5 Ways to Invest $500

So, you have an extra $500 and you want that money to grow. What do you do with it?

Sure, investing in the stock market is the obvious -- and popular -- choice. Some 58% of U.S. adults own stock. But that's not the only -- or always best -- place you can put your money.

Let's take a look at the options for a few places you could invest $500 and watch it grow.

1. Index funds

Index funds are investments that track a market index, which are made up of stocks or bonds. Indexes can follow the stock market as a whole, or some subset thereof. For example, many popular index funds track the S&P 500.

The fund is designed to match the performance of the index it follows. Index funds can be a good choice for beginner investors because diversification is built right into the fund. It's also super easy to get started since you only need to make a single purchase.

2. Individual companies

Sometimes you want to personally pick which companies your money is going to support. In that case, you could invest directly in those specific companies. You can buy stock in publicly traded companies right from your investment account.

For some companies with high share prices, you may only be able to purchase a fractional share. This is what it sounds like: a fraction of a share of stock. For example, if a given stock costs $1,000 a share, you could use your $500 investment to purchase half of a share.

Another benefit of fractional shares is that you can diversify your investments. For example, maybe there are 10 different companies in which you'd like to invest. You could put $50 into each company. Depending on their share prices, you may get more -- or less -- than one full share in each company.

3. Peer-to-peer lending

What if you want to invest in other people, rather than companies? You might be interested in exploring peer-to-peer lending from the investor side.

Essentially, peer-to-peer lending platforms match individuals who need loans with investors willing to lend them money. So, you can join a platform, then explore potential investment opportunities. Good peer-to-peer lending apps will grade investments based on the risk level so you can manage your expectations.

And speaking of risk: As with any type of investment, there is risk involved when you invest in peer-to-peer lending. Specifically, if the borrower defaults on (stops paying) their loan, you'll lose out on some or all of your investment. At the same time, the potential return can be large, especially on higher-risk loans (i.e., loans for folks with lower credit scores).

4. Treasuries

Government Treasuries are essentially loans you give to the government. They then pay you interest on that loan. For the most part, Treasuries are considered to be a low-risk investment since the U.S. government is usually not at risk of defaulting on its debt obligations (the current political climate notwithstanding).

There are a variety of different types of Treasuries in which you can invest depending on how long you want to invest and the type of return you're after. I Bonds have been popular over the last year or so thanks to high inflation rates, but short-term T-Bills may be more attractive in an uncertain economic climate.

5. CDs and high-yield savings accounts

Ideally, your spare money should always be making you money. But you may not want it tied up in the stock market, loans, or even Treasuries, where it could take years to show results and/or become accessible.

One good alternative for many folks is a short-term CD (certificate of deposit). You can purchase a CD with a term of six months to a year that will earn 4.25% or more. Then, once the term ends, you can choose to withdraw your funds or roll them over into another CD.

If you'd rather your investments stay entirely liquid, you could opt for a high-yield savings account instead. While rates are generally (though not always) a bit lower than with a CD, you can withdraw your money whenever you need it.

Saving is (nearly always) better than spending

There's certainly a time and place for a little frivolous spending that boosts your morale or improves your quality of life. But in most cases, saving your money -- through investments or even just your bank account -- is going to be the better financial move in the long term.