At a time when equity markets are in turmoil, it would be smart for investors to make small bets. These bears have been in charge of late, and the bulls can’t find footing. And until the indices clearly find footing, investors should expect that it continues. Therefore, avoid swinging for bullish home runs so to avoid the giant mistakes. When in doubt, allocate risk in small doses and miss having large financial headaches. And one way to do this is to focus on the best stocks to invest in under $500 this year.
Of course, low price stocks doesn’t mean there wouldn’t be losses. Regardless of how small the bet is, we could still lose 100% of our investment. Therefore, due diligence is as necessary a step when compiling this list, and central now is the state of the overall macroeconomic conditions. Those have worsened mainly because of rhetoric from the Federal Reserve. They have seemingly waged a full assault on investor confidence by threatening unlimited rate hikes.
Moreover, consumers spending may have fallen off a cliff, the self-fulfilling prophecy came to fruition. The economy was too healthy and people were spending too much. That’s why the Fed embarked on its war against us. Now, we’ve all cinched our belts and I expect the badness to reverberate throughout the Wall Street and Main Street.
Earlier this week, it was announced that U.S. economic activity “has turned negative.”. If this happens again in the following quarter, it would likely officially announce a U.S. recession. Meanwhile, stocks have already crossed the recession threshold weeks ago.
So, now we take small positions that could pay well. And the idea is to find the best stocks and invest under $500 for the second half. In aggregate this bunch of smaller stocks has suffered even more. The Russell 2000, for example, is down 30% from the highs. It is not unusual for small-caps usually to move faster than the larger indices. So when the markets stabilize, this collection of stocks should rally even faster in relative terms. They fell first, they fell hardest, and they are likely to rebound also in the lead.
Thus, let’s dive in a take a closer look.
|SOXL||Direxion Daily Semiconductor Bull 3X Shares||$11.38|
|BITO||ProShares Bitcoin Strategy ETF||$12.02|
Meta Platforms (META)
My instinct during this correction is to first seek quality and for cheap. With that in mind, Meta (NASDAQ:META) fits the bill on the first part. This is the behemoth of social media, which is the predominant trend reshaping humanity. Additionally, they have now fully committed to a new direction, right into the metaverse. And, there is no doubt that when it comes to leadership, it’s top-notch in its industry.
As for the cheap part, Meta stock now sports a price-earnings ratio (P/E) of around 13. That is not usual and it will revert higher eventually. Since the markets are still falling, though, META stock might have less to fall. It has already hit the pre-pandemic levels, while Apple (NASDAQ:AAPL) still has 40% lower to go. Then, when the indices find footing, META stock will also likely have some catching up to do. Therefore, it is my first best stock to invest $500 now waiting for the turn.
The financial metrics support my claim of quality. They have averaged over 30% revenue growth without bloat, and they generate almost $60 billion in cash from operations. That is a cash cow that can withstand a few rate hikes without much chagrin.
Direxion Daily Semiconductor Bull 3X Shares (SOXL)
Picking winning stocks is tricky, so a safer approach would be to throw a blanket trade. In this case, I am adding semiconductors to my list of best stocks to invest $500 today.
The semiconductor industry has been suffering from shortages since the global shutdown of 2020. This has also contributed to the inflation problem, so I expect it to start easing. Meanwhile, the semi stocks are falling incessantly for weeks. The Direxion Daily Semiconductor Bull 3X Shares (NYSEARCA:SOXL) is my vehicle to bet on a reversal.
This ticker moves three times faster than the basket of stocks it tracks. Inside of it are great companies like Nvidia (NASDAQ:NVDA), so it inherits quality from that. The fundamental of its constituents are not in question. Furthermore, this week we will hear from Micron (NASDAQ:MU) about their earnings. So the sector may move in sympathy, too.
Because of this uncertainty, I would only take half the position now. This is also a good idea when dealing with a three-time accelerator factor. These mega exchange-traded funds (ETFs) move fast, so they don’t forgive mistakes. The NASDAQ has a must-hold weekly level just below here. Losing that would open a massive trap door. For that also I want to be patient by not deploying the full lot at once.
ProShares Bitcoin Strategy ETF (BITO)
Every time Bitcoin (BTC-USD) corrects, the experts call it dead. Yet, each one of those opportunities delivers tremendous rallies. Luckily, we now have a ticker that would allow retail investors to bet on that rally once more. ProShares Bitcoin Strategy ETF (NYSEARCA:BITO) is an ETF that directly tracks the price of Bitcoin. Portfolios should have a bit of everything, so why not crypto? It’s not going away folks, and future money will be digital. For now, Bitcoin is the chief coin in charge so I will invest in it.
This correction in crypto started last fall. We’ve been tracking it since then, and we had a potential target near $19,000 for BTC-USD. Now that it hit, we have further information that suggests that it could extend a bit lower. The next leg down is not certain, so I suggest to nibble now and adding more a few weeks later. If the goal is to deploy $500, I would not risk more than half at current levels. Leaving room to add is better than doubling down and exceeding the $500 allotment later.
I won’t spend much time arguing why Bitcoin should exist or not because it is immaterial for this purpose. Even the riskiest asset is a safe investment if the amount at risk is only $500. Every portfolio deserves a bit of speculation in it. The rebound rally can be substantial, even if it is one-third of the way back.
On the date of publication, Nicolas Chahine 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.