2 of the Smartest Stocks to Buy With $500 and Hold Forever

There are plenty of things to buy with $500. Few can reliably turn that sum into $600, $800, or even $1,000 in several years. That's what makes the stock market so great: It remains one of the best ways for most average people to grow their capital over time.

However, to pull it off, investing in the right companies with strong businesses, excellent long-term prospects, and solid competitive advantages is crucial. Here are two stocks that fit the bill: Shopify (NYSE: SHOP) and Microsoft (NASDAQ: MSFT). For those with $500 to spare, read on to find out why putting that money in either of these two market leaders would be a smart move.

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1. Shopify

Shopify aims to be a 100-year company, a feat few have accomplished. The e-commerce specialist is off to a good start. Corporations that last that long typically have several qualities, including a visionary leader, significant growth potential, and a competitive advantage.

Shopify, at least for now, has all three. The company's co-founder, Tobias Lütke, is the current CEO, and he has led it to market-crushing returns since its 2015 initial public offering (IPO).

What's more, recent decisions say a lot about Shopify's management team. For a long time, the company tried to build its logistics business, a project that might have paid off in the long run but was a drag on its bottom line and margins. Management abandoned this initiative in 2023 despite repeatedly saying it wouldn't in previous years. Since then, Shopify's profits and margins have increased. Some executive teams might have doubled down and refused to change their minds.

However, Shopify understood that getting out of the logistics business was more important than saving face. The company's management will eventually change, but so far, it is looking great for Shopify. Furthermore, the opportunities within its core e-commerce business are massive. Shopify offers merchants the opportunity to create online storefronts. It provides services, from cross-selling on major social media platforms to marketing, that allow business owners to focus on other aspects of their business.

Shopify has been incredibly successful -- it holds a 12% share of the e-commerce market in the U.S. by gross merchandise volume. Yet, e-commerce accounted for just 16.4% of total retail sales in the U.S. in the fourth quarter, a number that is likely much lower in most countries worldwide. So, there is still plenty of whitespace here.

Lastly, Shopify benefits from a moat from at least two sources. Its app store allows merchants thousands of options to customize their online store, while the company's main e-commerce website benefits from switching costs.

In short, Shopify is an excellent stock to buy and hold for the long term, and at $102 apiece, investors with $500 can get four shares of the company.

2. Microsoft

Microsoft has been around for decades and has already produced life-changing returns to its longtime shareholders. Some might argue that the company's best days are behind it. Microsoft's market cap is nearly $3 trillion. How much growth can the company possibly have left in the tank?

Perhaps Microsoft won't perform as well as it did in the past, but the stock is still worth holding onto for good. Microsoft also had excellent leaders -- its current one, Satya Nadella, took over in 2014 and has led the company through another superb period.

Though Microsoft's legacy computer operating system business is no longer much of a growth driver, the company can now count on its cloud computing unit, where it holds the second-leading market share, to drive solid top- and bottom-line results.

Microsoft's cloud business, Azure, was already performing well, but things have gotten even better recently thanks to artificial intelligence (AI). As of its latest period, the second quarter of its fiscal year 2025 (ended Dec. 31, 2024), Microsoft's AI business boasted a $13 billion annual run rate, an increase of 175% year over year.

Microsoft also has a competitive edge. Its brand name is one of the strongest in the world. Microsoft's cloud business and its suite of productivity tools also benefit from switching costs. Furthermore, the company has an internal culture of innovation, as evidenced by its long history of technological breakthroughs. Expect the company to conjure up other ways to improve its financial results in the long run.

Lastly, Microsoft is an excellent dividend stock. The company has increased its payouts by almost 168% in the past decade.

Reinvesting the dividend is a great way to boost long-term returns. Investors might only be able to get one share of Microsoft with $500, considering its current stock price of about $388, but that would be money well spent.

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Prosper Junior Bakiny has positions in Shopify. The Motley Fool has positions in and recommends Microsoft and Shopify. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.