Investing in growth stocks can be a great way to earn life-changing wealth in the stock market. The key, of course, is to know which growth stocks to buy and when.
Despite increased volatility in the stock market in 2025, growth stocks continue to outperform. The S&P 500 Growth index climbed about 18.9% through the first nine months of the year. Its counterpart, the S&P 500 Value index, was up just 8% during the same period.
However, growth stocks don't always outperform during periods of volatility. In 2022, the S&P 500 Growth index fell 30% for the year, while the S&P 500 index dropped just 19%.
Picking the right growth stock can help you weather the downside while profiting in the long run from its potential. Here's a handy guide to help you get started investing in growth stocks. With these tools and strategies, you can position your portfolio for long-term success with growth stocks.
Overview
What is a growth stock?
Growth stocks are companies that increase their earnings faster than the average business in their industry or the market as a whole.
Often, a growth company has developed an innovative product or service that is gaining share in existing markets, entering new markets, or creating entirely new industries. The market tends to reward businesses that can grow faster than average for long periods, delivering handsome returns to shareholders in the process. The faster they grow, the bigger the potential returns.
Unlike value stocks, high-growth stocks tend to be more expensive than the average in terms of profitability ratios. Despite their premium price tags, the best growth stocks can still deliver fortune-creating returns to investors.
That said, growth stocks can be much more volatile. Big drops in growth stock prices may take years to fully recover and catch up with the rest of the market.
High inflation puts pressure on growth stocks because it reduces the future value of their expected earnings. Supply chain constraints also affect the ability of some to expand, and other macroeconomic factors slow the entire economy. However, downturns can give long-term investors a buying opportunity when growth stock prices are low.
Top growth stocks
Top growth stocks in 2025
To provide you with some examples, here are 10 excellent growth stocks available in the stock market today.
| Company name | Company ticker | Market cap | Industry |
|---|---|---|---|
| Meta Platforms | NASDAQ:META | $1.8 trillion | Interactive Media and Services |
| Shopify | NASDAQ:SHOP | $203 billion | IT Services |
| Uber Technologies | NYSE:UBER | $197 billion | Road and Rail |
| Block | NYSE:XYZ | $46 billion | Diversified Financial Services |
| MercadoLibre | NASDAQ:MELI | $104 billion | Multiline Retail |
| Nvidia | NASDAQ:NVDA | $4.4 trillion | Semiconductors and Semiconductor Equipment |
| Netflix | NASDAQ:NFLX | $511 billion | Entertainment |
| Amazon | NASDAQ:AMZN | $2.3 trillion | Multiline Retail |
| Salesforce | NYSE:CRM | $225 billion | Software |
| Alphabet | NASDAQ:GOOG | $3.0 trillion | Interactive Media and Services |
As this list shows, growth stocks come in all shapes and sizes. They can be found in a variety of industries, both within the U.S. and international markets. Although all the stocks on this list are from larger businesses, smaller companies can also be fertile ground for growth investors.
A great way to invest in a wide variety of small-cap growth stocks is via an exchange-traded fund (ETF), such as Vanguard Small-Cap Growth Index Fund ETF (VBK -1.18%). This fund tracks the performance of the CRSP U.S. Small Cap Growth Index, which gives investors an easy way to invest in roughly 560 small-cap growth companies all at once.
The Vanguard Small-Cap Growth Index Fund ETF has an ultra-low expense ratio of 0.07%. This means investors will receive almost all the fund's returns, with only a small amount in fees going to Vanguard. (An annual expense ratio of 0.07% works out to only $0.70 in fees per $1,000 invested annually.)
Where to look
How to find growth stocks
To find great growth stocks, you'll need to:
- Identify powerful long-term market trends and the companies best positioned to profit from them.
- Narrow your list to businesses with strong competitive advantages.
- Further narrow your list to companies with large addressable markets.
Identify trends
Identify trends and the companies driving them
Companies that capitalize on powerful long-term trends can increase their sales and profits for many years, generating wealth for their shareholders along the way. Here are some examples, along with the companies that can help you profit from those trends:
E-commerce
As more people shop online, Amazon (AMZN -0.57%), Shopify (SHOP 0.09%), and Etsy (ETSY 0.98%) are well positioned to profit within the U.S. (and many international markets). MercadoLibre (MELI -0.32%) holds a leading share of the online retail market in Latin America. Despite the consistent presence of brick-and-mortar retail, e-commerce still has tons of growth potential as an industry.
Digital advertising
Meta Platforms (META -0.81%)(formerly Facebook) and Alphabet (GOOGL 0.12%) (which owns Google) own the lion's share of the digital ad market and are poised to profit handsomely as marketing budgets shift from TV and print to online channels. Amazon has built a massive advertising business, which continues to expand into new formats. Even Netflix (NFLX -1.64%) has come around to advertising to increase its subscriber base and boost its revenue.
Digital payments
PayPal (PYPL -2.9%) and Block (NASDAQ:XYZ) are helping accelerate the global shift from cash to digital payment forms by allowing businesses of all sizes to accept debit and credit card transactions and giving consumers easier access to cashless payments.
Cloud computing
Computing power is migrating from on-premise data centers to cloud-based servers. Amazon's and Google's cloud infrastructure services help make this possible, while Salesforce (CRM 3.98%) provides some of the best cloud-based enterprise software available. The rise of artificial intelligence (AI) will require vast amounts of computing power that cloud providers are ready, willing, and able to offer.
Cloud Computing
Cord-cutting and streaming entertainment
Millions are canceling their cable subscriptions and replacing them with less expensive and more convenient streaming options. As the global leader in streaming entertainment, Netflix offers a great way to profit from this trend, but it faces growing competition from other media companies.
Electric and autonomous vehicles
The world is shifting from its reliance on gasoline to using electricity to power vehicles. According to a survey of industry executives, half of all auto sales could be electric vehicles (EVs) by 2030. Tesla (TSLA -1.42%) has been the leader in the space with its lineup of vehicles and battery technology. Chinese company BYD's (BYDDY 0.0%) (BYDD.F -0.58%) automotive segment has ascended rapidly to become the leading EV maker in the world, thanks to its low-priced vehicles.
Both EV makers have made significant progress in developing self-driving technology for their cars. However, Alphabet's Waymo has a clear lead in the space, offering a commercial service in several U.S. cities and completing more than 250,000 rides per week. Uber (UBER -2.14%) has emerged as a key partner for autonomous vehicle companies looking to deploy their fleet and maximize their capital utilization, and it could be a hidden beneficiary of the growing number of self-driving cars on the road.
Artificial intelligence
Companies have recently poured billions into accelerating their AI development and applying it to their businesses. Nvidia (NVDA 1.04%) has been a big beneficiary since it designs the chips used to train many large language models (the foundation of generative AI).
Alphabet, Amazon, Microsoft (MSFT -0.43%), Oracle (ORCL 2.99%) also benefit from growth in AI applications since many run on their cloud computing platforms. Salesforce is leveraging its position in enterprise software to help companies use their own data to create AI-powered agents.
The key is to try investing in these trends and companies as early as possible. The earlier you get in, the more you stand to profit. However, the most powerful trends can last for many years -- even decades -- giving you plenty of time to claim your share of the profits they create.
Competitive advantages
Prioritize companies with competitive advantages
It's also important to invest in growth companies that possess strong competitive advantages. Otherwise, their competitors may pass them, and their growth may not last long.
A strong competitive advantage will help companies survive and thrive through market downturns, while those without one will struggle.
If you can identify stocks of companies with strong competitive advantages being sold off along with the rest of the market, it can be an opportunity to generate massive returns as they recover. Some competitive advantages are:
- Network effects: Meta's Facebook is a prime example here. Each person who joins its social media platform makes it more valuable to other members. Network effects can make it difficult for new entrants to displace the current market share leader. Meta's 3.5 billion users across its family of apps certainly make it unlikely that a new social media company will displace it.
- Scale advantages: Size can be another powerful advantage. Amazon is a great example in this category because smaller rivals will find it extremely difficult to replicate its massive global fulfillment network.
- High switching costs: Switching costs are the expenses and difficulties associated with switching to a rival's product or service. Shopify, an online retail system for more than 1 million businesses, is a perfect example of a business with high switching costs. Once a company begins using Shopify as the core of its online operations, it's unlikely to go through the hassle of switching to a competitor.
Why invest in growth stocks
Why invest in growth stocks
- High return potential.
- Less demand for immediate capital returns allows management to invest in the future.
- One excellent growth stock investment can make up for a handful that don't work out.
Risks
Risks of investing in growth stocks
Growth stocks can offer excellent long-term returns, but there are no free lunches in the stock market. The cost of better returns is greater risk.
Growth stocks generally exhibit greater price volatility. That's partly due to their higher valuations. Any changes in expectations for the future are multiplied by a greater factor when valuations are high. As such, investor need to be able to stomach severe drawdowns in the value of their growth stocks.
Individual growth stocks also hold significantly more risk than individual value stocks. By their nature, growth stocks are less predictable, so an individual investment could face setbacks from poor execution, challenges scaling the business, or another company disrupting its product or market. As such, growth stock investors should maintain a portfolio with companies across industries and in different phases of growth.
Related investing topics
Opportunity
Find companies with large addressable markets
Finally, you'll want to invest in businesses with large addressable markets and long runways for growth still ahead. Industry reports from research firms -- such as Gartner (IT -0.38%) and Insider Intelligence, which provide estimates of industry sizes, projections for growth, and market share figures -- can be very helpful.
The larger the opportunity, the larger a business can ultimately become. And the earlier in its growth cycle it is, the longer it can continue to grow at an impressive rate.
FAQ
FAQ: Growth stocks
Do growth stocks pay dividends?
Most growth stocks don't pay dividends, instead using excess capital to invest in the continued growth of the business. However, as companies grow larger and generate substantial free cash flow, some can continue investing in growth while returning some capital to shareholders through dividends.
What growth stock is going to boom in 2025?
The stock market prices future expectations for each company into its stock price. If a company exceeds expectations, it'll likely see its stock price increase. So, the stocks expected to rise the most in 2025 are those that outperform market expectations.
What is an example of a growth stock?
One example of a growth stock is Amazon. Its shares are usually considered expensive by traditional valuation measures, like price-to-earnings (P/E) or price-to-sales (P/S) ratios. However, the company continuously invests to grow its business and expand into new markets and industries. The long-term potential profit remains extremely high.
What are the best stocks for growth?
The best stocks for growth are usually smaller companies with unique competitive advantages in large or potentially large addressable markets. They are typically expensive relative to their peers, but the company's upside justifies the stock price.
What is the difference between a growth stock and a value stock?
Growth stocks tend to exhibit faster and less predictable revenue growth compared to value stocks, which are much more predictable from year to year. Over the long run, growth stocks are expected to grow revenue and earnings much faster than value stocks. Value stocks typically trade based on their valuation, while growth stocks may trade on momentum and how their financial results and management outlooks compare to expectations.
Expert Q&A on growth stocks
Dr. Preston D. Cherry, PhD, CFP
The Motley Fool: What's your best advice on finding high potential stocks like growth stocks?
Dr. Cherry: Because growth stocks tend to operate in a growth business cycle or business sector, finding high potential growth stocks should contain metrics that attempt to confirm or support current growth and best signal sustainable growth patterns. One important feature of a growth company is to ask, "do they possess a unique business service or product in their sector that provides a valuable moat?" This service or product is the lifeline of growth where the company needs to market, produce, deliver, and protect better than competitors and new entrants. Performance metrics to consider are whether the company shows historical increases in earnings over select periods and profit margin analysis, which illustrates how a company can manage costs and increase revenues. Other analysis considerations are the technical chart trend characteristics and experienced market analysts' forward growth and price projections.
The Motley Fool: Are growth stocks risky?
Dr. Cherry: Investing in individual stocks, in general, contains risk factors such as overall market risk and business risk, among others. The characteristics of growth stocks can make them riskier than their value stock counterparts. As their name suggests, growth stock companies tend to be in a growing business phase. The growing stage could consist of younger and smaller companies with an unproven product or entity track record that tend to use much of their revenues and raised capital to grow the business. These growth characteristics, among others, tend to make growth stocks riskier through higher stock price volatility or reactions to market, company, economic, and political risks, to name a few, thus more significant exposure to downside stock price pressure. However, as investors should avail themselves of the downside cautions of growth stock risk, the upside potential should also be considered. With additional risk comes the prospect of added returns. Because growth companies have the potential for higher company growth rates, growing from earlier business stages to mature business stages, growth stocks could potentially experience higher returns over shorter time horizons. Above all, investors should consider their risk tolerance, capacity, portfolio allocations, and goals to accept the higher risk of growth stocks.
The Motley Fool: How do you tell the difference between a growth vs. value stock?
Dr. Cherry: Growth and value stocks tend to differ in a few areas, such as company size, business stage, and revenues to return gains to the shareholder. Growth stocks tend to be in the emerging markets or small or mid-cap company size areas whereas value stock companies tend to be large-cap. The size of companies tends to be the lens of what business stage a company resides. Growth stocks tend to be in the early to mid-business stages, the growth stages (although a small segment of large companies can be growth companies too), and value stock companies tend to be larger, more mature business stage companies. The value stock companies tend to be trading at a discount, "on-sale," or a premium, "overvalued," to their valuation, thus their name, finding value. Growth stock companies tend to reinvest their earnings back into the company and return value to shareholders solely through stock price appreciation. In comparison, value companies may return earnings to investors through a dividend, representing income to an investor and complements stock price appreciation. This income and stock price appreciation mean a total return approach.
Scott Stewart, PhD
The Motley Fool: How do you tell the difference between a growth vs. value stock?
Dr. Stewart: The Gordon valuation model is an excellent tool to illustrate the difference between growth and value stocks. Professor Gordon’s model, with some simplifying assumptions, shows that stock prices equal next year’s earnings (e) divided by the expression r – g, where “r” is a discount rate and “g” is a growth rate. For the same stock price, a lower growth rate necessitates a higher earnings number. Conversely, (illustrated by dividing both sides by e) a high-p/e stock is associated with a high growth rate. Of course, these numbers reflect investor expectations.
Investors bid up the p/e ratios of some stocks because, despite low current earnings relative to their market values, they expect earnings to grow at high rates. These are traditionally defined as growth stocks. Tesla stock is a good example of a growth stock, with its 154 p/e multiple and 73% earnings growth rate (using Yahoo Finance data).
The Motley Fool: Are growth stocks risky?
Dr. Stewart: Note that a company’s risk is embedded in its discount rate “r.” As a result, companies with stable earnings will justify higher p/e multiples than ones with volatile earnings, other things equal. Clorox, a large-cap, stable-earnings company with only modest growth expectations (basically 0% using Yahoo Finance data) still justifies a p/e of 30 (using next fiscal year’s earnings).
Empirical evidence suggests that high-growth stocks underperform low-growth, low-p/e “value” stocks over the very long term. For example, the Russell small-cap Value index yielded roughly 3% a year higher than its Growth peer over the forty years ending 2019, and at lower return volatility. One explanation is that investors over-estimate the sustainability of high-growing companies since these “glamour” stocks subsequently fail to deliver on those high expectations. However, there can be long periods in which growth stocks outperform, such as the 10 years ending 2020.
The theory and evidence suggest that the key to picking good growth stocks is to identify the ones whose earnings growth rates will accelerate in the short term (increasing the p/e and price) and not disappoint in the long term (sustaining e growth and maintaining a high p/e). For value stocks, some practitioners suggest picking companies that investors have given up on (ones with very low-p/e or other multiples if e is less than zero), that won’t fail in the short-term and will recover in the long-term. Not easy tasks!
