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The Smartest Financial Stocks To Buy With $200 Right Now
Thanks to fractional shares and commission-free trading, anyone can invest these days, whether you've got $200 or $2 million. Investing can be risky and time-consuming, so it's a good idea to start investing as early as possible and with a smaller amount of money so your losses don't impact you too much financially.
It's generally a good idea to invest only what you can afford to lose, especially if you're considering putting your money into individual stocks. That way, you can gain investing experience firsthand and painlessly.
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Here are two of the smartest financial stocks to buy with $200.
1. Wells Fargo: Finally positioned for offense
There are four large money-center banks in the U.S., and Wells Fargo (NYSE: WFC) is one of them. These money-center banks have trillions in assets, are considered too big to fail, and generally pay solid dividends. They aren't going to grow like a high-flying artificial intelligence (AI) stock, but it's a good idea to have a few bank stocks in your portfolio.
Since 2018, Wells Fargo has operated under an asset cap imposed by banking regulators as punishment for its phony accounts scandal, where bank employees opened millions of bank and credit card accounts without customer consent. This restriction prevents the bank from growing its balance sheet, which is one of the main ways banks make money -- growing loans and generating interest income from their loan portfolios. After a lot of work, it looks like Wells Fargo is close to getting the asset cap removed.
Bloomberg recently reported that the bank sent the Federal Reserve a third-party review of its new framework for the company's internal control process to ensure that incidents like the phony accounts scandal never occur again. The submission is considered a key step in the journey toward asset-cap removal.
Wells Fargo's CEO Charlie Scharf, who came aboard in late 2019, has done a good job overhauling the bank's regulatory infrastructure while stripping out expenses, focusing on the bank's core U.S. franchise and enhancing returns. Scharf has also begun to improve higher-returning businesses that the bank hasn't taken full advantage of previously, like credit card lending and investment banking.
While the stock has performed well in anticipation of asset-cap removal, and it still could take time for regulators to remove the asset cap, Wells Fargo is finally positioned to play offense for the first time in a long time. The bank should be able to grow its dividend, as well, which is currently in the bottom half of its peer group.
2. Robinhood Markets: A fintech and crypto-growth play
While Wells Fargo and other large banks offer more stability, Robinhood Markets (NASDAQ: HOOD) will give you exposure to a growth company that can ideally grow faster than its peers. Robinhood revolutionized the idea of commission-free trading before it became popular. The company now has over 24 million funded accounts and roughly $152 billion in assets under custody.
Robinhood has become a favorite among retail investors and has a "uniquely differentiated growth opportunity," according to analysts at Barclays. Robinhood has begun to serve its customers in more ways through individual retirement accounts with a promotional contribution match of 1% to 3% when they open the account and may offer robo advisory services soon.
The company also has the opportunity to become a big player in the crypto space. President-elect Donald Trump's administration is expected to provide a more favorable regulatory backdrop for crypto, allowing Robinhood to sell more cryptocurrencies on its platform. The company also has opportunities to expand its trading operations into new financial instruments, like futures, and in other unique areas, like sports betting.
The stock has surged since Trump won the election and isn't exactly cheap, trading at nearly 37 times forward earnings. However, the growth opportunities are real, and the company has already developed a strong brand and following among retail investors, so it definitely has an advantage over others looking to get into the space.
Should you invest $1,000 in Wells Fargo right now?
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Wells Fargo is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
