For decades, the stock market has achieved an average annual return of almost 10%. That’s pretty good! (Of course, over shorter periods of time, this could average out to be much more – or less.) It makes sense for most investors to park much, if not most, of their money in one or more simple, low-cost index funds, like like one that the S&P500.
Even Warren Buffett has recommended index funds to 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 a higher return? What if you’re willing to read more about investing and become adept at studying companies? What if you want to choose some individual growth stocks to invest in? Well, here are some portfolio candidates to consider.
Any list of promising growth stocks seems almost incomplete without it Nvidia (NASDAQ: NVDA)because he has been a phenomenal artist. As I type this, its value has tripled in the past year and has seen an average annual gain of 75% over the past decade. This rapid growth rate is unlikely to continue as the company continues to grow, but there is still plenty of growth potential ahead, and surprisingly the shares are arguably still fairly valued – with a recent, forward-looking price rise. earnings ratio of 34, below the five-year average of 41.
Nvidia is a dominant player in semiconductors. It used to be best known as a maker of gaming chips, but it is now also focusing quite heavily on data centers, which increasingly need more chips to support the boom in artificial intelligence (AI) technology.
PayPal (NASDAQ:PYPL) is another growth stock to consider. It too has an attractive valuation, with a price-to-earnings ratio of 18 below its five-year average of 21. You’re probably very familiar with the fintech company’s PayPal service, which enables digital financial transactions. PayPal has more to offer, though: it’s also home to companies like Venmo, Braintree, Paidy, Hyperwallet, and Zettle.
Recently, it boasted 426 million active customer and merchant accounts and 25 billion annual transactions. In the third quarter, revenue grew 6% year-on-year, while payment volume increased 9%. PayPal’s growth has slowed lately, especially when it comes to acquiring new customers. It has introduced new features such as the FastLane and Cash Pass rewards program, and expanded the Buy Now, Pay Later feature.
A stellar performance going forward isn’t guaranteed, but it’s certainly possible, with the company looking to boost its growth and profit margins and raise its projections. Dive into PayPal to see what you think. You may want to buy now, buy a partial position now, or simply add the company to your watchlist.
Shopify (NYSE: STORE) is known for working behind the scenes and providing 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 also posted solid gains, up nearly 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 delivered 26% revenue growth and 19% free cash flow margin this quarter, marking our sixth consecutive quarter of over 25% revenue growth excluding logistics.” The company has made a number of strategic partnerships lately, even with PayPal.
The shares are also attractively priced, with a recent price-to-earnings ratio of 56, well below the five-year average of 142. (Such a high average suggests the stock is richly valued over several years.)
Finally, here’s a pick that isn’t exactly a common stock; it is an exchange-traded fund (ETF) – a fund that trades like a stock. So you can buy shares of it from any good broker. The Vanguard Information Technology ETF (NYSEMKT: VGT) is a powerful ETF that gives you easy access to over 300 stocks, all of which are high-tech in some way. The top holdings include several of the “Magnificent Seven” stocks, such as Microsoft, Appleand Nvidia.
If you’re not already intrigued, consider its performance. Over the past five years, it has posted an average annual gain of 23.5%. Over the past ten and fifteen years, average annual gains have been 21% and 19% respectively. At the time of writing, it is up almost 33% so far this year. The ETF won’t always deliver such great returns. When the market pulls back, as it always does every now and then, the ETF will take a hit. But if you’re optimistic about the tech sector’s long-term potential, consider adding some shares of this powerful ETF to your long-term portfolio.
Also keep in mind that if you don’t feel comfortable picking stocks yourself and you’re concerned that the Vanguard ETF is too volatile, you can also do well with a simple S&P 500 index fund.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that 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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Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $369,349!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $45,990!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $504,097!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
Selena Maranjian has held positions at Apple, Microsoft, Nvidia, PayPal and Shopify. The Motley Fool holds 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 calls from $405 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
