The Wisdom of Crowds gained widespread attention when it was published 17 years ago. In the book, author James Surowiecki laid out the case that “the many are smarter than the few.”
To be sure, there are plenty of times when the crowd isn’t all that wise. However, Surowiecki’s point is often spot-on.
Take, for example, Robinhood’s 100 most popular list. It includes the stocks most widely held by investors on the trading platform. Some of those stocks aren’t great alternatives, in my view. However, quite a few are.
And there are some stocks on the top 100 list that are absolutely brilliant picks. I think that buying these three popular Robinhood stocks could even be the smartest investing moves you’ll ever make.
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Vanguard S&P 500 Index Fund ETF
OK, the Vanguard S&P 500 Index Fund ETF (NYSEMKT:VOO) really isn’t a stock. However, it is securely ensconced on the Robinhood top 100 list. Since exchange-traded funds (ETFs) trade like stocks, I personally don’t have any problems with VOO (I’ll use its ticker symbol instead of its rather lengthy full name) being treated by the folks at Robinhood as a stock.
Investing in an S&P 500 index fund like VOO truly is one of the smartest financial moves you can make if you hold it over the long run. The S&P 500 has never lost money over a 20-year period. It has delivered an average annualized return of close to 10%. That rate means that you can double your money every seven or so years.
Warren Buffett, one of the best investors the world has seen, really likes S&P 500 index funds. He even revealed several years ago that his will directs that 90% of the money inherited by his family when he dies be invested in a low-cost S&P 500 index fund.
VOO’s annual expense ratio is a super-low 0.03%. You won’t find an S&P 500 index ETF with a lower cost. Investing in VOO should make you solid returns over the long term.
It’s not surprising that lots of Robinhood investors like (and own shares of) Amazon.com (NASDAQ:AMZN). The internet giant ranks as the third-largest company in the world based on market cap. Amazon is a household name. And its stock has been a huge winner, soaring more than 1,500% in the last decade alone.
Buying shares of Amazon for what it’s done in the past isn’t a smart move, but doing so because of it could do in the future is. I especially like Amazon because — like a great football team — it plays both offense and defense really well.
From a defensive standpoint, Amazon is about as strong as they come. The company’s moat is formidable. It’s highly unlikely that any rival will be able to topple Amazon’s advantages in e-commerce.
What about Amazon’s offense (i.e., growth opportunities)? It still has tremendous prospects in e-commerce and cloud hosting. Amazon is expanding rapidly into healthcare. My Motley Fool colleague Sean Williams predicts that the stock could hit $10,000 by 2025 — nearly three times higher than its current share price.
I don’t think that’s far-fetched. Even if Amazon doesn’t deliver such an outsized gain, my view is that buying the stock is still one of the smartest moves you can make right now.
While Amazon’s share price has soared over the last 10 years, the stock doesn’t hold a candle to NVIDIA (NASDAQ:NVDA). Shares of the graphics chip maker have skyrocketed nearly 5,000% during the period.
Are NVIDIA’s growth days over? Not at all. Its market cap currently stands at a little over $500 million. I wouldn’t be surprised if NVIDIA becomes the next $1 trillion company.
My enthusiasm about NVIDIA stems from the company’s leadership in three hot growth areas. The least of these (based on the current financial impact for NVIDIA) is cryptocurrency mining. The most important (again, based on its current financial impact) is gaming. NVIDIA’s graphics processing units (GPUs) are highly prized by gamers.
However, I suspect that NVIDIA’s expertise in artificial intelligence (AI) could be the biggest catalyst for the stock over the long term. NVIDIA’s GPUs are already widely used in data centers, especially in powering AI applications. My take is that buying NVIDIA stock now and holding for at least 10 years will look like a genius decision in retrospect.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Keith Speights owns shares of Amazon, NVIDIA, and Vanguard S&P 500 ETF. The Motley Fool owns shares of and recommends Amazon, NVIDIA, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.