Most New Investors Pick the Wrong Stocks First. Here's What I'd Buy Instead.

I'll be the first to say it's all too easy for new investors to become overly excited about a particular stock. The market's bullish buzz can paint it as a must-have name regardless of its price, or the underlying company's realistic growth prospects.

A name like Space Exploration Technologies comes to mind. Indeed, you may have made your foray into the stock market because you had a shot at participating in its initial public offering (IPO). Or there's Nvidia, which has drawn a massive amount of bullish attention since 2023 due to its role as the supplier of most of the computer processing tech at the heart of most AI data centers. The stock's performed very well during this time frame.

The fact of the matter is, however, Nvidia is an exception rather than the norm. Plenty of seemingly similar revolutionary ideas never actually pan out. At the same time, when ChatGPT was launched in late 2022, few people fully understood just how quickly artificial intelligence would become as big as it is now. A bunch of new investors gambled on the wrong tickers and lost during this stretch, while a bunch of other people missed out on opportunities.

Invest for the unknown

That's why you invest for the unknown at least as much as you speculate on what seems like the known. And investing for the unknown looks a whole lot different than the portfolios that new investors often build around a small handful of (if not just one) hyper-speculative positions.

The good news is, whether you were on the sidelines or tossed around by all the volatility during this time, you're not out of luck. There's never a bad time to start or restart investing. The key is just doing it right, by avoiding the hype that's often so intoxicating and instead beginning -- and ending -- with stocks you know will perform well in the long run.

To this end, here's a rundown of five names that aren't exactly exciting, but are easier to own simply because it's clear what they do, and what they are worth.

My five-stock starter portfolio

Actually, there are six (seven, technically) tickers I want to suggest for newcomers, the first of which isn't a conventional company at all. Rather, it's a broad investment in almost the entire U.S. stock market. That's either the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) or the Vanguard S&P 500 ETF (NYSEMKT: VOO), both of which are meant to mirror the performance of the S&P 500 index (SNPINDEX: ^GSPC).

This foundational holding doesn't require you to do anything other than buy it and sit on it indefinitely, plugging you into an index that's averaged an annual net gain of 10% over the past several decades. Some years are better than others. Some years are even losers. If you can remain patient and stick with it for the long haul, though, its past performance is a reasonably good indication of what to expect from it in the future.

As for the actual individual stocks to consider once your foundational position in the S&P 500 is established...

Qualcomm

You may know it as a mobile phone brand, but that's not what Qualcomm (NASDAQ: QCOM) does anymore (although it does license its name and some of its mobile tech out to third-party makers). Rather, Qualcomm's big business now is high-performance computer processors capable of handling light-duty AI work, turning laptops and even smartphones into true generative AI devices. You'll also increasingly find its hardware in automobiles, and even robotics.

That being said, although it's far from being a powerhouse in this business yet, Qualcomm is addressing the artificial intelligence data center processing market now as well; its processors excel at inference.

QCOM shares haven't performed consistently well of late, largely because investors, as well as Qualcomm itself, are trying to figure out its place is within the AI landscape, or for that matter, what the landscape itself look like. The answers to those questions are getting a little clearer every day, though.

BlackRock

You may be more familiar with BlackRock (NYSE: BLK) than you realize. This is the company that manages the iShares family of exchange-traded funds.

It's an often-misunderstood business. Contrary to a common assumption, the investment management industry is rarely based on performance. BlackRock simply needs to ensure the funds it offers reflect what investors are demanding, and then convince those investors to remain patient even when those funds are losing ground.

And BlackRock is very good at doing that. As of the latest look, it had $15.3 trillion worth of assets under its management, all of which produce recurring revenue that ultimately supports growth as well as dividend payments that currently translate into a respectable forward-looking yield of 2.1%.

Roku

The streaming industry's highest-growth days are in the rearview mirror. In fact, I would argue that it's fully saturated, especially in North America. This obviously works against streaming giants like Netflix and streaming players like Walt Disney.

There's one name that's perfectly positioned to thrive on the streaming industry's continued existence regardless of how much it grows, however. That's Roku (NASDAQ: ROKU), which supplies the platform -- and even TVs -- needed to deliver streaming content to streaming subscribers. Its revenue was up 22% year over year for the three months ending in June, extending a margin-widening growth streak despite the streaming business's congestion.

Walmart

Walmart (NASDAQ: WMT) shares have underperformed since May, and I more or less get why. Its sales growth is slowing. Investors panicked.

This setback, however, is more of an opportunity than an omen.

See, an investment in Walmart isn't really a bet on its near-term results. It's not even really a bet on its long-term potential (which is certainly more promising than its recent results imply). Holding a stake in Walmart is essentially a bet that the company can do a number of constructive things with its sheer reach, here and abroad.

As of the latest look, about 90% of the U.S. population lives within 10 miles of a Walmart store or Sam's Club warehouse, which is a big reason why, according to a recent study done by Dunnhumby, a record-breaking 72% of Americans now regularly shop at one of its stores. That's more than twice the penetration of its nearest competitor.

Brookfield Infrastructure

Last but not least, I'd recommend new investors own a stake in Brookfield Infrastructure (NYSE: BIPC) (NYSE: BIP) mostly for its dividend. While the forward-looking yield of 5% is respectable even if not thrilling, what is thrilling is the company's touted commitment to raising its annual dividend payment somewhere between 5% and 9% for the indefinite future, with some help from targeted internal rates of return (on deployed capital) between 12% and 15% per year.

Brookfield Infrastructure privately owns several different infrastructure businesses, from railroads to gas transmission lines to digital data storage, just to name a few. It's attractive to investors simply because it offers access to opportunities that might not otherwise be available, just because they're not publicly traded.

Just make sure you're buying the right Brookfield Infrastructure... the one that uses the ticker "BIPC," which is the conventional stock. The other one -- BIP -- is structured as a partnership version of the same company, which can create some tax-reporting headaches that may or may not be worth the hassle.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BlackRock, Netflix, Nvidia, Qualcomm, Roku, Vanguard S&P 500 ETF, Walmart, and Walt Disney. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.