Investing $500 in Penny Stocks

5 Ways to Invest 500 Dollars NOW

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Make your money go further with these best ways to invest 500 dollars

500 dollars isn’t going far with most investments so how can you put that money to work for the highest return but without gambling it away?

In this video, I’ll reveal five ways to invest $500 for double- and triple-digit returns but without the risk. I’ll show you actual returns and profits from different investments. We’re talking how to invest 500 dollars, today on Let’s Talk Money!

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How Far Does 500 Dollars Go Invested?

Nation, let’s face it, $500 just doesn’t go very far these days. For example, investing in the stock market, the S&P 500 index, you’re going to get a dividend yield of just 2.25% a year. That’s about $11 a year in dividends…about enough for a combo meal at McDonald’s.

But that’s about how much the average family saves each month, 500 dollars, and at that rate, it would take you 44 years to reach a million dollars after adjusting for inflation.

Investing 500 Dollars for $1 Million
Investing 500 Dollars for $1 Million

I don’t know anyone that wants to wait 43 years to retire…I’d be 86 by the time that happens!

Ways to Invest $500 for High Returns

So we’re going to have to get creative here with these five ways to invest 500 dollars. None of this invest in your education or just buy dividend stocks. I’ve got five ways you can invest $500 to make it go farther!

And I’m taking these in order of return from lowest to highest so stick around for that last one because I’m going to show you how to turn that $500 in hundreds of thousands fast.

Investing $500 in Stock Trends

Our first way to invest $500 is the easiest but again, the lowest return of the five, and that’s using the Sell in May phenomenon to invest.

So if you’re not familiar with Sell-in-May, it’s an annual trend in the stock market where stocks just tend to fall during the summer. In fact, on more than 60 years of stock market data to 2012, that May through September period is four of the five worst months to invest and the only four months to average negative returns.

So the investing strategy says, you invest in the stock market, and you can just put your money in the S&P 500 market fund from November 1st through April 30th each year. That’s six months of the year you’re investing in the market. Now those other six months, starting in May, you just go to cash or a very safe bond fund like the Vanguard Short-term Bond Fund, the BSV.

And this strategy seems ridiculously simple but it does work. I took market data from 1950 through 2012 here to compare three scenarios.

The difference in return is amazing! Investing $10,000 in 1950 and holding stocks in only that May through October period would have actually lost you money. You’d be down almost $3,700 over the 62-year period. Now look at the far right side, that’s the buy-and-hold strategy and we see that the market returned an annualized 8.1% a year over the 62 years.

That’s not bad. It would have turned ten grand into about $644,000…but now look at the middle section. If you would have invested in just that November through April period and then kept your money in cash…you would have beaten the market with a return of 9.3% a year. You could have turned that $10,000 into almost $1.9 million just with this simple strategy.

And instead of just sitting in cash for that May through October period, investing in the bond fund would have gotten you another 2% annually, so a 10.3% annual return! Even after adjusting for inflation, this simple strategy gets you to seven-figure status in 34 years, exactly a decade faster than the blind investing strategy.

Investing $500 in Stocks
Investing $500 in Stocks

Now I’d recommend using this strategy in a retirement account like an IRA or Roth so you don’t get hit with taxes each year. It’s a simple strategy and a great one to eke out a few extra percent on your returns.

Investing 500 Dollars in Penny Stocks

Next here is going to be investing in penny stocks and I usually use Webull for this kind of short-term stock trading idea. I can use the stock simulator on Webull to paper trade a few penny stock ideas before I commit real money. The app gives you a million-dollars for a paper portfolio to test out strategies and follow stocks.

Now, the first thing I’ll do when looking for good penny stock investments is run a quick search on the Webull screener, something to narrow the list. So I’ll go into the app and to the screener. You can create a new screen or use an old one. And first I’m going to screen for companies with a market cap, that’s the company size from $200 million to one billion. I like to keep it in this range so I’m investing in companies with at least some financial size but not so big that they lose the flexibility.

Then I’ll add a debt-to-assets screen and we’ll move this slider to under 50% debt leverage and I like that the screener updates with an estimate of number of companies as you’re playing around this this.

I’ll also use these return-on-assets, ROA, and the return-on-equity, ROE, screens to find companies that are performing well. We can use the sliders to move these around and really here we’re just looking for at least positive returns on assets and equity.

Finally you can use some of these technical indicators as well to narrow your list a little further. I like this relative strength index to find oversold stocks and we can see there’s still 144 stocks that meet the criteria.

If we click through to any of these, we get all the technical charting and info we need including news and analysis, order flow, and distribution.

That screener is going to narrow the list a little but I want to use some fundamental analysis to pick those handful of penny stocks I think can give us some long-term as well as short-term gains.

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So here I’m going to be looking generally at three things in the financials, First I want to find companies that have grown their sales over at least two or three consecutive years. Even if the company isn’t profitable yet, it’s at least getting closer with this positive sales trend.

I also want to see a consistently higher operating margin. That operating margin, or the operating income divided by the sales on the income statement, that trend is hugely important especially for these small, fast-growing companies. You see, most penny stock companies, they’re growing sales so fast, they’re sacrificing efficiency for growth in this stage. Sales are growing but they’re also spending so much on marketing or more staff that the operating margin or that profitability is decreasing. But if you can find a company that is growing sales AND becoming more profitable while it’s doing that, you’ve got the potential to see earnings explode.

I also want to watch for runaway debt for these companies because a lot of these, they’ll get loose with the spending and start using lots of debt instead of keeping things lean. Management rationalizes that it’s ok to borrow because the company is growing so quickly but it’s just a noose that slowly tightens over the company. So I’m looking for companies that are able to produce that sales growth, do it efficiently and stay lean without blowing out their debt-to-equity ratio.

Now penny stocks aren’t for the faint-of-heart. This is a high-risk, high-return investing strategy but you can average around 12% return if you follow the steps here.

I know, you see all kinds of penny stock strategies online that promise returns of twenty- or thirty-percent or more but that’s usually people trying to sell you their book or their course. Realistically, you can average 12% investing in penny stocks and small cap companies and that’s enough to knock four more years off your journey to a million-dollar portfolio.

Investing $500 in Penny Stocks
Investing $500 in Penny Stocks

Investing your Money for FREE Money!

Our next way to invest 500 dollars isn’t so much a continuous strategy like the others but I had to include it because this is free money and that makes it a huge return. I’m talking about getting the free bonus cash on investing platforms.So I’ve been using Webull for about a year now and I love the features but what originally attracted me to the app was getting two free shares of stock, just for opening the account and making a deposit.

And Webull isn’t the only place you get free stock just for signing up. I’ve gotten over $430 in free stock on Robinhood including a share of Microsoft.

Most of these freebie investing sites only require a deposit of $100 to qualify for the free stock so you can split that $500 up and get lots of free shares. Have your spouse open an account, get an account in your kids names. I recently did an analysis on the average value of free share programs and found the averages around $8 on Robinhood and as high as $40 with those two free shares on Webull.

Get a FREE share of stock worth up to $9,600 when you open a Webull investing account – learn more here.

Investing $500 in a Side Business

This next way to invest $500, being a reseller and flipping, is getting us into the business ideas because that’s where you’re really going to make your money.

Here I’m talking about buying either locally or online and then flipping it for a profit on eBay. We’ve actually talked about this strategy before on the channel in a video about getting huge discounts for Amazon Daily Deals and then selling it for a markup of fifty- and 70-percent on eBay.

I like that online method because it cuts down on the time you have to spend finding things to resell. You’re not driving around to local flea markets. I will say though, that kind of local-to-online flipping strategy can make the big money though.

A fellow Marine, David Pere, from the Military to Millionaire channel here on YouTube, shared his reselling strategy in a grow your dough challenge last year. David searched locally and flipped $300 into $1,200 in less than a month!

A few tips though and first is consider specializing in just a few types of products whether it be collectibles or household items or whatever. This is going to make it easier to know how much something is worth before you buy it.

Second is search for the item on eBay or use an app to see how much people are getting for the item. You might also check your local Craigslist and Amazon to get price comparisons.

Finally is have fun with this one. Make it a family trip, looking for things to buy and resell. It’s a great way to spend a couple of hours with the family on Saturday and make a couple hundred bucks while you’re doing it!

Now David made a 16,000% return on one of his flips but realistically, you can count on doubling your money every month or so with this one. And even if you don’t use all $500 to resell or you spend down some of your profits, this can make a lot of money!

Investing $500 in an Online Business

Four our next way to invest $500, I’m going to use my very own example with an online business.

When I started three blogs in 2014, it cost me less than $400 to have someone develop the theme, get web hosting for a year and some extras.

Six years later and I’ve made over $400,000 on my online business and I’ve averaged a 63% increase in monthly income every year for the past three. Honestly, starting your own online business is going to be the best investment you can make and will go way farther than any traditional investment.

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After that first year of blogging, I was able to cover all my expenses with income, so $500 isn’t going to cover all your business expenses forever but it will get you started and to the point where you’re making money.

Investing $500 isn't going to go very far but you can definitely turn it into something that will make you rich. Investing small amounts, try to make up for it by putting in the time to grow some of these investing and business ideas. You'll get huge returns on your effort and small cash. It's a game changer to actually learn to grow your money stash form scratch because you also learn at the process. Learning in investing for me, is one of the best instruments for breakthrough. When you follow the right steps and go consistently with your goals, you can effectively grow your $500 nonstop! A lot of beginners may never be able to appreciate the small growth at first, but just wait 'til it takes off!

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