If you are considering a stock gift for college student in your life this holiday season, think about what makes a good starter stock. The best stocks for new investors are the ones they still want 50 years from now, when they are old and gray investors.
Here’s why Berkshire Hathaway (NYSE-BRK: A), (NYSE-BRK: B), Netflix (NASDAQ: NFLX), and the Vanguard S&P 500 ETF (NYSEMKT: VOO) The perfect trio for a college investor.
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1. Berkshire Hathaway
Berkshire Hathaway had a disappointment in 2020. It failed S&P 500 index and sat at a record $ 147 billion in cash through one of the largest stock market sales in history. But the reason is not to give your college child a Berkshire Hathaway Class B shares gift to help them earn a quick buck next year or two. The goal is to give them a dose of Warren Buffett’s investment wisdom.
Buffett has always told investors to look elsewhere if short-term profits are what they are after. It is recommended that you only buy Berkshire shares if your retention period is five years or more. Being a shareholder in the Buffett company is the right way for new investors to learn that buying and holding strategy. Since 1965, it has provided complex annual returns just north of 20%.
One reason for its performance is so good in the past year, as well as a few such catches Apple, historically, it has stayed away from technical stocks, which have led the S&P 500 to rise recently. The focus has always been on strikers in industries such as financial services and consumer goods (think American Express and Coca-Cola) it is clear that they are not going anywhere.
While the 90-year-old Buffett seems to be giving more stock-raising authority to investment managers Todd Combs and Ted Weschler these days, his annual letters to shareholders still need to be read to investors. investment everywhere. Yes, they could be read on the internet by the non-Berkshire shareholders out there. But his words will bring more magic to younger investors as they learn how his philosophy is to make their money grow.
2. Netflix
College age students are old enough to remember the days when you got Netflix mostly through a red envelope, but young enough they may not remember life without it. Being a brand that will have a lifelong experience (along with having its shares skyrocketed over 50% since January), Netflix is a stock that students will be thrilled to have.
The company finished its third quarter with 195 million supporters, boosted by people spending more time at home. Its shares have risen more than 50% year to date. CEO Reed Hastings admits slower growth in 2021, but there are plenty of reasons to bet on Netflix’s long-term success.
While 195 million registrars feel overwhelmed, that’s also less than 10% of global households. In fiscal 2020, it has almost doubled its revenue in India, home to the world’s fastest growing overhead video streaming (OTT) market. Netflix has a large fan base worldwide, with approximately 63% of subscribers living outside the US and Canada.
Plus, its large membership base makes it easy to get huge cash sucks with price increases so small that most customers barely notice. Even if Netflix doesn’t add one new subscriber in 2021, it will bring in an additional $ 2.3 billion by raising prices by about $ 1 per month for most customers.
With a movie theater presence unlikely to bounce back even after a pandemic, Netflix is a stock college that students will want to keep long after wearing their hats and gowns, even if 2021 will deliver irrelevant results.
3. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF is a trading asset, rather than a stock. It may look daunting, but it’s an elegant option for teaching a newbie about what’s closest to making an investment commitment.
Like any asset that follows the S&P 500 index, Vanguard’s assets will move in a gray phase with the broader stock market. You can expect ups and downs, but an average year will yield results of about 10%. The amazing thing about investing over the index is that over a 20 year investment period, there will always be a good return no matter when you have invested.
S&P 500 index fund is a great way for people with little knowledge of stocks to start building wealth. (Of course, this is how Buffett thinks most people should invest.) Really, you can’t go wrong with low-priced S&P index funds here. But with its minuscule cost ratio of 0.03%, Vanguard assets are a solid choice.