Don't limit your options. You can follow the crowd with your investments and still not take on too much risk. There are highly popular stocks among Robinhood investors, for example, that are relatively safe picks.
I'll admit, however, that I don't always practice what I preach. A few weeks ago, I wrote about three of the safest Robinhood stocks to buy. But I limited my options. I intentionally excluded some alternatives that rank among the 100 most popular Robinhood stocks.
Now that I've seen the error of my ways, though, I'd like to fix it. If you're looking for the safest Robinhood stock of all, there's one pick that's the hands-down winner.
Image source: Getty Images.
Honorable mentions
Before I get to the indisputable safest Robinhood stock to buy, I'd like to acknowledge the three stocks I wrote about previously. They certainly deserve to receive honorable mentions.
Johnson & Johnson (JNJ +0.43%) is the biggest healthcare company in the world. It's a Dividend King with an impressive 59 consecutive years of dividend increases. The company is diversified across several major areas within the healthcare sector, including consumer health, medical devices, and pharmaceuticals. J&J has shown that it can weather storms over the long run.
Microsoft (MSFT 0.43%) ranks as one of the largest technology companies in the world. It also offers diversification across multiple high-growth areas, including artificial intelligence, cloud hosting, gaming, and work-from-home collaboration.
Walmart (WMT +0.45%) also is worthy of an honorable mention. It's the biggest retailer in the world. The company thrives even during challenging economic periods. Walmart continues to adapt to changes in the retail market remarkably well.
I stand behind my picks of J&J, Microsoft, and Walmart as the safest Robinhood stocks to buy -- if we use a purist definition of stock. However, the list of the 100 most popular stocks on Robinhood actually doesn't just include stocks. Several exchange-traded funds (ETFs) also make the ranking. They're technically not stocks, but they trade just like stocks do.
Robinhood doesn't exclude ETFs from its most popular list. I don't think investors should rule them out, either. There are several attractive ETFs in Robinhood's top 100. Two really great picks are the SPDR S&P 500 ETF Trust (SPY 1.22%) and the Vanguard 500 Index Fund ETF (VOO 1.34%). However, as good as these two ETFs are, they aren't the safest choice.
The hands-down winner
So what is the safest pick among the Robinhood 100 most popular holdings? It's the Vanguard Total Stock Market Index Fund ETF (VTI 1.37%), which I'll refer to by its ticker, VTI, for short.
VTI seeks to track the performance of all stocks traded on U.S. stock exchanges. ETFs that track the S&P 500 index own positions in the 500 biggest U.S. stocks. VTI includes those stocks plus nearly 3,300 other stocks.
Remember how I cited Johnson & Johnson's diversification in healthcare and Microsoft's diversification across multiple technologies as positives? VTI offers even greater diversification across every industry.
I like S&P 500 index ETFs, but sometimes these large-cap stocks don't perform as well as small-cap and mid-cap stocks. That's not a problem for VTI: It owns them all. This diversification across stocks of different sizes makes the ETF safer over the long term.
Some ETFs charge high annual expense fees. That's not the case with Vanguard ETFs and especially not with VTI. Its annual expense ratio is only 0.03%.
Instead of pulling an April Fool's joke this year, The Motley Fool recommended a portfolio of 20 "high-conviction Foolish stocks designed to make money over the long run." The list included a few ETFs. The very first recommendation was, unsurprisingly, VTI.
There's no such thing as a risk-free, 100% safe investment. However, among the 100 most popular on Robinhood, you won't find an alternative that's safer than VTI.
