The Smartest Growth Stock to Buy With $1,000 Right Now

Key Points

• Growth stocks can help your portfolio grow faster -- but can be more volatile.

• Here are a handful of great growers that aren't insanely overvalued.

• Even more convenient: consider this growth ETF instead.

• 10 stocks we like better than iShares Trust - iShares U.s. Technology ETF ›

Most of us would love to have portfolios featuring some great growth stocks, right? Why have your portfolio growing at an average pace when it might grow at an above-average rate? That may seem obviously true, but there are some downsides to growth stocks, too.

Here's a look at some very promising growth stocks, including one that's exceptionally tempting, along with a few caveats to consider.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

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Nvidia

The semiconductor titan Nvidia (NASDAQ: NVDA) recently became the first company to reach a market capitalization of $4 trillion. It got there by averaging annual gains of 78% over the past decade -- and by becoming a key producer of data center chips that are increasingly necessary in this age of artificial intelligence (AI) everything.

Better still, Nvidia's shares seem to have plenty of room for further growth, with a recent forward-looking price-to-earnings (P/E) ratio of 37.3, below its five-year average of 39.5.

Microsoft

Meanwhile, Microsoft (NASDAQ: MSFT) is another compelling giant, with its recent forward P/E of 33 not far above its five-year average of 30, suggesting it's still reasonably valued. The company has multiple growing businesses, such as its dominant Office 365 suite of applications, its Azure cloud computing platform, its Xbox gaming platform, and its major Windows operating system, among many other things.

Microsoft pays a dividend that may seem small, with a recent yield of 0.67%, but that payout has been growing briskly. The recent total annual payout was $3.24 per share, up from $2.09 in 2020 and $1.59 in 2017. In Microsoft's third quarter, revenue grew by 13% year over year, with net income up 18%.

Alphabet

Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is also tempting to choose as the smartest growth stock. My colleague Keithen Drury recently called it a "once-in-a-decade opportunity." It encompasses not only the Google search engine, but YouTube, the Chrome browser, the Google Cloud Platform, and more. Alphabet's recent forward P/E of 18.8 is well below its five-year average of 22.1.

Meta Platforms

See how many terrific growth stocks are out there that aren't insanely overvalued? Here's another: Meta Platforms (NASDAQ: META), parent of Facebook, Instagram, WhatsApp, and more. On average, 3.4 billion people use at least one of Meta's services daily (up 6% year over year as of March). Meta Platforms' forward P/E, recently 28.5, was well above the five-year average of 21.1, but its PEG ratio (comparing its price to its growth rate) was a very reasonable 0.99, below the five-year average of 1.12.

Here's my smartest growth stock to buy

So which stock am I choosing? Well, I'm going to suggest you check out the iShares US Technology ETF (NYSEMKT: IYW). An exchange-traded fund (ETF) is a fund that trades like a stock, and this one tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, investing at least 80% of its assets in stocks from that index.

If you're thinking that a growth-stock ETF doesn't sound as exciting as an actual growth stock, know that this ETF has averaged annual returns of 19.6% over the past 15 years and 27.9% over the past three years. It's not a sleeper.

The fund recently encompassed 142 stocks, and its top 10 holdings made up 64% of its total value. Those top 10 stocks include all of the ones I mentioned earlier, and nearly 90% of the ETF's value is invested in technology stocks.

So take a closer look at this ETF if you're now intrigued. Buying into it will quickly make you a part owner of 142-some companies, with much of your invested dollars in the stocks mentioned above.

A few caveats to consider

As you think things through, though, remember that growth stocks are exciting, but they can also be volatile. If for any reason you fear our economy may be in for some bumps soon, perhaps due to tariff wars, know that growth stocks tend to fall harder during market downturns.

Think, too, about your holding period. No money that you'll need within around five years (if not 10, to be more conservative) should be in stocks, because market corrections do happen now and then. If you're interested in investing in any of these growth stocks or this ETF for just, say, a year, think twice. If you're a long-term investor, aiming to hold for many years and even a decade or more, you'll likely be able to ride out a market downturn or a slow period for any particular growth stock.

Should you invest $1,000 in iShares Trust - iShares U.s. Technology ETF right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.