2023 tax season has come and gone meaning it is time to consider 2024 contributions to your IRA. That will include some mix of Index and mutual funds, ETFs, bonds, and individual stocks. The maximum contribution in 2024 is $7,000 for those under 50 years of age and $8,000 for those 50 and older.
While most investors will be primarily mixing funds and bonds many will also be picking individual stocks to add to their IRAs. How much money an investor dedicates to individual stocks within an IRA is largely a function of risk tolerance. Generally speaking, the higher that contribution, the more risk and reward it entails.
That said, let’s look at some of the better individual stocks to choose when considering IRA contribution limits in 2024.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) stock is going to be one of the most popular large cap choices in an individual IRA in 2024. Many investors will have exposure to Microsoft through various index funds and ETFs. However, here we’re advocating for purchasing MSFT shares on an individual basis as part of an individual retirement account.
Frankly, investing in Microsoft should be an easy choice. Analysts recommend purchasing Microsoft on a near unanimous basis. It’s generally expected that the value of those shares should rise by between 20% in a base case scenario and by as much as 50% should things rapidly improve.
There’s plenty of reason to believe in that best case scenario when one looks at the firm’s most recent earnings report from April 25. Revenues grew by 17% and net income increased by 20%. Thus, it’s entirely logical to believe that the value of the stock will rise by 20% moving forward. I like Microsoft because its AI fueled Cloud growth is a particular bright spot. Otherwise, investors should continue to consider Microsoft for its blend of growth and scale that has rarely been rivaled in the past.
Realty Income (O)
Realty Income (NYSE:O) represents an excellent individual stock choice within an IRA, especially for income-oriented investors. Each share includes a dividend yielding 5.6% paid as a monthly dividend. The beauty of a monthly dividend is that it includes three times as many distributions meaning greater opportunities to compound gains.
Realty Income is also well-positioned defensively. Although the company is very retail oriented, it is highly recession resistant. The vast majority of its tenants operate in recession resistant sectors. That generally includes grocery stores, dollar stores, drugstores and other retail categories that tend to be non-cyclical in nature.
The other thing to note about Realty Income is the structure of the leases it signs with its tenants. They tend to be longer, usually on the order of 10 years. Further, the triple net agreements place many of the cost responsibilities on the tenants themselves. That leaves more money for investors and shareholders in the end.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) will continue to show up on lists and articles discussing the best stocks to invest in. Whether it’s related to Warren Buffett or defensive positioning and anticipation of a weakening economy, Coca-Cola is generally well regarded.
It’s that ladder notion – a potential economic weakening – that bears discussion. A lot of the issue centers around the ongoing fight against inflation. The Federal Reserve has not had as much success in the last few months as it would have liked. That leads some to believe that inflation will be much more persistent than initially believed.
I believe Coca-Cola is uniquely positioned to benefit from that ongoing issue. First of all, Coca-Cola is one of the best defensive stocks there is. It tends to weather economic downturns better than the vast majority of the stock market. Further, consumers continue to buy Coca-Cola products despite higher prices brought on by inflation. In fact, the company raised its guidance for 2024 due to that fact. If inflation will indeed continue to prove more sticky than initially believed, Coca-Cola looks uniquely positioned to thrive regardless.
Apple (AAPL)
Apple (NASDAQ:AAPL) continues to deal with a period of stagnation and slowing sales. The news there isn’t all bad by any means. while Apple’s sales and earnings did decline on a year-over-year basis, each also bested guidance.
Apple decided to placate investor worries by increasing its share buyback program while simultaneously increasing its dividend by 4%. So, Apple is trying to introduce greater share price stability via more conservative means. The market seems to have appreciated the efforts. However, that is not the only reason to buy Apple at the moment.
The company remains tight-lipped about its AI plans. CEO Tim Cook is likely to divulge the details about Apple’s AI future at the firm’s Worldwide Developer Conference (WWDC) in June.
The best time to have invested in Apple would have been a few days ago before the share buyback announcement. However, all is not lost. Apple’s shares are strengthening again as it appears dedicated to stability. That, along with the potential for a price spike in June suggest that investors should buy in the interim.
Amazon (AMZN)
It’s difficult not to like Amazon (NASDAQ:AMZN) stock at the moment. Aside from the ever persistent threat of anti-monopoly litigation there’s very little to dislike. Amazon has largely avoided that threat for so long that it’s probably better to just ignore it wholesale. Instead, investors should focus on its earnings report and what it says about the company’s future.
Sales increased by 13%, rising to $143.3 billion. The company’s Cloud service – Amazon Web Services – continues to thrive. As good as those numbers are, the focus is really all about artificial intelligence.
The company announced a generative AI based assistant intended to speed software development. That AI assistant should be particularly powerful from the perspective that it leverages Amazon’s AWS cloud. The company concurrently announced Bedrock, a fully managed AI service for quickly building and launching applications.
Those developments – along with strong results – suggest that Amazon is an excellent individual stock choice in any IRA.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) stock continues to face a bevy of headwinds that have pulled its share prices lower by about 15%. Those headwinds include news that its Blackwell chips might ship later than initially anticipated, disappointing guidance from rival AMD (NASDAQ:AMD), and ongoing concerns regarding when in 2024, if at all, rate cuts will occur.
Buy it anyway because it is one of the best individual stocks to have in your IRA or otherwise. The simple fact remains that until another firm produces better AI chips than Nvidia does, there’s no reason to doubt the company over the mid and long-term. The artificial intelligence boom continues to be the greatest opportunity for investors of this generation.
Nvidia dominates demand for the chips that power the AI boom. However, Nvidia’s strengths extend beyond chips alone when it comes to AI. The company is rapidly moving into the artificial intelligence fueled humanoid robots sector. The Project GR00T foundational model is going to be an interesting theme to follow. Nvidia has clearly affected the data center space and may ultimately disrupt the entire economy down to the factory floor.
American Express (AXP)
American Express (NYSE:AXP) is arguably the best choice of the top three credit card stocks. Actually, if you follow the returns it’s inarguable that it’s the best. American Express has outperformed Visa (NYSE:V) and MasterCard (NYSE:MA) in 2023. That outperformance spans back more than 5 years and suggests that American Express will continue to outperform its rivals.
That logically begs the question of why American Express has been able to outperform other credit card stocks. My theory is that it relates to credit worthiness. American Express serves a higher income consumer base which is more credit-worthy. The risk of non-payments and defaults is much lower and as a result AXP shares simply outperform.
Frankly speaking, any of the major three credit card stocks are good choices for the purpose of an IRA investment: each is relatively stable and well exposed to fintech growth opportunities. However, for all of the reasons I just discussed, American Express stands head and shoulders above the other two.
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.com Publishing Guidelines.
