Best stocks to buy in 2021

Last updated: 17.05.2021
Dominic Hawker
Author:
Dominic Hawker
Adviser
CFD & Trading
Experience
> 30 years

There is no denying the impact the Covid-19 pandemic has made on the economy during 2020, so now that we seem to be making headway out of the worst of it, where has that left the stock market?

Once you know the answer to that question, several equally important ones follow on. Which are the best stocks to buy now and how will they fare for the rest of 2021? We don’t know all of the answers, but what we have found out might help you to look in the right direction.

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nextmarkets investors

  • Stock market sectors
  • Top five best stocks to buy - sectors
  • Current trending stocks
  • Make use of a watch list
  • Be a stock trader in 2021
  • 2021 considerations

Stock market sectors

You may, or may not know if you’re just starting out, that the stock market is divided into eleven sectors, as defined under the Global Industry Classification Standard (GICS):

  • Energy
  • Materials
  • Industrials
  • Utilities
  • Health care
  • Financials
  • Consumer discretionary
  • Consumer staples
  • Information technology
  • Communication services
  • Real estate

There is no relevance to the order of the list above; you will often see it posted online in a different order. There is also a competing system, the ICB (Industrial Classification Benchmarks) with a slightly different list, but the sectors remain the same. 

Just for the record, there are also further divisions, amounting to 24 industry groups, 69 industries, and 158 sub-industries. However, what is relevant to you as a trader is that within each sector, similar types of companies are grouped together. 

The reason stock market sectors are important is because they can give you a good idea of how certain types of businesses are performing, rather than trying to second-guess by following one particular example.

Top five best stocks to buy - sectors

Following on from trends set throughout 2020, at the end of the first quarter of 2021 the top five best-performing stock sectors look like this:

Information technology, Health care, Consumer staples, Communication services, and Consumer discretionary.

It is quite easy to see why those sectors came out right at the top of the list and by a good margin. However, 2020 was not exactly a typical year and the start of 2021 was a little shaky too, so it is debatable how long that particular list will remain valid. 

As global Covid vaccine programmes are now well underway and lockdowns are slowly but surely being lifted, the rest of 2021 is going to be a case of ‘watch this space’. It is certain to be an interesting year ahead, with trends likely to go haywire and for those of you who use a news trading strategy, our guess is you are going to be kept very busy.

Best forex broker - Nextmarkets

Make use of a watch list

Just to pick on one of those influences and give you a typical example of a catalyst, we will look at AMC based on share performance over the last 12-month period. In April 2020, you could buy AMC stock at just over $2 per share.

 For most of 2020 it held fairly steady, but then in February 2021, its shares suddenly hit a tad under $20. Why may you ask? Well the major influence was retail traders discussing AMC in a Reddit chat room, believe it or not.

If you want to do any more homework, then one company that has seen some real highs and lows in recent months is GameStop. A year ago you could buy GameStop stock for next to nothing. It was pretty much flat lined for most of 2020, but if you take a look now, it is an entirely different picture, with ups and downs all over the show.

GameStop is far from being blue-chip, but the sudden surge in its share prices made some happy traders a fat profit. Unless you have a substantial portfolio behind you, it is the smaller but promising businesses that are really worth keeping an eye on and the shares are usually available at much more affordable prices too.

Be a stock trader in 2021

The last few months of 2021 are certain to be challenging as none of us really knows what is just around the corner. Let’s face it, a lot went on in 2020, not least of which was a global pandemic and Brexit, both causing some unusual stock trends. 

You may well be new to trading and are reading this to soak up knowledge, or perhaps you are a veteran that simply likes to keep his eye on the ball. Either way, by constantly reading new material, you are certain to pick up a few tips along the way. In the meantime, here are a few reminders about what you should strive for.

Time

One answer springs to mind straight away and that is time. However, time in the trading world can be construed in several different ways.

  • The hours you spend on trading
  • How you spend them
  • Being prepared to get up early and stay up late
  • Knowing the opening hours for the global stock exchanges

And that is just a few of the time-related matters that traders must account for. Successful traders don’t do office hours, or sit on the beach in Hawaii looking at their bank accounts self-loading! What they do in real life is pull all-nighters when necessary and work or research seven days a week.

Knowledge

What we mean is not simply what you already know about trading; it’s an awareness that there is always something more to learn. Some of the best (and wealthiest) stock traders in the world spend time every day learning something new.

Always keep abreast of the economic and financial news. That does not mean you have to be glued to your TV set 24/7, just make a habit of checking in periodically at various times of the day and don’t forget to keep an eye on social media too.

Keeping track

As well as being able to see your profit and loss at a glance, keeping a record of your trading activities can help you to see which of your strategies are paying off and which could do with some improvement.

If you are a professional, you will also need to keep records that are suitable to submit as a part of your annual tax return; it’s no fun trying to get them put together shortly before the deadline is looming.

Money

Making plenty is the aim, but using your available capital wisely will help you along the way to achieving that goal. Your trading strategy should always allow for unexpected circumstances, such as needing to hold stocks for longer than anticipated to avoid a loss. Also, if you fail to consider your risk tolerance at all times, your capital will not last very long.

Temperament

Not everyone is cut out to be a stock trader, or any other sort of trader for that matter, but those who succeed and do well have something in common – the ability to trade unemotionally and logically, which is a must. 

Enjoy trading 

If you seek out stocks that genuinely interest you, perhaps in a specific stock sector, you will certainly find trading more of a pleasure than most other occupations. However, do be aware of a mistake that some stock traders make, which is forming an attachment to their stocks. You must curb the urge to do this, just think like a car salesman instead, they are in your portfolio to make you money after all.

2021 considerations

The way that 2020 went down was a shock not just to the economy, but to investors across the world. At the start of 2021, things are looking up with the Covid vaccine programmes well on target, but as we have all learned, things can change very rapidly.

The tech sector is still holding fast at much higher levels than a year ago, but some are already describing those successes as a ‘bubble ready to burst’. At this time more than at any other, it is essential to keep a close eye on the news and to observe what is trending on social media as well. Use Nextmarkets to find out which are the best stocks to buy.

Best stocks FAQs

💲 Which are the best stocks to buy Amazon or Google?

There’s plenty to consider before you choose between the shares of two respected companies whose stocks are always sought after, but more suited to those with a fat portfolio. However, you don’t need to be rich to get started in stock trading either, find out how by reading our guide to stock trading to see exactly what we mean.

💷 Are penny stocks real stocks?

Yes, they are real shares in real companies which are available for purchase at less than $5. However, they are not listed on the stock markets. If you want to know more facts about stock trading and how to decide if a particular stock is worthy of your investment, then check out our 2021 stocks guide here along with plenty of other useful information.

💹 Which is the most reliable stock sector?

There is very little about any financial market that can be described as reliable. Even stocks that appear to have been stable for a long time can change direction radically in a very short period. Find out more about stock trading in general, along with plenty of facts on a variety of stocks to watch in 2021.

📊 How do you decide which stocks to buy?

There are lots of different ways you can decide, as well as reasons that some stocks might suit your portfolio better than others. You can find out everything you need to know about investing in stocks in 2021 by reading our informative guide.

🏸 Are stock CFDs better than buying real shares?

Stock CFDs, also known as stock derivatives, are different financial instruments and are more readily accessible to retail traders than company shares. It is important to understand the differences between these two products and you can do that by taking a look here, where you will find numerous helpful guides covering all types of trading.

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