The old adage “it takes money to make money” no longer applies to investing: the democratization of Wall Street has allowed investors to purchase shares for as little as $50.
Even better, the elimination of transaction fees means that all of your money starts working for you as soon as you buy a stock. No longer will frictional costs eat away at your purchasing power. And there’s never been a better time to invest.
With numerous free online tools at the fingertips of every investor and more information available for free than ever before, sifting through thousands of publicly traded stocks and buying them has never been easier.
But investors still need to be careful: Just because you can buy a stock doesn’t necessarily mean you should. Investors with less cash to spare need to make sure they’re putting their initial capital into a business that will grow into a bigger stash down the line.
If you only have $50 on hand and don’t need the money to pay bills or for an emergency, buying these three stocks is a great way to start your investing journey.
AT&T (T)
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Telecommunications giant AT&T (NYSE:T) is the first stock you can buy for $50. Currently trading for under $20 per share, AT&T continues to grow. The stock is up 15% over the past year. Add in a generous 6% annual dividend yield and AT&T’s total return is over 24%.
CFO Pascal Desroches recently said at an industry conference that the telecommunications company is in a “very unique position.” AT&T owns both the wireless and fiber-optic networks, which allows it to offer service at lower prices than its competitors, according to Fierce Wireless.
“Because we own both networks, our cost per bit will be lower than our peers in the long run,” the industry site quoted Desroches as saying.
AT&T has a goal of reaching 30 million fiber optic locations by the end of 2025. It has already reached 27 million, with a net addition of 252,000 locations in the first quarter, marking the 17th consecutive quarter that it has exceeded a net addition of 200,000 locations.
T stock is trading at a bargain price: 10 times earnings, 8 times estimates, less than 2 times sales, and 6 times free cash flow (FCF), making AT&T the stock to buy now.
Bank of America (BAC)
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As one of the largest banks in the United States, Bank of America (NYSE:BAC) is a financial institution that is actually benefiting from the current high interest rate environment. Because banks are increasing their net interest income, they are not really bothered by the Federal Reserve’s reluctance to cut interest rates.
That doesn’t mean banks aren’t immune to high interest rates. Bank of America saw a surge in unrealized losses on its loans as the Fed raised interest rates at an unprecedented pace. But because most of those losses were unrealized and in held-to-maturity portfolios, banks may be able to recover most or all of their value by maturity. After the initial fears about losses, the market fully invested in the bank.
Bank of America shares have been soaring, up 20% so far this year and more than 40% above where they were a year ago. BAC’s price-to-earnings ratio of 14x is up from last year but still within the range it has traded in over the past decade. Similarly, its price-to-book ratio of 1.2x has also risen but is also within historical ranges.
Currently, with stock prices at $40 a share, Bank of America is a stock you can buy with a $50 bill.
SPDR Portfolio S&P 500 ETF (SPLG)
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If you can spare just $15 more to invest, I’d recommend the SPDR Portfolio S&P 500 ETF (NYSEARCA:SPLG) , an exchange-traded fund (ETF) that mimics a broad market index.
Run by State Street (NYSE:STT), which launched its first ETF in 1993, SPLG is one of a family of S&P 500 ETFs that is arguably one of the better choices. State Street already has the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY), but is offering SPLG because it has a slightly lower expense ratio than its competitors. And while SPY, Vanguard S&P 500 ETF (NYSEARCA:VOO), and S&P iShares Core S&P 500 ETF (NYSEARCA:IVV) all trade for over $500 a share, SPLG is priced at $65 a share as of this writing.
Investing in an S&P 500 ETF is a great way to start your investment journey, providing instant diversification across the 500 largest stocks in the market and a variety of industries, all at a relatively low expense ratio. Simply purchasing an index fund is the perfect investment strategy for most investors, eliminating the need to go through the hassle of finding individual stocks to buy.
As of the publication date of this article, Rich Duprey held a long position in shares of T. Opinions expressed in this article are those of the author and follow InvestorPlace.com’s publication guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Rich Duprey has been writing about stocks and investing for the past 20 years. His work has appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance and has been quoted in numerous U.S. and international media outlets, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, and L’Express.
