Got $500 to Invest in Stocks? Put it in This ETF

An ETF can be the best way to put your little bit of cash to good use. And here is one of the top ones I would consider on the TSX today.

| More on:

When it comes to new investors, exchange-traded funds (ETF) are some of the best places to start. That’s mainly because these ETFs provide you with a portfolio of stocks, all chosen with a specific goal in mind, and by a group of professionals.

But just because you decide you want to invest in an ETF doesn’t mean the choice is a simple one. That goal could be investing broadly in the TSX. It could be looking at tech companies. It could be foreign investments, bonds, heck, even cryptocurrency! But if you’re new with just $500 on hand, here is what I would consider.

Think it through

If you want to invest in a top ETF, there are many points to consider. Let’s say you’re going to take that $500 and just put it into one ETF with the goal of creating passive income through returns and dividends. That means you want to have a solid ETF with top-notch performance, not those riskier options out there.

To get a solid performer, think about low cost and diversification. An ETF may invest in a lot of stocks, but that doesn’t mean it’s diverse. That’s why investing in a bunch of tech stocks or even a bunch of bank stocks may not be the best option. Instead, consider diversification in terms of sectors, sure, but also currencies, countries, market capitalization, all of it.

However, you also don’t want to be paying too much in management fees. These can seriously add up and can really take away from your overall goals — especially if you’re considering investing just $500. You also want ETFs that offer passive income that can really push forward your cash and use it to reinvest right back into the ETF itself.

A strong option

If you’re looking for a strong ETF then, I would consider Vanguard FTSE Canada All Cap Index (TSX:VCN). This ETF is well diversified, investing in a slew of Canadian companies across all market capitalizations. It offers low costs with 0% in net management fees, as it’s not an actively managed fund.

The company also provides you with a solid dividend yield, currently at 3.18%. That’s large enough that you can continue to take it out and reinvest it but not so high that you need to worry that perhaps shares aren’t doing so well.

Then, of course, there’s its performance. VCN ETF has grown by about 8% in the last year, seeing a huge amount of growth in the last few months alone. While that isn’t huge growth by leaps and bounds, again, it’s solid growth you can likely look forward to year after year.

Bottom line

There are a lot of ways to invest, but if you’re looking for stability, income and growth, then the VCN ETF is a strong option these days. You get the diversification of a strong ETF, with large investments across the board. With very little risk and a whole team of portfolio managers at your fingertips, it’s certainly a strong option to consider with just $500 on hand.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

ETF stands for Exchange Traded Fund
Dividend Stocks

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Discover two high-yield dividend ETF powerhouses: one offering a bold 21% yield for risk-takers, the other a steady 7.6% for…

Read more »

Caution, careful
Dividend Stocks

The CRA is Watching TFSA Holders: Here Are Some Red Flags to Avoid

There are some bad red flags that many investors may be overlooking, but fear not! Here's how to side step…

Read more »

Start line on the highway
Dividend Stocks

Invest $7,000 in This Dividend Stock for $3,727.60 in Passive Income

Dividend stocks are the perfect fit for any TFSA contribution, but after strong earnings, this one should be top of…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

2 High-Yield Dividend Stocks for Canadian Retirees

These top TSX stocks still offer attractive yields.

Read more »

alcohol
Dividend Stocks

How to Earn $2,680 of Annual Passive Income That the CRA Won’t Tax

Trying to boost your annual passive income? Here's one way you could earn $2,680 annually, completely tax-free!

Read more »

monthly desk calendar
Dividend Stocks

Buy 1,970 Shares of This Top Dividend Stock for $252.44/Month in Passive Income

This monthly dividend stock not only provides you with a high yield, but a monthly one!

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

1 Dividend Growth Star Perfect for a TFSA

CN Rail (TSX:CNR) is a fantastic rail play that's looking too cheap to pass up for investors focused on landing…

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Recession-Resistant Stocks to Close Out 2024

Waste Connections and GFL Environmental are two top TSX stocks positioned to deliver market-beating returns to shareholders.

Read more »