Even if you have $500 to invest, you can find good opportunities in the financial sector, from growth to value to income.
With markets soaring after the Federal Reserve’s big interest rate cuts, Wall Street may feel like there’s nothing good to invest in. After all, the major market indexes are breaking records, suggesting that perhaps an overly enthusiastic investor base is currently running the show. But don’t despair. If you look hard enough and think about what’s going on today, you can still find investments worth buying. Even if you only have $500 in your pocket, here are three candidates you can consider.
1. Berkshire Hathaway is doing big things.
The most obvious factor first: Buy Berkshire Hathaway (BRK.A 0.42%) (BRK.B 0.72%) Class A shares, which are trading at more than $685,000 per share. However, $500 is definitely not enough. But $500 is enough to buy B stock, which is trading around $455. So don’t despair if you want to trade with Warren Buffett, the oracle of Omaha.
The key to understanding Berkshire Hathaway is that it is so large and diverse that it is very similar to a mutual fund. From this perspective, there is no right or wrong time to buy because what you are buying is Buffett’s approach to investing. Of note is that he tends to be opportunistic. What’s interesting right now is that Berkshire Hathaway is selling a lot of stock in some of its big winners, including Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC). This will further strengthen the company’s already large cash holdings, which amounted to more than $270 billion at the end of Q2 2024.
The bad news here is that Buffett may think there is a significant risk of a bear market. The good news is that he is saving cash that he can use for new investments at better prices in the future. If you’re a value-oriented investor, it might not be a bad idea to invest alongside Buffett in a market that looks a little frothy.
2. Visa is an attractively priced growth stock
Over the past decade, Visa (V 1.28%)’s earnings have grown at around 10% per year. That sounds pretty good. Earnings per share expanded at 15% per year over the same period. That’s even better! The fortunes of any company aren’t all upwards, but Visa is still in a good position despite its long-term success. A key part of that is its position as one of the world’s two largest transaction processors. Growth investors should be interested here, but there’s more to the story.
Visa’s price-to-sales ratio is currently about 16.9 times, but the five-year average is 17.7 times. The price-to-earnings ratio is approximately 30.9 times, compared to the long-term average of 34 times. The dividend yield is modest at around 0.7%, which happens to be near the high end of the historical yield range. Overall, Visa is a growth stock that looks relatively cheap, even though its price is near all-time highs. It’s worth digging into it now, before more investors wise up.
3. Real estate income is a boring dividend turtle
Realty Income (O 0.40%) has trademarked the nickname “The Monthly Dividend Company.” This shows a huge commitment that will reward investors handsomely for persevering. To this end, the company’s monthly dividend has been increased every year for 29 consecutive years. Again, this record is unlikely to stop, thanks to investment-grade rated balance sheets and the status of real estate investment trusts (REITs) as the largest players in the net lease niche (net leases allow tenants to (need to pay most of the level’s operating costs)).
Large size and strong financial strength provide significant advantages in real estate investing, as real estate income provides easy access to low-cost capital. This generally means you can compete aggressively for deals and still make a profit. The REIT, on the other hand, has a highly diversified portfolio, with assets in the US and Europe, and includes exposure to retail and industrial real estate. Add in a high dividend yield of 5%, and income investors will likely find this boring stock quite exciting. To be fair, yield makes up the majority of returns, and dividends only increase slowly over time. But if you’re trying to live off dividend income, it probably doesn’t matter much to you.
Don’t give up, there are options if you look for them.
When the market looks expensive, it can be easy to give up, especially if you don’t have a lot of money to spend (like $500 or $1,000). But you can still find interesting stocks like Berkshire Hathaway B shares, Visa, and Realty Income. Each is suitable for different types of investors, but each has something worth digging into if you’re looking to invest today.
Bank of America is an advertising partner of The Motley Fool’s Ascent. Reuben Gregg Brewer holds a position in the real estate revenue sector. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Realty Income, and Visa. The Motley Fool has a disclosure policy.
