Investing in growth stocks can be a powerful way to build long-term wealth -- but it’s not always a smooth ride. Growth stocks tend to outperform when the market rewards future potential, but they can fall hard when investors grow more cautious.
That’s exactly what we’ve seen in recent years. Growth stocks surged in 2025 (the S&P 500 Growth index gained 21.4% versus 11% for the S&P 500 Value index), but they were crushed in 2022 (down 30% versus 19% for the S&P 500 overall).
The upside is real. So is the volatility. The goal is to invest in growth companies that can keep compounding through good markets and bad, and to build a strategy that helps you stick with them.
What is a growth stock?
A growth stock is a company expected to increase revenue and earnings faster than the broader market (or faster than most peers). Many growth companies win by doing at least one of the following:
- Taking a share of a large existing market.
- Expanding into new markets.
- Creating a new product category altogether.
Because investors are paying for future potential, growth stocks often trade at higher valuations than the average stock. That doesn’t mean they’re “overpriced,” but it does mean expectations are high, and the stock can drop quickly if growth slows.
Why they can be volatile: Growth stocks are especially sensitive to interest rates and inflation because more of their value is tied to earnings expected years in the future. That’s why downturns can hit them harder.
Top growth stocks to consider
| Company name | Company ticker | Market cap | Industry |
|---|---|---|---|
| Meta Platforms | NASDAQ:META | $1.6 trillion | Interactive Media and Services |
| Shopify | NASDAQ:SHOP | $174.1 billion | IT Services |
| Uber Technologies | NYSE:UBER | $152.0 billion | Road and Rail |
| Block | NYSE:XYZ | $39.3 billion | Diversified Financial Services |
| MercadoLibre | NASDAQ:MELI | $89.7 billion | Multiline Retail |
| Nvidia | NASDAQ:NVDA | $4.4 trillion | Semiconductors and Semiconductor Equipment |
| Netflix | NASDAQ:NFLX | $415.1 billion | Entertainment |
| Amazon | NASDAQ:AMZN | $2.3 trillion | Multiline Retail |
| Salesforce | NYSE:CRM | $183.5 billion | Software |
| Alphabet | NASDAQ:GOOG | $3.7 trillion | Interactive Media and Services |
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.
Growth Stocks | Dividend Stocks |
|---|---|
Fast-growing young companies in evolving industries. | Slow-growing mature businesses in stable industries. |
Reinvest profits in expanding the business and growing market share. | Pay out a large portion of profits as dividends for shareholders. |
May produce little or negative free cash flow as management invests in the business. | Steady and predictable growth in free cash flow over time. |
Higher volatility. | Lower volatility. |
The biggest risk is management's execution on the long-term outlook. | The biggest risk stems from mismanaging capital allocation, leading to a dividend cut. |
Typically trade for high valuations. | Typically trade for low valuations. |
Investors can generate great returns from either type of stock. Understanding what to look for when investing in growth stocks or dividend stocks is key to getting the most from either strategy.
How to manage a portfolio of growth stocks
Not every growth stock you buy will pan out. As such, it's best to start with small positions in multiple growth stocks. If a business's financial performance lines up with your investment thesis, you might increase your position in that stock, as you should now have more confidence in its future growth. However, if you start to see evidence that your thesis was wrong, you should start trimming your position, or possibly exit it altogether.
As mentioned, growth trends can last a very long time, so you should avoid selling a stock too early. However, since growth stocks are more volatile than value stocks, it may be smart to limit your biggest positions to a certain percentage of your portfolio. That way, a big swing in the stock price won't crater your whole portfolio.
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FAQ: Growth stocks
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