Investing in stocks can feel like a roller coaster ride -- thrilling highs, heart-stopping drops, and everything in between. Take 2022, for example. Major market indices like the broad-based S&P 500 and the tech-heavy Nasdaq Composite reached all-time highs in 2021. Fueled by inflation trends and a widespread investor retreat from risky ideas, the next year unveiled a brutal bear market with the worst full-year market returns since the subprime mortgage meltdown of 2008.
But the market storms are almost always followed by sunny skies and solid gains in the next year. There were 11 bear markets with full-year S&P 500 drops of at least 20% in the last 60 years. 7 of them were followed by double-digit gains in the next year, including 5 jumps of at least 20%.
It's impossible to say how far the market metrics will fall in a correction or bear market. Still, history shows us that every significant stock market crash will eventually turn into a full-fledged bull market rally. That's why Wall Street's double-digit percentage drops actually open up a fantastic buying window for opportunistic investors.
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And the good news doesn't stop there. Smart investors have history on their side, and they also benefit from fairly recent policy changes at many stock brokerages. Online brokers have almost universally dropped their old minimum deposit limits and pay-per-trade commissions. Fractional shares are available almost everywhere, in case you don't have enough cash to pick up a full share of some high-priced stock.
In other words, the costs and administrative friction of buying stocks online have pretty much disappeared. As a result, the best amount you can put to work in the stock market is whatever you can afford right now, after covering your everyday bills and setting some spare cash aside to cover emergency expenses. After all, time in the market usually beats trying to time the market. If you only have $400 to invest this month, that's still enough to make a serious investment that can make you a lot of money in the long run.
So if you have $400 to invest right now, the two super-simple stocks below stand out as excellent buys right now.
Coca-Cola
The first stock that begs to be bought today with $400 or less is Coca-Cola (KO). It's hard to find a simpler business than this classic distributor of soft drinks, water, and other libations. Moreover, Coke's stock looks very affordable today.
You know exactly how Coca-Cola makes money. The company makes concentrated beverage concentrates, which are distributed through a global network and bottling partners. The unprocessed syrups also end up in soft drink fountains, and Coca-Cola's in-house bottling operations add another revenue stream with high unit volumes but milder profit margins.
Master investor Warren Buffett is a longtime shareholder of this transparent company, for the usual reasons. You know how it goes. This business is so simple that a ham sandwich could run it. Coke also pays a generous dividend with an effective yield of 3%. Buffett loves these qualities in any business, and Coca-Cola has them in spades.
The dividend may not sound like much, but these payouts make a big difference to long-term shareholders. Buffett's Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) bought its first Coca-Cola shares in 1988. Four 2-for-1 stock splits later, Berkshire paid $2.70 per split-adjusted share. After 35 years of uninterrupted dividend increases, the effective annual dividend yield on those shares works out to 68%. That is, for every dollar Buffett invested in Coca-Cola all those years ago, he collects $0.68 of dividends per year nowadays.
And the beverage giant isn't resting on its fizzy laurels. For example, the company is building artificial intelligence (AI) into everything from marketing campaigns to distribution network management. Always on the lookout for new drink experiences, Coke recently partnered with Molson Coors (TAP -0.45%) to create the Topo Chico Ranch Water line of hard seltzers. An even fresher collab with Brown-Forman (BF.B 0.04%) resulted in the ready-to-drink Jack Daniels and Coca-Cola blend.
We could talk about Coca-Cola's business acumen all day long. The company generated $9.0 billion of free cash flows over the last four quarters, and that's 21% of its $43.5 billion in top-line revenues. That's an impressive cash machine, which is why those free-flowing dividends make so much sense. Oh, and the stock has traded sideways in 2023 with a year-to-date total return of just 2.3% -- missing out on the broader market's 14% gain. Coke's tasty ticker looks downright delicious in that light:
KO Total Return Level data by YCharts
Amazon
Here's another household name for you. Amazon.com (AMZN 3.43%) is also a simple stock you can buy with $400 right now, and you won't lose a minute of sleep over this buy for years to come.
Of course you know what Amazon does, at least in broad strokes. The e-commerce giant has blurred those sharp lines somewhat in recent years by also becoming a world leader in cloud computing services. I'm not complaining, though. That fast-growing Amazon Web Services (AWS) unit accounted for 25% of Amazon's sales last year (up from 22% in 2021), and it was the only segment that delivered positive operating profits for the full fiscal year.
Let me keep Amazon's analysis short and sweet:
- The company keeps growing in any economy, including last year's inflation-burdened environment.
- Amazon always keeps its corporate eye on the long-term horizon, happy to miss short-term expectations if that's what it takes to build an even stronger cash machine for the long haul.
- The balance sheet holds $64 billion of cash equivalents and short-term investments -- a comfy cash cushion that should carry Amazon smoothly through whatever short-term financial challenges might turn up.
All things considered, Amazon is a great stock to pounce on whenever its share prices are under pressure. That's the case right now, since many investors turned away from this richly valued e-commerce specialist during the inflation crisis. The stock is mounting a decent comeback in 2023 but still sits 31% below the all-time highs from two years ago. So you can still buy Amazon on the dip, and that looks like a great idea.
