Over many decades, the stock market has averaged annual returns of close to 10%. That’s pretty good! (Of course, over shorter periods, it can average much more — or less.) It makes good sense for most investors to park much, if not most, of their moola in one or more simple, low-fee index funds, such as one that tracks the S&P 500.
Even Warren Buffett has recommended index funds for most people, and index funds can be all you need to get rich.
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But what if you want to aim for higher returns? What if you’re willing to read up on investing and become skilled at studying companies? What if you’d like to choose some individual growth stocks in which to invest? Well, then, here are some portfolio candidates to consider.
Any list of promising growth stocks almost seems incomplete without Nvidia(NASDAQ: NVDA), because it’s been a phenomenal performer. As I type this, it has tripled in value over the past year, and has averaged annual gains of 75% over the past decade. This torrid pace of growth isn’t likely to continue as the company gets even more huge, but there’s still plenty of growth potential ahead, and, surprisingly, the stock is arguably still reasonably valued — with a recent forward-looking price-to-earnings (P/E) ratio of 34, below the five-year average of 41.
Nvidia is a dominant player in the semiconductor arena. It used to be known as primarily a gaming chip maker, but it’s now also quite focused on data centers, which need more and more chips to support the boom in artificial intelligence (AI) technology.
PayPal(NASDAQ: PYPL) is another growth stock to consider. It, too, is sporting an appealing valuation, with its forward P/E of 18 below the five-year average of 21. You’re probably very familiar with the fintech company’s PayPal service, which facilitates digital financial transactions. There’s more to PayPal, though: It’s also home to businesses such as Venmo, Braintree, Paidy, Hyperwallet, and Zettle, among others.
It recently boasted 426 million active customer and merchant accounts and 25 billion annual transactions. In its third quarter, revenue grew 6% year over year, with payment volume up 9%. PayPal’s growth has slowed lately, especially in terms of gaining new customers. It’s been rolling out new features, such as its FastLane and Cash Pass rewards program, and expanding its buy now, pay later feature.
A terrific performance going forward isn’t guaranteed, but it’s certainly possible, with the company aiming to boost its growth and profit margins and upping its projections. Dig into PayPal to see what you think. You might want to buy now, buy a partial position now, or just add the company to your watch list.
Shopify(NYSE: SHOP) is known for working behind the scenes, offering a platform that helps people “achieve independence by making it easier to start, run, and grow a business” — specifically, an e-commerce business. It’s been posting solid gains, too, up close to 50% so far this year and averaging annual gains of more than 25% over the past five years.
Shopify’s third quarter was impressive, with CFO Jeff Hoffmeister noting that “Shopify achieved 26% revenue growth and 19% free cash flow margin this quarter, marking our sixth consecutive quarter of greater than 25% revenue growth excluding logistics.” The company has been inking some strategic partnerships — even with PayPal — lately.
The shares are priced appealingly, too, with a recent forward P/E of 56 well below the five-year average of 142. (Such a high average suggests that the stock has been richly valued over multiple years.)
Lastly, here’s a pick that’s not exactly a common stock — it’s an exchange-traded fund (ETF) — a fund that trades like a stock. So you can buy shares of it from any good brokerage. The Vanguard Information Technology ETF(NYSEMKT: VGT) is a powerful ETF that gives you easy access to more than 300 stocks, each of which is in some way high-tech. Its top holdings include several of the “Magnificent Seven” stocks, such as Microsoft, Apple, and Nvidia.
If you’re not yet intrigued, consider its performance. Over the past five years, it has averaged annual gains of 23.5%. Over the past decade and past 15 years, its average annual gains have been 21% and 19%, respectively. It’s up close to 33% year to date, as of this writing. The ETF will not always have such amazing returns. When the market pulls back, as it always does now and then, the ETF will take a hit. But if you’re bullish on the technology sector’s long-term potential, consider adding some shares of this high-performance ETF to your long-term portfolio.
Remember, too, that if you’re not comfortable picking stocks on your own and you fear the Vanguard ETF might be too volatile, you can do well with a simple S&P 500 index fund, too.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,990!*
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
See 3 “Double Down” stocks »
*Stock Advisor returns as of December 9, 2024
Selena Maranjian has positions in Apple, Microsoft, Nvidia, PayPal, and Shopify. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, PayPal, and Shopify. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, long January 2027 $42.50 calls on PayPal, short December 2024 $70 calls on PayPal, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
4 Brilliant Growth Stocks to Buy Now and Hold for the Long Term — Including Nvidia was originally published by The Motley Fool
Dena Holloway is a writer, editor, and content creator based in the United States. She has written for a variety of publications, including Men With Wings Press, where she covers arts, automotive, travel, and fashion. She's also a certified yoga instructor and works as a freelance copywriter.
