Best Stocks to Buy and Hold Forever in December 2024
Updated August 26, 2024 at 5:39 pm
Finding the best stocks to buy and hold forever can lead to higher gains and less stress. Investors who follow a buy-and-hold strategy don’t worry as much about day-to-day price fluctuations. These investors focus on finding the best stocks to buy now and waiting several years to see what happens.
The best stocks often tap into compelling growth opportunities while expanding their profit margins. If you’re looking for long-term investments, this list contains some of the best stocks to buy and hold forever.
Our Methodology Our research is designed to provide you with a comprehensive understanding of personal finance services and products that best suit your needs. To help you in the decision-making process, our expert contributors compare common preferences and potential pain points, such as affordability, accessibility, and credibility.
Our Picks - Best Tech Stock: Microsoft
- Best Advertising Stock: Alphabet
- Best Social Media Stock: Meta Platforms
- Best Semiconductor Stock: Synopsys
- Best Fintech Stock: American Express
- Best E-commerce Stock: Amazon
- Best Athletic Apparel Stock: Deckers Outdoor
- Best Retail Stock: Walmart
- Best Edtech Stock: Duolingo
- Best Software Stock: ServiceNow
Discover the Top Stocks for Patient Investors
Best Tech Stock
Microsoft
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Why We Chose It
Microsoft is gaining market share in the cloud computing industry and is only behind Amazon in that sector. The company is well-diversified across artificial intelligence, business software, gaming, and other verticals.
Pros
- Growth in multiple industries
- Second largest cloud provider
- Copilot offers enticing opportunities
Cons
- Competition in the artificial intelligence industry
- Antitrust scrutiny can limit acquisitions
- Stock gains have exceeded the company’s financial growth over the past year
Best Advertising Stock
Alphabet
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Why We Chose It
Alphabet generates most of its revenue from its advertising platform but has diversified into other segments like cloud computing. Google and YouTube offer advanced targeting capabilities, which suggests that they will continue to attract advertisers for many years.
Pros
- Rising profit margins
- Cloud computing is gaining market share
- Alphabet is the leading online advertising company, and that isn’t likely to change
Cons
- AI blunders
- Advertising is the key revenue driver without much variety
- Not many meaningful initiatives to expand revenue streams
Best Social Media Stock
Meta Platforms
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Why We Chose It
Meta Platforms knows how to keep people’s attention and run targeted ad campaigns across its social networks. The company’s profit margins have expanded significantly, which prompted the firm’s first dividend distribution.
Pros
- The number of daily active users continues to grow
- Net income more than tripled year-over-year in Q4 2023
- The company recently issued its first dividend
Cons
- Competition in the advertising industry is growing
- The company relies on ad revenue without much diversification
- The yield is only 0.38%
Best Semiconductor Stock
Synopsys
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Why We Chose It
Synopsys is a leading provider of silicon chips that has been in business for more than 35 years. The company is expanding its profit margins and is working to expand its market share.
Pros
- Expanding profit margins
- Ansys acquisition will expand Synopsys’ market share
- AI tailwinds can lead to more revenue and earnings
Cons
- High P/E ratio
- Competition in the semiconductor industry is fierce
- Regulators and shareholders must approve the Ansys acquisition before it gets finalized
Best Fintech Stock
American Express
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Why We Chose It
American Express has plans to achieve 10% revenue growth and mid-teens earnings-per-share (EPS) growth each year beyond 2026. The valuation is reasonable, dividend growth is impressive, and profit margins have been expanding.
Pros
- Rising profit margins
- Leading position in the credit and debit card industry
- Multi-year growth plans that make the valuation look reasonable
Cons
- Competition with other credit card giants
- The company depends on the strength of the consumer
- Stock gains over the past year have exceeded revenue and net income growth rates
Best E-commerce Stock
Amazon
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Why We Chose It
Amazon is one of the top 10 best stocks to buy now because it has a leading position in two critical industries: e-commerce and cloud computing. The company is diversifying its business beyond those two segments. The stock can continue to rise due to advertising, video streaming and other opportunities.
Pros
- Well-diversified into multiple business opportunities
- A leader in e-commerce and cloud computing
- New opportunities like advertising and video streaming can generate additional growth
Cons
- Rising competition in e-commerce and cloud computing
- Revenue growth hasn’t kept up with stock gains over the past year
- Government scrutiny can limit acquisitions moving forward
Best Athletic Apparel Stock
Deckers Outdoor
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Why We Chose It
Deckers Outdoor is gaining market share in the athletic apparel industry. The stock has a reasonable valuation, and profit margins recently reached 25%. The new S&P 500 addition is in its early innings of growth.
Pros
- Gaining market share with Hoka and Ugg
- Relatively low P/E ratio if growth rates remain intact
- S&P 500 inclusion has brought more attention to the stock, which can result in more frequent rallies
Cons
- Any growth deceleration can put pressure on the valuation
- Many competitors operate in the athletic apparel industry
- The stock price is already up by 30% year-to-date
Best Retail Stock
Walmart
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Why We Chose It
Walmart has established itself as one of the most recognizable retailers for affordable products. The company is making a bid to attract wealthier customers amid high inflation. Advertising and e-commerce are two exciting growth opportunities.
Pros
- Advertising and e-commerce growth can improve profit margins
- The company recently hiked its dividend by 9%, which is the highest increase in over a decade
- The stock has outpaced the S&P 500 over the past five years
Cons
- Competition from other retailers
- Low profit margins
- Net income declined year-over-year in Q4 2023
Best EdTech Stock
Duolingo
Vault Verified
Why We Chose It
Duolingo has become one of the best apps for learning new languages. Its interactive lessons keep users engaged and have translated into impressive revenue growth. A recent switch to profitability and tapping into new subjects beyond language learning can lead to long-term gains.
Pros
- The company recently became profitable and already has an 8% profit margin
- High active user growth gives the company more runway
- The company is exploring subjects like math and music to increase its total addressable market
Cons
- Competition in the language learning space
- Concerns about artificial intelligence hurting the business
- High valuation
Best Software Stock
ServiceNow
Vault Verified
Why We Chose It
ServiceNow has an impressive roster of 8,100 enterprise clients. The corporation has a 99% renewal rate for its software. Rising revenue and substantial net income growth have enabled higher profit margins.
Pros
- High retention rate
- Recurring revenue model
- Profit margin expansion
Cons
- High valuation
- Competition from other tech leaders
- The stock is already up by 66% over the past year
What Is Buy and Hold?
A buy-and-hold strategy is a long-term investing approach. Investors following this method buy stocks with good fundamentals and set lengthy time horizons. Some people prefer to buy stocks and never sell them, while others may consider selling some of their positions after five to 10 years.
Buy-and-hold investors tend to focus on financials, valuations, growth opportunities, and the company’s current position in its industry. Technical indicators like 50-day moving averages and oscillators aren’t as valuable for a buy-and-hold strategy. Investors consider what a stock can become when they buy shares rather than only assessing a stock for what it currently is.
Many top investors like Warren Buffett use a buy-and-hold strategy. They prefer to pick solid companies and wait for them to gain value rather than ride on a short-term market opportunity that is likely to fizzle out. Buying and holding long-term stocks is more straightforward and comes with less risk than being an active trader.
Buying and holding caters to investors who want a more passive approach. Day traders spend a lot of time in their portfolios and monitoring the news. With a long-term approach, you can save time and focus on other strategies, such as growing your income. Investors can’t control how their investments perform, especially if they initiate short-term trades. But they have more control over their career trajectories and other opportunities.
How Does Buy and Hold Work?
Buy and hold involves picking individual stocks or funds and accumulating shares. Investors consistently buy new shares each month as their earnings arrive. Investing consistently allows people to capitalize on dips and build up their positions.
Time in the market rather than timing the market leads to passive returns that can outperform the stock market. Investors still have to monitor their holdings in case the fundamentals change, but it’s less work than trading. You can save even more time by finding an exchange-traded fund (ETF) that aligns with your portfolio objectives and risk tolerance.
People who hold onto stocks for more than a year end up with long-term capital gains when it’s time to sell. Long-term gains get taxed more favorably than short-term gains.
Dividend investors also use the buy-and-hold approach to increase their dividend income each year. Dividend growth rates and reinvestments allow investors to accumulate additional cash flow each year.
Why Invest in a Buy-and-Hold Strategy?
A buy-and-hold strategy offers several advantages for long-term investors. These are some of the reasons you may want to consider this approach with your investments.
- Save Time: You won’t have to spend as much time checking your portfolio and planning complex trades. Investors can use that extra time to grow their income or master their work-life balance.
- Long-Term Capital Gains: Holding stocks for over a year results in lower taxes when it’s time to sell. Short-term gains are treated like ordinary income, while long-term capital gains have better tax rates.
- Outperform the Stock Market: A buy-and-hold strategy can help you outperform the stock market. Picking individual stocks and ETFs can get you closer to your long-term financial goals.
- A Focus on Fundamental Analysis: An approach that prioritizes finances, growth opportunities and other fundamentals can help investors avoid chasing speculative stocks. You also won’t have to spend as much time looking at technical indicators.
- Less Risk: A buy-and-hold approach minimizes risk since investors set longer time horizons and don’t bother with speculative investments and short-term trading opportunities.
How to Choose Stocks to Buy and Hold Forever
Long-term investing can help people outperform the market and achieve their financial objectives. Choosing the right stocks can minimize your losses. Following these steps can lead to long-term buy and hold stocks.
Step 1: Determine Your Portfolio Goals and Risk Tolerance
Every investor has different preferences for what makes a good long-term stock. Mapping out your portfolio goals and risk tolerance will allow you to find stocks that align with your objectives.
Investors should consider how much money they need to retire and when they will need to access funds in the future. People with time horizons of more than a decade can take more risks than people who are retiring within five years or want to buy a house within one to two years. Investors should also set realistic goals based on their portfolio’s value and the amount of money they contribute to their accounts each month. Knowing the asset classes you want will also help you craft better goals.
A dividend income investor and a dividend growth investor look for two different types of investments. Income investors prioritize high yields, while dividend growth investors look for companies that have high dividend growth rates. Investing can get more nuanced, and it’s important to know where you stand before looking for long-term stocks.
Step 2: Create a Shortlist of Stocks
It takes a lot of time to analyze many individual stocks to invest in, but you can skim through stocks when creating a shortlist. Investors can look for one to two fundamentals, such as a stock’s valuation and the financial results from the most recent quarter. A Google search can provide you with this information in less than a minute.
If a stock looks interesting, add it to your shortlist. This designation isn’t enough to warrant a buy, but including it in your shortlist ensures you don’t forget about a promising opportunity. You can use a stock screener to filter stock results based on your criteria. Investors can use screeners to find stocks based on financial growth, historical performances, valuation metrics, and other factors.
Step 3: Review Each Stock’s Fundamentals
Once you have your shortlist, it’s time to dive deeper into each stock. The valuation and financial results from the most recent quarter are still important. But you should also visit a corporation’s investor relations page and read through recent earnings reports and press releases.
Leaders within the company will provide commentary in quarterly press releases about recent initiatives. Earnings reports contain a lot of data, and you will have to distinguish which data points are the most important.
Year-over-year revenue and net income growth are key indicators. Investors should also look at a company’s guidance and how leadership comments about challenges and opportunities. Investors should also compare corporations with their competitors. That way, it’s easier to tell if growth is the same across the board or if there is an outlier.
Step 4: Buy Your Favorite Long-Term Stocks
Investors should initiate small positions in long-term stocks that fulfill their requirements. Smaller positions give you a stake in the company without over-exposing yourself. People tend to pay more attention to companies after investing in their stocks. If you become more confident about the company’s long-term prospects, you can accumulate shares and build your position.
A diversified portfolio shouldn’t lean heavily into one stock. Most investors should have at least 10 stocks in their portfolio to spread their money across multiple assets. Individual stocks alongside funds can further minimize your risk. But if you buy more than 30 stocks, it’s similar to having your own fund. Having more stocks will also increase the amount of time you have to spend monitoring your holdings. Each investor is different, and it’s important to assess how much diversification you want in your portfolio as you buy long-term stocks.
Step 5: Monitor Your Investments
A corporation’s fundamentals can change over time. A growth opportunity that formed your entire thesis can suddenly dry up and justify leaving your position. Some stocks become significantly overvalued relative to their long-term catalysts and may be worth trimming.
Occasionally, looking at news related to your investments can help you make better decisions. But investors will get the best idea of a company’s current prospects during each quarterly earnings report. Those reports display the company’s recent financial growth rates, catalysts, and guidance.
Pros and Cons of a Buy-and-Hold Strategy?
A buy-and-hold investing strategy offers many advantages but isn’t right for everyone. Investors should consider these pros and cons before buying long-term stocks.
Pros of a Buy-and-Hold Strategy
- Less work: You don’t have to spend as much time monitoring stock prices or the news.
- Long-term capital gains: Save money on taxes when it’s time to sell.
- The potential to outperform the stock market: A buy-and-hold strategy can generate significant long-term returns.
- Grow your investment income: Dividend investors who follow this strategy and reinvest dividends will end up with higher dividend payments each quarter.
- It works: Buying individual stocks and funds for the long run has been an effective strategy. Top investors like Warren Buffett use the buy-and-hold strategy.
Cons of a Buy-and-Hold Strategy
- Enduring market crashes: It can be tempting to abandon the strategy during a correction or a crash. It’s easy to stick with this strategy during the good times, but the challenging economic cycles will test your resolve.
- Missing out on opportunities: Short-term trades can generate higher gains than a buy-and-hold strategy, but trading comes with more risks.
- Requires patience: Most investors can patiently wait for one to four weeks before seeing results. Fewer investors can wait five to 10 years for their investments to pan out.
Frequently Asked Questions
What Are the Two Ways That Investors Can Make Money From Stocks?
Investors can make money from stocks with dividends and capital gains. Dividends are cash distributions corporations give out to reward long-term shareholders. Capital gains are the unrealized profits you incur when a stock you’re holding gains value. Investors must sell their shares to realize capital gains.
Is It Important To Avoid Buying Single Stocks and Invest in Mutual Funds Instead?
Buying individual stocks is riskier but can generate higher returns. Beginner investors may benefit more from mutual funds since these funds come with diversified portfolios. You also have to do less research if you invest in mutual funds compared to buying individual stocks.
How Old Do You Have To Be To Invest in Stocks?
You must be at least 18 years old to open your own brokerage account. It’s possible to invest before turning 18 years old through a joint or custodian account. Investing sooner gives your money more time to compound over time.
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