Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Now

New investors should buy Royal Bank of Canada (TSX:RY) and another top stock right now with only $500.

| More on:

Image source: Getty Images

You don’t need a significant sum to get started investing, especially if you’re a young person who’s looking to learn the ropes before you really start putting new money to work. If you have a broker that allows low-cost (or even no-cost) trades, perhaps $500 is a good point to get started. Of course, a low-free, vanilla index fund that tracks the S&P 500 or TSX Index is good enough to get the job done. You can simply buy and forget with such index funds or exchange-traded funds (ETFs).

However, if you really want to learn more about the process of picking your own stocks, I’d argue that it can’t hurt to put in your research by analyzing companies that you’d be tempted to buy with relatively small amounts. Sure, a mockfolio is good enough to get the job done.

However, I’d argue that you may also be likely to speculate and overextend on risk with money you know isn’t the real deal. In any case, this piece will focus on two Canadian stocks I view as underpriced that new investors may wish to consider picking up right now, provided your broker doesn’t charge more than $6 per trade.

With the rise of no-free trading, it may not make much sense to pay $9.99 per trade to invest a sum as small as $500. In any case, if you have a low-cost broker and are ready to put in the homework to build your starter portfolio, you’ve come to the right place. Here are two that are worth checking out as we inch closer to the heat of the summer!

Royal Bank of Canada

Royal Bank of Canada (TSX:RY) is Canada’s largest bank and it’s also one of the better-performing of the Big Six banking cohort in recent years. The stock recently hit new all-time highs, just shy of $150 per share, before pulling back to around $142. I think the more than 4% pullback is unjustified and could represent a great buying opportunity for new investors who like solid dividends.

At writing, shares trade at 13.1 times trailing price-to-earnings (P/E) ratio to go with a 3.96% dividend yield. Of course, RY stock isn’t a deep-value play, given some of its peers are struggling to sustain gains out of their depths.

However, when it comes to Royal Bank, it’s one of the bluest blue chips of the group. Also, the HSBC Bank Canada acquisition is a stellar deal that should unlock value for long-term shareholders. As a “gold standard” banking play, RY stock is one of the names you can buy and forget about for years at a time.

Shopify

Shopify (TSX:SHOP) is a riskier, high-growth stock for new, young investors who really want to build their market “legs.” Heightened volatility may be perceived as a risk, but for those who know how to navigate tougher terrain, the rewards (growth) could be substantial over the long term.

Shopify stock is attempting to rally after a brutal implosion suffered back in May on a sub-par quarterly earnings report. I think the quarter, though not incredible, wasn’t deserving of a substantial plunge.

On Friday, the stock soared 4.6% in a day as a new bull stepped forward in the analyst community. Given Shopify’s massive market opportunity and its impressive tech talent, I’d be inclined to buy the $119.6 billion Canadian tech titan on the way up.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

More on Investing

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

financial freedom sign
Investing

2 Stocks With Millionaire-Maker Potential

These two top Canadian stocks are among the best on the TSX, and each has the potential to be millionaire-maker…

Read more »

Piggy bank next to a financial report
Stocks for Beginners

Is It Finally the Right Time to Buy Bank Stocks?

Canadian bank stocks are some of the most secure investments out there, but of them all, this bank stock is…

Read more »

clock time
Investing

3 Blue-Chip Stocks Every Canadian Should Own

Want some reliable blue-chip Canadian stocks to buy and hold for the next 10 years? These three stocks are worth…

Read more »

gas station, car, and 24-hour store
Investing

ATD Stock: Buy, Sell, or Hold Today?

Let's dive into whether Alimentation Couche-Tard (TSX:ATD) is a buy here, or whether ATD stock could have more risk than…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »