What is a growth stock?
A growth stock is a company that is anticipated to grow its sales and earnings at a faster rate than the market average. Investors are often attracted to these stocks in the hope that this business growth will translate into significant stock price appreciation. However, it's important to understand that this growth is an expectation, not a guarantee. If a company's growth fails to meet these high expectations, its stock price can experience sharp declines. Growth stocks typically don't pay out dividends. Instead, growth companies usually reinvest cash back into their business. This can help fuel expansion, employee recruitment, research and development, and new products or services—which could be why investors anticipate positive returns from growth stocks.
Characteristics of growth stocks
Growth stocks come in all different sizes, from all different industries. Still, they tend to have these common characteristics:
- Higher P/E ratios (price-to-earnings ratios), which tell you how much investors are willing to pay for the company's earnings
- Reinvestment into their business
- Typically no dividends, though some growth stocks pay dividends
- Higher volatility
- A focus on innovation
Examples of growth stocks
The following make up the top 10 holdings of Fidelity® Blue Chip Growth Fund and/or Fidelity® Large Cap Growth Index Fund. (Links will take you to top 10 holdings of each fund.) Note that even though these growth stock examples are all from large companies, there are many small companies, even startups, considered to be growth stocks too.
Blue Chip Growth Fund (FBGRX), Top 10 holdings (62.83%) as of 10/31/251
- Nvidia (
), 16.92% - Apple (
), 9.69% - Amazon (
), 7.90% - Microsoft (
), 7.49% - Alphabet (
), Class A, 6.60% - Meta Platforms (
), 4.27% - Broadcom (
), 3.37% - Netflix (
), 2.56% - Eli Lilly (
), 2.12% - Marvell Technology (
), 1.89%
Large Cap Growth Index Fund (
- Nvidia (
), 13.71% - Apple (
), 11.44% - Microsoft (
), 11.13% - Broadcom (
), 5.03% - Amazon (
), 4.47% - Tesla (
), 3.89% - Meta Platforms (
), Class A, 3.20% - Alphabet (
), Class A, 3.11% - Alphabet (
), Class C, 2.54% - Eli Lilly (
), 2.14%
Magnificent 7 stocks
The Magnificent 7 is a group of tech-sector stocks that over the past decade have far outpaced the growth of the S&P 500® index, a group of about 500 of the largest publicly traded companies in the US. All Magnificent 7 stocks are generally considered growth stocks, though classifications can be fluid. Consider that these companies all began as tech startups and eventually made good on their promises of profitability growth. These include:
- Alphabet (
) - Amazon (
) - Apple (
) - Meta Platforms (
) - Microsoft (
) - NVIDIA (
) - Tesla (
)
Non-Magnificent 7 stocks
There are both other tech companies that aren't part of the Magnificent 7 and non-tech stocks considered growth stocks, like holdings in the Fidelity® Large Cap Growth Index Fund as of October 31, 20251, including:
- Broadcom (the category is listed as semiconductors and semiconductor equipment, the same as Mag 7 company NVIDIA)
- Caterpillar (machinery) (
) - Coca-Cola Co. (consumer staples) (
) - Eli Lilly and Company (pharmaceuticals)
- Pinterest Inc. (
) (the category is listed as interactive media and services, the same as Mag 7 companies Alphabet and Meta Platforms)
Note: These are examples only, not endorsements. Classifications are fluid, and stocks can exhibit both value and growth characteristics.
Growth stocks vs. value stocks
Growth stocks are often compared to value stocks. Value stocks tend to trade at a price that seems low given the company's earnings or growth potential. Instead of investing profits in their businesses, value stock companies are more likely to pay dividends, which is rarer among growth stocks. While growth stocks can be small companies or well-established ones, value stocks are more likely to be large companies that have been around a while.
Pros of growth stocks
Growth stocks have some potential advantages, including that they typically:
- Could offer larger returns
- Represent high-growth companies
Cons of growth stocks
There are some drawbacks to growth stocks too. They tend to:
- Have high-growth expectations, which means they are vulnerable if the company's growth falters
- Could be more volatile than value stocks
- Do not pay dividends, meaning the only way to generate income is to sell when the stock price increases
Should you invest in growth stocks?
Whether you invest in growth stocks—or any other investments—depends on your financial goals, time horizon, and risk tolerance. Because of these stocks' volatility, a growth stock investor should be able to stomach regular ups and downs in share price. Another factor to consider: the high upfront cost of growth stocks, with some trading for hundreds of dollars for 1 share.
How to invest in growth stocks
If you decide growth stocks make sense for your portfolio, you could invest in them via a taxable brokerage account, 401(k) or other workplace retirement plan (if your plan offers growth-stock funds), individual retirement account (IRA), or health savings account (HSA).
Once you have your account, you could invest in single stocks or a bunch of growth stocks in a single share of an exchange-traded fund (ETF) or mutual fund.
Here are the steps to invest in growth stocks or funds at Fidelity:
- Log in to your account.
- Type in the symbol for the stock or fund you want to purchase in the search bar. Or go to the Fidelity Stock Screener, Fidelity's ETF/ETP Screener, or Fidelity's Mutual Fund Research page, and filter for growth stocks and funds to get suggestions.
- When you've found an investment you want, select the account through which you'd like to buy and the dollar amount you wish to purchase.
- Preview your order, and if everything is correct, place your order.