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What is the best way to invest $500 legally so that I can get tangible profits over a relatively short period of time, say 6 months?

When considering how to invest $500 to achieve tangible profits over a relatively short period of 6 months, it's crucial to balance the potential for returns with the associated risks. Here are some viable options:

High-Yield Savings Account (HYSA)

A high-yield savings account is a low-risk option that can provide a steady, though modest, return. These accounts are FDIC-insured, meaning your deposit is insured up to $250,000, and they typically offer interest rates between 3% to 5% APY. While the returns may not be spectacular, it is a safe and liquid option5.

Short-Term Bond Funds

Short-term bond funds are another low-risk option that can offer returns in the range of 1% to 4%. These funds hold bonds with shorter maturity periods, usually between one and five years, and are less volatile than stock-based funds. They allow for easy access to your money when needed5.

Exchange-Traded Funds (ETFs)

ETFs, particularly those tracking broad market indices like the S&P 500, can offer diversification and the potential for higher returns compared to savings accounts or bond funds. Since many brokers now offer commission-free trading, you can invest in ETFs without incurring significant fees. However, keep in mind that ETFs carry market risk, and returns can vary1 3.

Micro-Investing Apps

Apps like Acorns allow you to start investing with very small amounts of money and offer diversified portfolios of ETFs. The "Round-Ups" feature can help you invest small amounts regularly, which can add up over time. While the returns may not be dramatic in a short period, it's a convenient and low-risk way to start investing2.

Robo-Advisors

Robo-advisors like Betterment, Wealthfront, or automated services from major brokers can create diversified portfolios based on your risk tolerance and goals. These services often have low minimum investment requirements and charge relatively low fees (typically 0.25% to 0.50% annually). They handle rebalancing and reinvestment of dividends, making them a hands-off option1.

Considerations

Risk Tolerance: Higher-risk investments like stocks or ETFs may offer higher potential returns but also come with a higher chance of losses.
Fees: Minimize trading fees by using commission-free brokers or robo-advisors to maximize your returns.
Diversification: Spread your investment across different asset classes to reduce risk. ETFs and robo-advisors can help with this.
Time Horizon: Since you're looking at a 6-month horizon, you may want to lean towards more liquid and lower-risk options to avoid significant losses.

Given these considerations, here’s a suggested approach:

High-Yield Savings Account or Short-Term Bond Funds: For a very low-risk approach with guaranteed returns, though modest.
ETFs or Robo-Advisors: For a balanced approach with potential for higher returns, but with some level of risk.

Ultimately, the best option depends on your personal risk tolerance and financial goals. If you can afford to take some risk, ETFs or robo-advisors might offer better potential returns over a 6-month period. If you prioritize safety, a high-yield savings account or short-term bond funds would be more suitable.