How to Build a Low-Cost Portfolio for $5,000 Without Taking Risks

Investing in the 2020s isn’t exclusively for the wealthy. With as little as $5,000, you can build a low-cost portfolio with excellent growth potential for the long term.

Selecting a handful of affordable stocks and low-priced exchange traded funds (ETFs) will allow you to diversify and thereby de-risk your portfolio. As we’ll see, a few simple strategies can help you turn your $5,000 into a worry-free passive income generator.

Finding Affordable, Low-Risk Stocks

To properly diversify your $5,000 portfolio, you’ll want to select some ETFs with baskets of stocks. However, it’s fine to start off by picking a few individual stocks.

You’ll want to concentrate on large-cap blue-chip stocks representing well-known brands with good reputations. That’s the first key to de-risking your portfolio.

Furthermore, you’ll need to narrow down your picks to low-priced stocks. Also, you’ll want to focus on stocks with low beta. To sum it up, beta is a measure of how fast a stock moves (in both directions, up and down) when compared to the S&P 500 large-cap stock index.

The S&P 500 has a beta of exactly 1. If a stock has a beta of less than 1, then its price tends to move slower than the S&P 500. That’s a sign that the stock has low volatility and is relatively safe.

3 Low-Priced Stocks to Get You Started

The best way to explain my stock picking process for a $5,000 portfolio is with a few examples. One candidate is AT&T (NYSE:T) stock, which represents a famous, well-established, and highly profitable company.

As of July 9, 2025, AT&T stock cost less than $30 per share. Plus, the stock had a beta (based on the past five years’ worth of price action) of 0.6.

That beta is much lower than 1, so AT&T stock tends to move substantially slower than the S&P 500. Moreover, the stock offers a forward annual dividend yield of 3.84%, which is a nice bonus for the shareholders.

Another example is Coca-Cola (NYSE:KO) stock. There’s no doubt that you’ve heard of this company, and it’s been a profitable dividend payer for many years.

Coca-Cola stock checks all the right boxes for a $5,000 low-risk portfolio. The stock costs around $70 per share (I’m looking for stocks below $100), has an ultra-low beta of 0.46, and offers a 2.88% annual dividend yield.

Then there’s pharmaceutical giant Pfizer (NYSE:PFE), which provides its loyal investors with a massive 7.1% annual dividend yield. Given Pfizer stock’s low share price of around $25 and its beta of 0.49, this certainly looks like a strong candidate for a low-risk $5,000 investment account.

De-Risk and Diversify With ETFs

Even if you pick a dozen stocks for your $5,000 portfolio, that’s still not enough diversification. Therefore, you can add a few ETFs representing baskets of stocks. If they pay decent dividends, you could further enhance your profit potential.

My favorite ETF pick is the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD). This fund focuses on the Dow Jones U.S. Dividend 100 Index and includes roughly 100 large-cap stocks.

With an annual distribution (dividend) yield of 3.97%, the SCHD ETF will deposit cash into your $5,000 account every three months. It will also generally mitigate share-price volatility as the fund has a beta of 0.78.

Next, I will refer you to Joey Frenette’s excellent article about two ETF’s under $50 which also happen to be low-risk. The first one is the Invesco S&P SmallCap Low Volatility ETF (NYSEARCA:XSLV), which has a share price below $50.

Small-cap stocks can be volatile when purchased individually. However, the XSLV ETF includes hundreds of high-confidence small-cap stocks across multiple market sectors.

Besides, you’ll get access to consistent dividends as XSLV has a 12-month distribution rate of 2.43%. On top of all that, the fund’s beta of 0.82 is reasonably low, which means you can sleep soundly at night if you own the Invesco S&P SmallCap Low Volatility ETF.

Frenette also highlights the Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD), which trades for slightly less than $50 per share. SPHD’s 12-month distribution rate of 3.41% is quite respectable, and the fund provides exposure to around 50 stocks from the prestigious S&P 500 index.

With a quick check, we can see that the Invesco S&P 500 High Dividend Low Volatility ETF has a fairly low beta of 0.77. By combining XSLV and SPHD, investors can achieve a balanced mix of small-caps and large-caps.

Along with that, you could purchase shares of the SCHD ETF and a small selection of affordable, low-beta individual stocks. When all is said and done, your $5,000 can get you a risk-reduced low-cost portfolio to hold for many years.

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