Got $500 to invest? It might not seem like a lot, and the idea of investing it in meme stocks, cryptocurrency, or penny stocks for a quick profit might cross your mind.
Thankfully, ETFs offer a smarter, more stable alternative. With ETFs, you can invest your $500 into a globally diversified portfolio that spans thousands of stocks, all accessible via a single ticker.
This approach allows you to spread your investment across various industries and regions, providing balanced and diversified exposure with just one transaction.
Here’s how you can put that $500 to work effectively by investing in a single ETF.
Image source: Getty Images
How this ETF works
Before I dive into my ETF recommendation, let’s cover some basics for those who might be new to ETFs or need a refresher on how they operate.
The ETF I’m about to introduce holds a few thousand stocks from the U.S., Canada, and other international markets, all under a single ticker. This means you can buy and sell shares of this ETF on the stock market just like you would with any individual stock.
When you invest $500 into this ETF, your money is distributed across a wide array of stocks that make up the ETF’s portfolio. Essentially, with this single investment, you’re placing a bet on the performance of the global stock market.
While it’s true that investing in stocks comes with its share of volatility, this ETF mitigates some of that risk. Because it’s 100% invested in stocks, you’ll still see some ups and downs. However, your investment isn’t overly concentrated in any single country or market sector.
This is diversification in action—by spreading your investment across a broad range of assets, you reduce the risk of significant losses that can come from having all your eggs in one basket.
My ETF pick
The ETF I like is BMO All-Equity ETF (TSX:ZEQT). In addition to the diversification benefits noted earlier, you’ll also receive dividends—a current annual yield of 2.24%, distributed every quarter.
Purchasing ZEQT is straightforward: simply look up its ticker in your brokerage app and decide on the number of shares you wish to buy. Given its current price of $43.78 per share as of market close on February 12, you can acquire 11 whole shares with $500, and possibly more if your platform allows for fractional trading.
However, investing in ZEQT isn’t without costs. The ETF charges a management expense ratio (MER) of 0.20% annually. For a $500 investment, this translates to approximately $1 being deducted each year for management expenses
