Part of managing your money is taking calculated risks to help your money work for you. That means, whether you like it or not, you're going to have to take on some risk. With a federal funds rate around 5%, consumers have found the relatively risk-free return of high-yield savings accounts and certificates of deposit (CDs) to be a safe option.
But that safety comes with a ceiling on growth. Plus, with interest rates likely to come down in the next 12 to 18 months, those risk-free returns will start getting smaller and smaller. And there's no guarantee that they will keep up with inflation.
If you're trying to grow that $5,000 in 2025 and beyond, you'll want to be investing in stocks. In this special presentation, we're looking at six stock sectors and one stock that are solid choices for where to put your money.
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- Technology Stocks
- Defense and Aerospace Stocks
- Consumer Staples Stocks
- Biopharmaceutical Stocks
- High-Yield Dividend Stocks
- International Stocks
- Berkshire Hathaway
#1 - Technology Stocks (NASDAQ:MSFT)
If you thought this list was going to include low-growth investments, think again. Technology stocks are still the way to go if you’re looking for growth. These stocks carry risk but also offer the best chance for the outsized gains that many investors crave.
If you want set-it-and-forget-it stocks for a long-term portfolio, you can’t do much better than putting $5,000 into one of the Magnificent 7 stocks. And Microsoft Corp. (NASDAQ: MSFT) is one of the best picks in that exclusive club. Microsoft gives you exposure to artificial intelligence (AI), software, cloud computing, personal computing, gaming, and more. The stock has delivered a five-year total return of 211.05%, which is better than the industry median average of 75.9%.
You can also keep it simple and invest in NVIDIA Corp. (NASDAQ: NVDA). The company’s high-speed chips are still the standard for companies looking to create AI applications. And with 85% market share and the launch of its Blackwell platform, that won’t be changing anytime soon. Plus, after a 10-for-1 stock split in 2024, you’re getting NVDA stock at a more accessible price.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $430.81
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 32 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $494.72 (14.8% Upside)
#2 - Defense and Aerospace Stocks (NYSE:LMT)
Another area for investors to consider investing $5,000 is the defense and aerospace sector. Geopolitical concerns are increasing, so the defense budget is unlikely to go down regardless of which party wins the White House.
And there are some names you’ll want to consider. One example is Lockheed Martin Corp. (NYSE: LMT). This is the number one global defense contractor by revenue and market cap. And 75% of the company’s business is in the defense market. Over the last five years, LMT stock has delivered a total return of 68.83%, and when you take a longer view, the gains are even greater on a percentage basis.
And this is also a good sector for investors looking towards the future of the industry. If that fits your investment philosophy, you may want to consider AeroVironment Inc. (NASDAQ: AVAV). The company is a leader in the emerging sector of robotics and robotics services. AVAV stock has a five-year total return of 267%.
About Lockheed Martin
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
Read More - Current Price
- $566.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $553.43 (2.2% Downside)
#3 - Consumer Staples Stocks (NASDAQ:PEP)
If you believe that interest rate cuts will spur consumer spending, consumer staples stocks are another stock sector to consider. These stocks underperformed the market in 2023 and 2024 as investors rotated into more favorable sectors. However, consumer staple stocks are getting renewed attention due to expectations of an improving economic outlook.
One of the best names to consider in the sector is PepsiCo Inc. (NASDAQ: PEP). The company is the home of the iconic soft drinks that bear its name and also owns the Frito-Lay brands. PEP stock is up just over 5% in 2024 but is well-positioned for growth as the economy improves. Plus, you get a dividend king that has increased its dividend for 53 consecutive years and currently offers a yield of 3.04%.
Another name to consider in this sector is Procter & Gamble Co. (NYSE: PG). In 2024, PG stock is up over 20%, which proves the company’s reputation as a defensive stock. The growth is particularly impressive as many consumers are opting for house brands over their preferred brand names. Procter & Gamble is another dividend king that has increased its payout for 69 consecutive years.
About PepsiCo
PepsiCo, Inc engages in the manufacture, marketing, distribution, and sale of various beverages and convenient foods worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.
Read More - Current Price
- $175.21
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $185.53 (5.9% Upside)
#4 - Biopharmaceutical Stocks (NYSE:LLY)
Some tried-and-true investment advice involves skating to where the puck is going. As many investors have seen, GLP-1 drugs are clearly where the money is going. As more research is collected, patients are becoming more comfortable with these drugs as a treatment for Type-2 diabetes and, increasingly, for weight loss.
That means that there is likely to be a long runway for companies like Eli Lilly & Co. (NYSE: LLY) and Novo Nordisk A/S (NYSE: NVO). These are the two leaders, and although more competition is coming, these two will continue to have a first-mover advantage.
Oncology is another area showing promise for biopharmaceutical investors in 2025. While a cure remains elusive, there’s more hope than ever before. Merck & Co. (NYSE: MRK) is well-known for its cancer drug, Keytruda. But the company also has a deep pipeline of oncology drugs and recently purchased Daiichi Sankyo for $5.5 billion. This gives Merck the right to co-develop three of the Japanese company’s antibody-drug conjugates.
About Eli Lilly and Company
Eli Lilly and Company discovers, develops, and markets human pharmaceuticals worldwide. The company offers Basaglar, Humalog, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, insulin lispro mix 75/25, Humulin, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500 for diabetes; Jardiance, Mounjaro, and Trulicity for type 2 diabetes; and Zepbound for obesity.
Read More - Current Price
- $905.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $977.35 (8.0% Upside)
#5 - High-Yield Dividend Stocks (NYSE:VZ)
A more conservative option for $5,000 in 2025 is high-yield dividend stocks. With interest rates likely to come down, risk-free instruments such as Treasury notes become less attractive. That means that stocks that pay a dividend yield above the federal funds rate could become a better growth option.
One name to consider is Verizon Inc. (NYSE: VZ), which raised its dividend on September 4, 2024 for the 18th consecutive year. The wireless company may be considered too boring for some investors, but this is one example of why boring is beautiful. The five-year total return on VZ stock is negative as of September 2024, but zooming out shows that, over time, the company delivers a solid return in addition to a dividend that yields 6.4%.
Another high-yield dividend stock to consider is Chevron Corp. (NYSE: CVX). Lower interest rates will spur consumer and business spending, both of which are bullish for oil and natural gas prices. Chevron has been lagging oil stocks in 2024 as its merger with Hess Inc. (NYSE: HES) is delayed. That makes it likely to outperform as the sector recovers and investors get a growing dividend that yields 4.62%.
About Verizon Communications
Verizon Communications Inc, through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments, Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
Read More - Current Price
- $43.89
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $45.66 (4.0% Upside)
#6 - International Stocks (NYSE:TM)
International stocks can sometimes be overlooked by U.S. investors. However, in times of uncertainty, it can’t hurt to diversify your portfolio. Particularly when it comes to quality names.
One name to consider is Toyota Motor Corp. (NYSE: TM). The auto industry is going through an upheaval as the push for electrification intensifies. However, as the debate over EVs versus ICEs continues, what’s old is becoming new again.
Hybrid vehicles are flexing their muscles, and Toyota is a leader in this market. The company recently made the decision to launch the 2025 version of its popular Camry sedan exclusively as a hybrid model. The stock is flat in 2024, but analysts project earnings growth of more than 37% in the next 12 months.
Another international stock to consider is Netherlands-based NXP Semiconductors N.V. (NASDAQ: NXPI). The stock is up just 3.3% in 2024, but analysts are forecasting strong earnings growth that makes this a buyable dip.
About Toyota Motor
Toyota Motor Corporation designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories in Japan, North America, Europe, Asia, Central and South America, Oceania, Africa, and the Middle East. It operates in Automotive, Financial Services, and All Other segments.
Read More - Current Price
- $176.78
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Berkshire Hathaway (NYSE:BRK.B)
If you want to invest like Warren Buffett, putting $5,000 in Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) is a straightforward choice. Investors can also buy shares of the company through Class A shares (BRK.A) and Class B shares (BRK.B). Some of the stocks in this presentation are also owned by Berkshire Hathaway.
The B shares are more accessible for most investors. In this example, $5,000 can buy over 10 shares as of September 5, 2024. However, the Class A shares do give investors more voting rights if that’s important to you.
Either way, you’re investing in the companies that define Buffett’s investment philosophy. And you’re getting those shares at a price-to-earnings (P/E) ratio of around 13x, which is well below the average P/E of the S&P 500 stocks, which is around 21x.
Interestingly, as much as Buffett loves collecting dividends on the stocks he owns, neither the Class A nor Class B shares offer a dividend. But the fund efficiently reinvests that money back into the business.
About Berkshire Hathaway
Berkshire Hathaway Inc, through its subsidiaries, engages in the insurance, freight rail transportation, and utility businesses worldwide. The company provides property, casualty, life, accident, and health insurance and reinsurance; and operates railroad systems in North America. It also generates, transmits, stores, and distributes electricity from natural gas, coal, wind, solar, hydroelectric, nuclear, and geothermal sources; operates natural gas distribution and storage facilities, interstate pipelines, liquefied natural gas facilities, and compressor and meter stations; and holds interest in coal mining assets.
Read More - Current Price
- $456.60
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $457.50 (0.2% Upside)
Some investors prefer to invest in stocks through exchange-traded funds (ETFs) or mutual funds. In fact, many employer 401(k) or IRA accounts don't allow individual stock investing. If this is money you need for retirement, the tax benefits of opening a 401(k) or IRA can be significant.
However, when it comes to fund investing, you must take the bad with the good. And it may have you including stocks that don't fit your investment goals or values. Putting all of your money into one or two stocks carries risk, but $5,000 is a sizable position that you can let work for you in individual stocks without having to assume outsized risk.
Our goal at MarketBeat is to help you not only identify those opportunities but give you the tools to keep you in control of your investments. That includes access to My MarketBeat to keep track of the stocks in your portfolio or your watchlist(s). You can also use tools like our Stock Screener to help find new investment opportunities.
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