last year, the company brought in more than $5 billion from PayPal.

Continue learning!
One of the most important things to understand about investing for beginners is the importance of dividends. Sometimes dividends are high, sometimes they are low, and sometimes they don't exist at all.

 In order to understand what it all means, I suggest checking out our special free report: "5 Dividend Myths... Busted!" In it, you'll learn which stocks provide premium growth and whether bigger dividends are better. Click here to keep reading.


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  • Report this Comment On May 17, 2013, at 9:57 AM, longjon123 wrote:

    I get the purpose of the article. However, I'm not sure how much money the author thinks a beginning investor would be starting with. How many shares of Google do you suppose that person could afford?

  • Report this Comment On May 17, 2013, at 4:49 PM, TMFCheesehead wrote:

    @longjon123-

    Fair enough. I guess it might take a while for the beginning investor to save up for that.

    Brian Stoffel

  • Report this Comment On May 18, 2013, at 11:20 AM, Curlywhirlyfool wrote:

    I set up a separate account and put a little aside each week towards saving for a big stock purchase. I now have 1 Google stock that I bought at $500.00.:-D I wish I could have gotten more but that's okay. I also had saved up for 1 Berkshire class B at $3500.00 I was happy when it split and continue to be happy. It It is doable.

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