A wise investment in the stock market doesn't require you to have thousands of dollars on hand. In fact, even if you have just $500 to invest, you can still build your portfolio in uncertain market times and put your money to work.
If you're looking for ways to invest $500 in the stock market, here are two top stocks to consider scooping up right now.
1. Etsy
Etsy (ETSY 0.49%) is one of a long list of pandemic favorites that have fallen out of favor with investors lately. With shares down more than 50% in the past year, you might be wondering whether it's time to buy the stock or give up on this e-commerce marketplace. I would maintain it's the former.
Growth stocks like Etsy have seen their share values depressed across the board in recent months, although some admittedly more than others. And in some cases, you might be able to say those valuation drawdowns were wholly justified, but that's not the case for Etsy.
In the most recent quarter, the company reported revenue growth of 11% year over year, while its gross profit jumped 9%. Active sellers on the platform jumped 42% year over year, and active buyers, while increasing at a lesser rate, still rose 4%. The company has also accumulated an impressive stockpile of cash. At the end of the second quarter, Etsy had $1.0 billion in cash and investments on its balance sheet, and it continues to generate cash with $530 million of free cash flow in the past year.
While I personally don't think it was reasonable to expect Etsy's pandemic-level momentum to sustain itself indefinitely, its underlying business and growth prospects remain incredibly compelling. Etsy is still a leader in its slice of the e-commerce world with its focus on unique and handmade products, many of which you can't find elsewhere. As of the most recent numbers available, roughly 94 million buyers and more than seven million sellers globally rely on the Etsy platform.
Its acquisitions of companies like the fashion resale marketplace Depop are a continuation of this theme that can reap growth many times over for Etsy in the years ahead. While a company like Etsy may be vulnerable to certain external headwinds brought about by fluctuations in consumer spending, high inflation, and fears of a recession, its family of platforms are also the very ones that buyers may flock to for purchasing more affordable specialty items or pre-owned goods instead of mass-produced items from larger retailers in a turbulent economic environment.
2. Poshmark
Keeping with the e-commerce theme, Poshmark (POSH) doesn't have as narrow a niche as Etsy, but its foothold in the secondhand retail market makes it an intriguing stock to consider for a long-term investment.
Poshmark makes it incredibly easy for individuals around the world to list everything from pre-owned clothing to certain pet products and electronics on its marketplace. Sellers can easily connect with interested buyers while hosting Virtual Posh Parties to market their listings. And with Poshmark providing everything from pre-paid shipping labels to seamless integrations with apps like Snapchat that can maximize sales potential, it's not hard to see why the platform has become so popular.
Poshmark isn't profitable at the moment, and it reported negative free cash flow of $3.5 million in the second quarter. On the flip side, net revenue rose 9% year over year, while gross merchandise value increased 8%, and active buyers for the trailing-12-month period popped 14%. The company also has a nice stockpile of $581 million in cash on its balance sheet.
According to a recent study by ThredUp, the secondhand market is on track to explode to a valuation of $82 billion by the year 2026, growing 16 times faster than the overall retail clothing market. Poshmark, along with other resale platforms like ThredUp and The RealReal, are expected to capture nearly 20% of the entire clothing industry by the year 2031 according to the study.
For risk-tolerant investors interested in tapping into a major slice of e-commerce, a platform like Poshmark could prove a compelling investment when featured in a well-diversified portfolio.
