If you clicked on this article because you invest or are thinking about doing so, then you're already ahead of the average American.
- 50% of American households don't have a retirement account.
- 40% of working Americans are not saving for retirement.
- 25% of households have no savings whatsoever.
- 7.7% of people don't even own a bank account.
So before getting to the issue at hand -- i.e., the one stock I recommend to beginning investors -- you deserve to be congratulated. Unlike the majority of your peers, you've acted responsibly by squirreling away extra cash, and now you're ready to put that money to work in the market.
Time to take the plunge
Investing for the first time can be a harrowing experience, with thousands of stocks to choose from -- let alone mutual funds, ETFs, derivatives, and all sorts of other investments.
Yet if you're like the rest of us, you were attracted to the stock market in the hope of turning a quick and easy profit. After all, how hard could it be to pick a stock that sells for $10 today only to turn around and sell it for $20 next week or next month? Do that a few times, and you'd be ready to retire.
I ask these questions rhetorically, because this isn't how the market works in the real world. Expecting a big payoff is nothing but speculation -- the same thing you do at a horse race. The famous value investor Benjamin Graham probably said it best: "If you speculate, you will lose your money in the end." So save speculation for the racetrack, where you can also enjoy libations and revelry to boot.
The truth behind successful investing
The keys to beating the market and getting fabulously rich while doing so are patience and discipline. According to Warren Buffett, the chairman and CEO of Berkshire Hathaway
Perhaps some examples would help illustrate this point.
Let's look at a speculative bet first. Dryships
On the other side of the equation, you have market stalwart McDonald's
What about that 1 stock?
Now that we're comfortable with this distinction, let's talk about the one stock I think you should buy for your first investment: Procter & Gamble
This is the most boring and unoriginal idea you've ever heard, right? Well that's the point. Your first few stock purchases should build the core of your portfolio. As such, you want them to be solid, stable holdings that -- most importantly -- don't lose money. There are two basic rules to investing according to Warren Buffett: "Rule No. 1 is never lose money. Rule No. 2 is never forget rule No. 1." And given the opportunity to have your cake and eat it to, you want a core holding that throws off a little cash every quarter via dividends that you can then use to reinvest and grow your portfolio.
Needless to say, Procter & Gamble fits this bill like a glove. It's a Fortune 500 corporation with a successful track record dating back to its founding in 1837. It owns 24 billion-dollar brands ranging from Tide laundry detergents to Gillette razors and more. Its globally diversified selling consumer products in more than 180 countries around the world. And it pays a respectable 3.3% dividend yield that you can take to pursue more speculative ventures if you're so inclined. Thus, while it's impossible to predict the future, so long as there is one, it seems highly likely that P&G will still be around selling its wares.
Want one more recommendation?
If you're on the hunt for another great stock to purchase for your young portfolio, take a look at our recently released free report titled: "The Motley Fool's Top Stock for 2012." It profiles an up-and-coming retailer that people are already calling the next "Costco of Latin America." To access this report while it's still available, click here now -- it's free.
Foolish contributing writer John Maxfield does not own shares in any of the companies listed above. The Motley Fool owns shares of Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of McDonald's, Procter & Gamble, and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.