Best ETFs for Beginners With Less Than $500 to Invest (Low Risk, Long Term)

Investing in the stock market can seem intimidating for beginners, especially with a small budget. Fortunately, Exchange-Traded Funds (ETFs) allow new investors to start with as little as $50–$500 while maintaining diversification and minimizing risk.

This guide from Finance Mate Club highlights the best ETFs for beginners, focusing on low-risk, long-term growth, and provides practical tips to start investing even with limited funds.

What Are ETFs?

An ETF (Exchange-Traded Fund) is an investment fund that holds a diverse portfolio of assets, such as stocks, bonds, or commodities, and trades on stock exchanges like an individual stock. ETFs allow investors to gain exposure to multiple securities in a single transaction, making them ideal for beginners who want diversification without needing a large amount of capital.

Advantages of ETFs for Beginners

1. Diversification

• A single ETF can hold dozens or even hundreds of individual securities, reducing the risk associated with investing in a single stock.
• Diversification spreads your investment across multiple sectors or asset classes, which helps protect your portfolio from market volatility.

1. Low Cost

• ETFs generally have lower management fees compared to traditional mutual funds.
• Lower fees mean more of your money is working for you, especially important for small investments under $500.

1. Flexibility

• You can purchase ETFs with small amounts of money, making them accessible to investors with limited capital.
• ETFs can be bought or sold at any time during the trading day, unlike mutual funds which trade only once per day.

1. Liquidity

• ETFs can be sold quickly at market price, providing access to your funds when needed.
• This liquidity makes ETFs a convenient option for beginners who want both stability and accessibility.

1. Ease of Use

• Buying an ETF is as simple as purchasing a stock through a brokerage account.
• Many brokerages allow automatic investing in ETFs, which helps build wealth steadily over time.

By understanding how ETFs work and their benefits, beginners can start investing with confidence, even with smaller amounts like under $500, while maintaining a balanced, diversified portfolio for long-term growth.

Best Low-Risk ETFs for Beginners

1. Vanguard Total Stock Market ETF (VTI)

Focus: U.S. total stock market
Expense Ratio: 0.03%

Why VTI Is Ideal for Beginners

• Broad Market Exposure: VTI invests in the entire U.S. stock market, including small, mid, and large-cap companies. This provides instant diversification, which is key for new investors with limited funds.
• Low Cost: With an expense ratio of only 0.03%, most of your investment remains working for you, rather than going toward fees.
• Long-Term Growth Potential: Historically, the U.S. stock market has delivered steady long-term returns, making VTI suitable for investors seeking growth over decades.
• Ease of Investment: Available through most brokerage accounts, VTI can be purchased with as little as one share, making it accessible even for budgets under $500.

2. iShares Core S&P 500 ETF (IVV)

Focus: S&P 500 index
Expense Ratio: 0.03%

Why IVV Is Suitable for Beginners

• Large-Cap Focus: IVV tracks the 500 largest U.S. companies, giving exposure to well-established, financially stable businesses.
• Moderate Risk: Investing in top companies reduces volatility compared to smaller, less stable stocks.
• Low Fees: Similar to VTI, the expense ratio is just 0.03%, ensuring that your returns are not eaten up by management costs.
• Reliable Long-Term Returns: The S&P 500 has historically provided consistent growth over long periods, making IVV a solid choice for beginner investors looking for low-risk, long-term gains.

Both VTI and IVV offer beginners a low-cost, diversified entry into the U.S. stock market, ideal for investors starting with under $500 who want steady, long-term growth.

3. Vanguard Total Bond Market ETF (BND)

Focus: U.S. investment-grade bonds
Expense Ratio: 0.03%

Why BND Is Ideal for Beginners

• Stability and Income: BND invests in U.S. investment-grade bonds, providing steady income through interest payments while reducing exposure to stock market volatility.
• Low Risk: Bonds generally have lower risk than equities, making BND suitable for conservative investors or those looking to balance their portfolio.
• Diversification: BND holds a broad mix of government and corporate bonds, spreading risk across multiple issuers and sectors.
• Long-Term Strategy: Ideal for investors who want consistent returns and want to offset risk from stocks in a long-term portfolio.

4. Schwab U.S. Dividend Equity ETF (SCHD)

Focus: Dividend-paying U.S. stocks
Expense Ratio: 0.06%

Why SCHD Is Suitable for Beginners

• Dividend Income: SCHD targets high-quality companies that consistently pay dividends, providing a reliable income stream.
• Growth Potential: Dividend-paying companies often have stable earnings and strong fundamentals, making them suitable for long-term growth.
• Moderate Risk: Investing in dividend-paying stocks tends to be less volatile than investing solely in growth stocks, making SCHD beginner-friendly.
• Low Cost: With an expense ratio of 0.06%, most of your investment remains in the market rather than going to fees.

Together, BND and SCHD offer beginners ways to balance their portfolios between stability, income, and growth, even with small investments under $500.

5. iShares MSCI EAFE ETF (EFA)

Focus: International developed markets
Expense Ratio: 0.32%

Why EFA Is Ideal for Beginners

• International Diversification: EFA invests in large and mid-sized companies across Europe, Australasia, and the Far East. This helps reduce reliance on the U.S. market alone.
• Risk Reduction: By spreading investments across different economies and currencies, EFA can help mitigate domestic market volatility.
• Long-Term Growth Potential: Exposure to international markets can complement U.S.-based ETFs like VTI and IVV, enhancing portfolio diversification for steady growth.
• Accessibility: Beginners can start with modest investments and gain exposure to global companies without buying individual foreign stocks.

Tips for Investing With Less Than $500

1. Start Small, Stay Consistent

• Even $50–$100 per month can grow significantly over time using ETFs.

1. Use Dollar-Cost Averaging

• Invest a fixed amount regularly to reduce the impact of market volatility.

1. Avoid High-Fee Investments

• Focus on low-cost ETFs to maximize long-term returns.

1. Reinvest Dividends

• Automatically reinvesting dividends accelerates growth over time.

1. Focus on Long-Term Goals

• Avoid trying to time the market; ETFs are ideal for long-term wealth building.

Final Thoughts

ETFs are an excellent way for beginners to start investing with less than $500 while maintaining diversification and low risk. Funds like VTI, IVV, BND, SCHD, and EFA offer a balance of growth, income, and stability.