The S&P 500 Is Not Enough: My 3-Stock Starter Portfolio for New Investors

Are you new to the stock market? Maybe you’re watching from the sidelines, looking for the right picks to start with. Or perhaps you’re still just trying to learn the mechanics of buying a stock.

Wherever you are in your journey, I’m sure by now you’ve heard the virtues of owning an index fund like the SPDR S&P 500 ETF Trust (SPY -0.42%) or the Vanguard S&P 500 ETF (VOO -0.43%), both of which simply mirror the performance of the S&P 500 (^GSPC -0.47%) itself. This index is a proxy for the near-entirety of the stock market in that it holds stakes in 500 different stocks that make up more than 80% of the market’s total value, which means while your position in an S&P 500 index fund will never beat the market, it won’t underperform it either. You’ll simply match its long-term average annual gain of 10%, with some years better than others.

I’d never deny that buying and holding a true “forever” position in an S&P 500 index fund is a little bit… shall we say, ho-hum? Picking a couple of individual stocks can make matters much more interesting.

To this end, I’ve got a batch of great all-around stock picks that would be ideal for new investors whether you want to add them to a portfolio that already holds an S&P 500 index fund or if you’re starting with a blank slate.

But first things first. How does one actually start investing?

Getting started

First and foremost, you will need a brokerage account or an individual retirement account (or IRA). These two different kinds of accounts are both capable of holding individual stocks, although the latter defers any taxation until money is withdrawn from them.

In many ways, investment accounts look and navigate much like ordinary online bank accounts, although they are distinctly different; most new investors aren’t ready for the idea that one single account can hold multiple assets, including the cash that’s needed to fund the purchase of a new stock pick. These accounts are also opened and funded much like checking accounts and savings accounts, with checks, or even online or wire transfers.

Although most major banks offer brokerage services, you will most likely want to utilize a reputable brokerage house like Charles Schwab or Robinhood, which charge little or nothing in fees for buying and selling shares. Their websites make it pretty easy to establish an account.

As for buying — and eventually selling — a stock, the process is surprisingly intuitive. If you can navigate most websites, you can walk yourself through the process of trading stocks. Assuming you’re trading online, once you’re logged into your brokerage account or IRA, look for something like “trade,” “buy,” or “sell” on your navigation menu. To start, click on buy, and the platform will take you through the process by asking you how many shares of a particular stock you want to purchase. Don’t worry! In almost all cases, the process will make sure you’ve got enough money in your account to pay for the trade. It will then double-check to make sure you’ve entered the numbers you intended to.

Once you’re ready to sell a stock you own, just walk yourself through the reverse process, plugging in the number of shares you’d like to exit. Again, your trading platform will confirm your numerical entries with you before completing the transaction. Most platforms will also highlight potential problems, like not having enough funds to cover a trade or not actually owning enough shares of a stock you may be trying to sell.

That’s it. If that’s not intuitive enough, however, all online brokers offer very plain explanations on their websites of how their trade-entry screens work. You will still need to figure out which stocks you actually want to buy though, which can be done in a number of ways.

On that note…

3 stocks for new investors

Obviously I make no guarantees; all investments pose some measure of risk. There’s a handful of stocks, however, that I think bring more potential upside than risk to the table, particularly at their current prices.

1. Alphabet

Google parent Alphabet (GOOG -0.72%)(GOOGL -0.63%) is one of the biggest and highest-profile technology companies in the world. Its shares are sure to remain volatile. If you can be patient though, there’s a long-term payoff for the obvious reason: Google remains the dominant name in web search. Search-based advertising alone accounts for more than half of Alphabet’s total top line. And, all the Google-branded services combined — including YouTube — make up nearly 80% of the company’s revenue. While Alphabet is making waves on the artificial intelligence (AI) front, the preferred gateway to the worldwide web remains its (highly profitable) breadwinning business. This business is clearly here to stay too.

2. GE Vernova

GE Vernova (GEV +0.23%) isn’t exactly a household name, but that’s ok. I’ve found that sometimes something a bit off the radar is exactly what a portfolio needs.

First and foremost, yes, this is one of the offshoots of the iconic industrial conglomerate General Electric that finally broke itself up into smaller, more manageable pieces back in 2024. GE Vernova is the power-production branch of that sprawling outfit. It makes natural gas power turbines, wind turbines, and a range of other electrification solutions, including the software that manages it all.

Today’s Change

(0.23%) $2.26

Current Price

$999.35

Key Data Points

Market Cap

$266BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$973.37 – $1027.00

52wk Range

$530.16 – $1195.94

Volume

12.1K

Avg Vol

2.3M

Gross Margin

20.16%

Dividend Yield

0.18%

It’s not a sexy business by any stretch of the imagination. In fact, it’s a little bit boring. It’s got teeth though. No matter how the world might change, we will always need cost-effective electricity.

This might help convince you: As of the middle of this year, GE Vernova’s backlog of future business just waiting to be delivered and booked grew by $13 billion to $176 billion compared to revenue of only $11.1 billion for the quarter in question.

3. Berkshire Hathaway

Finally, I’d suggest buying a stake in Berkshire Hathaway (BRKA +0.92%) (BRKB +0.95%) if you’re a new investor and just getting started.

It’s something of a cheat code. Rather than buying into a specific company’s operation as you would with an individual stock, you’re stepping into several, privately owned and publicly traded businesses, most of which were hand-picked by the brilliant Warren Buffett himself. Although he’s no longer in charge, his philosophy still guides the organization’s decisions and likely will for a long, long time.

Buffett’s whole approach is extreme patience paired with extra-picky stock selection, of course. The thing is, it works. Although it’s not been so hot of late, long-term, Berkshire shares have a track record of beating the broad market.