Please ensure Javascript is enabled for purposes of website accessibility

2 of the Best Stocks to Buy Now With $500

By Neil Patel – Oct 15, 2021 at 11:30AM

Key Points

  • Investing what may seem like a small sum of money can give your portfolio a healthy boost.
  • Etsy is a thriving e-commerce platform selling handcrafted goods to buyers all over the world.
  • Square offers both individuals and merchants an easy-to-use financial services tool.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Choosing to invest your hard-earned capital in the stock market can be one of the best financial decisions of your life.

The most important first steps to financial freedom include paying off high-interest debt and stashing away an emergency fund worth at least six months of expenses. After this, putting capital into long-term investments is a worthy option to consider. 

Even a relatively small sum of money can make a big difference over time. If you have $500 you're ready to invest, then look no further than these two top stocks.

Person holding a smartphone with stock chart on the screen.

Image source: Getty Images.

The online marketplace for unique goods 

Thanks to growth in e-commerce and consumer support for small businesses, handmade and vintage item seller Etsy (ETSY 5.41%) has benefited greatly. During the first six months of 2021, the e-commerce platform has seen gross merchandise volume (GMV) rise 53% to $6.2 billion, revenue jump 64% to $1.1 billion, and net income soar 122% to $242 million over the same period last year.

The company now has 5.2 million active sellers and 90.5 million active buyers transacting on its platform. Both of these figures are up meaningfully from the second quarter of last year. 

The potential ahead is still huge. There is a $27 billion online marketplace for Etsy's types of wares -- anything from apparel and crafts to home décor and toys. According to a 2020 survey, 88% of Etsy buyers say they find items on the site that they can't find anywhere else. The value proposition is strikingly clear. Habitual buyers -- those that had six purchase days and spent at least $200 during the last 12 months -- grew 115% in the latest quarter. Increasing engagement from its most loyal customers is a very positive sign for Etsy. 

And for sellers, Etsy's platform offers remarkable flexibility. Many can shift operations and start selling whatever is in high demand at any particular time -- such as face masks in 2020. The company also provides valuable services like Etsy Ads and Etsy Payments to help these entrepreneurs run their small businesses. 

While Etsy has buyers and sellers from all over the world, management is currently focusing on seven core markets: the U.S., U.K., Canada, Germany, Australia, France, and India, all of which present a colossal $1.7 trillion market. And the recent acquisitions of Depop, a secondhand fashion reseller, and Elo7, a Brazilian online marketplace, should only boost Etsy's long-term prospects. 

Etsy's stock is up more than sevenfold since it went public in 2015. But over the past six months, it has basically been flat as investors perhaps worry that an easing pandemic could cause the company's growth to slow. I think these fears are overblown, particularly because Etsy offers a truly differentiated shopping experience and has a strong competitive position in the e-commerce space. 

Person checking out with contactless payment on phone.

Image source: Getty Images.

Disrupting the financial services industry 

Digital payments are taking off, and Square (SQ 6.14%) is riding this trend to new heights. Revenue for the digital payments processor soared 143% year over year in the most recent quarter after skyrocketing 266% in the first quarter. Square processed $42.8 billion in gross payment volume (GPV) in the most recent quarter, up 88% from the same period last year. Over the past 12 months, GPV has totaled nearly $140 billion, making Square a formidable player in pushing forward the cashless economy. 

This leading fintech operates a booming, two-sided ecosystem that includes both individual and business customers. Its popular Cash App, which allows users to send and spend money, set up direct deposit, and buy and sell stocks as well as Bitcoin, now counts 40 million monthly active users. For sellers, Square offers a broad assortment of software, hardware, and financial services tools to help them accept payments and manage other aspects of their businesses. Larger sellers, or those with annualized GPV of at least $125,000, accounted for 65% of payment volume in the quarter. 

Square's ability to strengthen the connection between its Cash App and seller ecosystems puts the business in a strong position. Cash App Pay, which was launched in September, lets Cash App customers check out at Square merchants using their balances for both in-person and online transactions. And the integration of "buy now, pay later" leader Afterpay's 16.2 million consumers and nearly 100,000 merchants onto Square's platform gives users another checkout option. 

Management believes that the global revenue opportunity for Cash App is at least $60 billion and for sellers is more than $100 billion. With trailing 12-month sales of $15.9 billion, the business clearly has a long runway ahead of it. And consider that cash is still the most widely used form of payment worldwide. 

Like Etsy, Square has been a monster winner since it went public in 2015, rising an incredible 1,720% since then. During the past six months, however, the stock has dropped 9%. Investors have the chance today to buy shares in a business that Wall Street analysts expect will grow earnings more than sevenfold from 2020 through 2023. It seems like a no-brainer decision. 

Neil Patel owns shares of Bitcoin and Etsy. The Motley Fool owns shares of and recommends AFTERPAY T FPO, Bitcoin, Etsy, and Square. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.