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Put Your Coronavirus Stimulus Check to Work With These 3 Stocks

By Jamal Carnette, CFA - Dec 20, 2020 at 10:50AM

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If Washington politicians are in the mood to play Santa, ensure you're taking full advantage.

After months of pointing fingers and blaming each other for the impasse, legislators are finally moving forward on a coronavirus relief bill. One of the recent developments is that the $900 billion bill will likely include another round of stimulus checks, smaller than the first round ($600 per person).

In today's Washington, it's a good idea not to consider anything final until the money is deposited in your account. A tweet, smirk, or even a fresh round of polling from the Georgia Senate races could quickly change the narrative. That said, it's increasingly looking like Uncle Sam is on his way to delivering Christmas presents to taxpayers. 

The economic effects of COVID-19 have been horrible, and many people need the stimulus money to survive. However, if you're one of the 150 million that were lucky enough to stay employed through this pandemic, it's possible you've found yourself with a little extra savings due to lower gas bills and fewer entertainment costs like eating out.

While you're stuck inside, it's a good idea to put that money to work for the long term. Three stocks investors should consider with their coronavirus stimulus checks are Apple ( AAPL 3.16% ), Microsoft ( MSFT -1.79% ) and the iShares S&P 500 ETF ( IVV -1.90% ).

A $100 dollar bill with Uncle Sam wearing a Santa hat.

Image source: Getty Images.

You likely own Apple and Microsoft, but here's why you should own more

If you have a 401(k) or any other mutual fund, it's likely you have some exposure to tech stocks Apple and Microsoft. As the No. 1 and No. 2 largest companies by market capitalization in the U.S., these stocks are in most of the largest mutual funds, particularly those designed to track the S&P 500 or those with a mandate to buy growth stocks.

Still, there's a case to be made for investing directly in both stocks. Recently, Apple increased iPhone production by 30% due to a huge demand surge caused by the coronavirus pandemic. But iPhone sales are only the beginning, as Apple has been opportunistic about using its devices as a gateway to higher-margin and stickier services revenue.

Apple debuted its services bundle dubbed "One" in October, which will likely turbocharge subscription revenue. Increased device sales and service sales should drive the stock higher over time.

Likewise, Microsoft has a long runway for growth. While many investors know the company for its Office suite of products, Microsoft has also aggressively moved into cloud computing. Its Azure product is the only serious challenger to Amazon Web Services. Both stand to grow as the long-term trend for off-site storage and computer functions will continue to win, especially in a work-from-anywhere environment. In the short run, Microsoft also has revenue catalysts like the launch of the newest Xbox console and the continued growth of Microsoft Teams.

You don't have to choose just one stock

If you don't want to choose between Apple or Microsoft as an investment for your coronavirus stimulus check, the good news is that you don't have to. If you're a new investor or just craving instant diversification, an exchange-traded fund is the way to go. One of the more popular ETFs is the iShares S&P 500 ETF, which aims to track the broader S&P 500. Even better, because the S&P 500 is a market-capitalization weighted index, buying this ETF will give you immediate exposure to Apple (6%) and Microsoft (5%), along with 498 other companies.

In years past, there was a penalty to this kind of instant diversification: fees. However, in the last decade, competition and the advent of the ETF has led to a significant reduction in expense ratios across the board. For the iShares S&P 500 ETF, this fee is only 0.03%, or $0.18 a year for a $600 stimulus check. That's a small price to pay for instant diversification.

'Tis the season, it appears... but make no mistake, Santa's address isn't in Washington, D.C., and politicians aren't in the business of helping the retail investor. If they're sending you a check, take full advantage and make sure it's money well invested.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

iShares S&P 500 ETF Stock Quote
iShares S&P 500 ETF
IVV
$457.63 (-1.90%) $-8.87
Apple Inc. Stock Quote
Apple Inc.
AAPL
$165.30 (3.16%) $5.06
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$330.59 (-1.79%) $-6.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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