Many financial advisors, when asked how young people should invest, would say that such investors should be risk-seeking. The idea is that they have the benefit of time and that any losses will be overshadowed by big winners. Ideally, such investors will be farther ahead than their more risk-averse peers once they both become a bit older. Those same advisors will recommend that those investors then switch to steadier growth and lower-risk equities.
The complete opposite is the advisor who recommends a high proportion of investment in exchange-traded funds (ETFs) that track indices like the S&P 500 and perhaps a growth sector for some risk. And while ETFs are always a strong bet, I’m going to focus on individual picks for a college graduate. These will be moderate choices as they have both the potential for substantial growth and less downside.
Best Stocks for College Graduates: Alphabet (GOOG)
Alphabet Inc. (GOOG, GOOGL) and Google logos seen displayed on smartphones. The Google stock split is happening today.
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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock is a fairly easy pick to make. It is an excellent performer now and it should remain so for the foreseeable future.
Alphabet is going to continue to face significant scrutiny as a consequence of its size and practices. Perhaps someday that will drastically change the trajectory of the firm and stock, but it hasn’t yet. So, let’s assume it has decades of continued growth and dominance ahead.
Critics like to knock Alphabet and Google for the smaller issues. Most recently, it was the notion that Google was losing advertising relevance as YouTube ad revenue slipped due to short-video competition. Google always seems to adjust well. That’s precisely what’s happening now.
The point here is that Alphabet is as strong at leveraging its moving parts and adapting as any firm. The company will remain relevant for a long time and its other bets make it a growth firm, as well.
Johnson & Johnson (JNJ)
A red Johnson & Johnson (JNJ) sign hangs inside in Moscow, Russia.
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Investing in Johnson & Johnson (NYSE:JNJ) stock is definitely on the more conservative side of things. It is routinely noted in lists about dividend stocks and stocks for bearish economies.
For one, dividends are something college graduates and all young investors should seek to understand. The extra income they provide on top of any returns can be reinvested, creating a powerful compounding effect. Two, young investors are currently experiencing a bear market. For some, this may have been their first such experience. The upside with Johnson & Johnson is that stocks in the healthcare sector tend to significantly outperform bear markets. So, not only could it save them money, but it could help teach them a valuable lesson.
The other thing to note is that Johnson & Johnson has performed very well over the past decade. Even without factoring in the effects of dividends, JNJ stock has provided an average 12.84% annual return over that period. In other words, $1,000 invested 10 years ago would be worth $3,346.81 today.
Best Stocks for College Graduates: Apple (AAPL)
Close-up of Apple (AAPL) retail store Logo in Honolulu at the Ala Moana Center. Advertising the latest generation of the ipad, iphones, and ipods with a Retina display.
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College graduates should invest in Apple (NASDAQ:AAPL) stock because it is simply a great company. Let’s start with the same idea of 10-year returns as above. Apple has shown massive annual growth that has averaged 22.19% annually over the last decade. $1,000 invested a decade ago would now be worth $7,420.
Past is not prologue, but let’s say today’s college graduate is able to sink $10,000 into Apple and leave it alone for a decade. By the time they are in their early 30s, they could logically have $70,000. That could be used for something life-changing, like a down payment on a home purchase.
Another strong reason to believe in Apple is its association with the legendary Warren Buffett. Apple stock is by far the biggest holding in his portfolio, accounting for more than 40% of its total value.
Procter & Gamble (PG)
Procter & Gamble Union Distribution Center. P&G is an American Multinational Consumer Goods Company
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Procter & Gamble (NYSE:PG) stock is a lot like JNJ stock. Both possess a strong, reliable dividend and both tend to fare well in weak markets. Let’s assume our college graduate investor is at the very beginning of their investment journey. If that’s the case, PG stock is one of the very best to impart the idea of beta and its value.
It carries a five-year monthly beta of 0.39, according to Yahoo! Finance. That means it moves about 39% as much as the broader market. In weak markets, like the one we’re experiencing, it is likely to move downward 61% less than a broad index like the S&P 500, for example.
Indeed, it is faring much better than the overall markets in 2022. Factor in its dividend and the notion that consumer packaged goods firms weather recessions better, and Procter & Gamble is a smart choice for today’s college graduate investor.
Best Stocks for College Graduates: Tesla (TSLA)
TSLA stock: Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.
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The stock of electric vehicle (EV) pioneer Tesla (NASDAQ:TSLA) has not done well in 2022. Electric vehicle stocks have faced a decline as questions of stretched valuations continue to bounce around.
Nevertheless, Tesla is a pioneering force in the world of electric vehicles. That means something. Legacy manufacturers are scrambling to catch up and are quickly retooling production lines to produce their own EVs and get in on the next evolution of automobiles.
Regardless of what many think of Elon Musk, he will go down as a pivotal figure in the automotive world. It was his drive and ambition that brought Tesla from nothing to the most valuable car stock in the world. It is highly unlikely that his firm or its stock are going anywhere.
Now that it is well established, it is unlikely that TSLA stock can provide the near 60% annual returns it did over the past decade. But it remains a very important name in automobiles today.
Visa (V)
several Visa (V) branded credit cards
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Say Visa, (NYSE:V), and most people will automatically think of credit cards. True, fees on transactions drive much of its business. That isn’t going to change and college graduates probably know as much.
But the company is also factoring in the pandemic-driven increase in digital payments. Chief Financial Officer Vasant Prabhu believes secular trends in digital payments have been accelerated by about a year based on data. The point here is that young investors should understand that Visa dominates the current payments landscape and has the resources to carve out a strong position as the sector evolves.
Visa suffered during the pandemic as higher fees charged for international transactions slowed due to lockdowns. It may stagnate for some time again as the economy looks to weaken further. But it is still a great name for any portfolio.
Best Stocks for College Graduates: The Southern Company (SO)
the southern company logo displayed several times on a screen
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College-age investors should also understand the value of utilities equities. Southern Company (NYSE:SO) stock is one to consider. It generates and sells electricity across Alabama, Georgia, Florida, and Mississippi. It also acquires electricity-generating assets, including renewables, and sells power into the wholesale market.
It is a very stable business model noted for steady performance in all market conditions. An investment in SO stock would have slightly more than doubled if left alone for the past decade. But again, that is absent of the effect of its dividend that currently yields 3.79%.
The other reason to consider Southern Co. is that its geographical footprint is well-positioned. The southern states it operates in have seen rapid growth as people migrate from other areas.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
