Investing in growth stocks can help you build substantial wealth over time -- but some investors may be hesitant to do that based on the idea that owning such stocks means accepting higher risks.
It doesn't have to. The key is thinking like a business owner and keeping a long-term mindset. As long as you stick with proven companies that are leading their respective markets, the odds are good that you'll be successful.
If you have money you're ready to invest now for the long term, here are two quality growth stocks you should consider buying and holding.
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1. Amazon
Amazon (AMZN -0.91%) has delivered incredible returns for its long-term investors. The past five years have been a bumpy ride for shareholders as e-commerce sales slowed, but Amazon possesses a wide moat and enjoys solid growth prospects, so there's every reason to believe that it can deliver steadily compounding returns from here for patient investors.
After a few years of sluggish online spending by consumers, Amazon's e-commerce growth is starting to pick up again. Its online sales grew 11% year over year in the second quarter -- marking the first quarter of double-digit percentage sales growth since Q3 2022.
Amazon has multiple businesses that can deliver growth. Revenues from its higher-margin non-retail businesses like cloud computing and advertising continue to grow at double-digit percentage rates. But the e-commerce business is still Amazon's largest revenue source, and there are a few catalysts that could drive higher spending frequency from its Prime members.
Amazon recently launched perishable grocery delivery in several U.S. cities as part of its regular same-day delivery service. This is in addition to its food delivery options from Amazon Fresh and Whole Foods, and shows how the company continues to invest to offer useful new services to its customers.
But Wall Street may be underestimating Amazon's margin expansion opportunity. Amazon is increasingly relying on robotics to move products around in its warehouses. It recently rolled out DeepFleet artificial intelligence (AI) to improve the efficiency of its robots. This should increase inventory efficiency, which will lead to higher margins and free cash flow over the long term.
Amazon's technology leadership makes it a no-brainer growth stock to buy. The company has been relentless in making investments to strengthen its competitive advantages. This is why Amazon continues to dominate the U.S. e-commerce market and will continue to deliver satisfactory returns for shareholders.
2. Spotify Technology
More people than ever are streaming podcasts, music, and audiobooks, and this is lighting a fire under Spotify (SPOT -1.87%) stock. It has risen like a rocket since the end of 2022's market sell-off. While investors might be hesitant to buy a stock that has climbed so rapidly over such a relatively short period, Spotify still has opportunities to grow its base of monthly active users that could send the stock higher over the next five years.
Spotify's second-quarter earnings report was solid. The number of premium subscribers grew slightly faster than the number of people on its free ad-supported plans. Spotify reported 696 million total monthly active users, with premium subscribers up 12% year over year to 276 million.
It continues to invest in solidifying its lead in the streaming market. It expanded its audiobook feature to Germany, Austria, and Switzerland and launched its voice-activated DJ feature in more than 60 new markets.
Users are also responding well to its AI-powered recommendation features. User engagement with its AI DJ nearly doubled in the past year. Spotify is also using generative AI across the service, including to create playlists based on user preferences that are driving longer listening sessions.
Management believes the platform is on track to reach 1 billion users. With analysts expecting the company's earnings to grow at an annualized rate of 28% over the next several years as it expands margins, the stock should deliver above-average returns from here.
