financial education

Reviewed by Michael J Boyle

Tesla remains one of the hottest companies on the market, with a P/E ratio of 143.62. However, it is also one of the most volatile stocks, meaning investors who want a cost-effective way to gain exposure to Tesla should consider investing in one of these three exchange-traded funds (ETFs) that include the California-based electric car company as a major holding.

Key Takeaways

• Tesla (TSLA) is one of the Magnificent Seven, a group of the 7 most valuable stocks in the U.S.
• While Tesla stock is highly sought-after, it also has a history of high price volatility, making investing in ETFs with significant TSLA holdings more attractive for some investors.
• Popular ETFs that TSLA drives include VanEck Vectors Low Carbon Energy ETF (SMOG), ARK Industrial Innovation ETF (ARKQ), and First Trust NASDAQ Clean Edge Green Energy ETF (QCLN).

VanEck Vectors Low Carbon Energy ETF (SMOG)

Launched in 2007, the VanEck Vectors Low Carbon Energy ETF (SMOG) seeks to provide similar returns to the Ardour Global Index Extra Liquid (AGIXLT). The fund achieves this by investing a minimum of 80% of its assets in small- and mid-capitalization low carbon energy companies that operate primarily in the alternative energy space which includes power derived principally from biofuels (such as ethanol), wind, solar, hydro, and geothermal sources. Tesla accounts for 5.41% of its portfolio, giving investors ample exposure to the electric car maker. Other top holdings in the fund include BYD Co. Ltd. (BYDDY) at 8.9% and Nextera Energy Inc. (NEE) at 7.58%.

The VanEck Vectors Low Carbon Energy ETF has a net expense ratio of 0.61% and has $120.6 million in net assets. As of Jan. 31, 2025, it has a five-year annualized return of 6.19% and a one-year annualized return of 6.47%. The fund also has a 30-day SEC yield of 1.21%.

ARK Industrial Innovation ETF (ARKQ)

The ARK Industrial Innovation ETF (ARKQ), formed in September 2009, invests in companies that are likely to benefit from automation or other forms of technological innovation and advancements. Although the fund invests in both domestic and foreign securities, the bulk of its exposure (86.12%) targets U.S. companies. Tesla is the fund’s top allocation at 11.26%. Teradyne Inc. (TER) and Kratos Defense & Security Solutions Inc. (KTOS) round out the ETF’s top three holdings.

The ARK Industrial Innovation ETF has net assets of $1.01 billion. Its expense ratio of 0.75% is higher than the 0.55% category average, but the fund’s outstanding performance warrants its higher management fees. As of Feb. 28. 2025, ARKQ has five- and one-year annualized returns of 16.85% and 56.18%, respectively. 

First Trust NASDAQ Clean Edge Green Energy ETF (QCLN)

The First Trust NASDAQ Clean Edge Green Energy ETF‘s primary objective is to track the NASDAQ Clean Edge Green Energy Index. The fund, created in 2007, achieves this by investing the majority of its assets in securities that make up the underlying index. This includes U.S.-listed companies that manufacture, develop, and install clean-energy technologies. QCLN has 9.9% of its portfolio in Tesla. The ETF’s other significant holdings include Rivian Automotive Inc. (RIVN) with a 7.19% weighting, First Solar Inc. (FSLR) with a 7.17% weighting, and ON Semiconductor Corporation (ON) with a 6.39% weighting.

The First Trust NASDAQ Clean Edge Green Energy ETF has an expense ratio of 0.59% and $510.39 million in net assets. While the fund has a 5.46% return over the past five years, it has experienced negative returns (-2.47%) over the past year.

Does Tesla Have an ETF?

The Simplify Volt TSLA Revolution ETF (TESL) seeks to provide capital appreciation by investing primarily in TSLA stock. TSLA makes up approximately 78% of the fund’s weight, with the remaining 22% made up of options to manage downside risk.

Is There an Inverse ETF for Tesla?

The T-Rex 2x Inverse Tesla Daily Target ETF (TSLZ) seeks daily investment returns of 200% of the opposite of the performance of Tesla, before fees and expenses.

Why Should You Pick a Tesla ETF over Tesla Stock?

For some investors, the volatility risk of TSLA stock outweighs its potential upside. These investors may prefer investing in an ETF that offers exposure to TSLA as well as similar companies.

The Bottom Line

While Tesla stock is extremely valuable, it’s not suitable for every investor. Some investors may prefer to invest in an ETF that is heavily weighted toward TSLA, such as SMOG, ARKQ, or QCLN. These ETFs provide you exposure to TSLA without having to invest directly in the stock itself.

Apple, Microsoft, and Taiwan Semiconductor lead the list

Reviewed by Gordon Scott
Fact checked by Vikki Velasquez

Technology companies have become a dominant driver in recent years of economic growth, consumer tastes, and the financial markets. The biggest tech stocks as a group have dramatically outpaced the broader market in the past decade. That’s because technology has reshaped how people communicate, consume information, shop, socialize, and work.

Broadly speaking, companies in the technology sector engage in the research, development, and manufacture of technologically based goods and services. They create, design, and manufacture computers, mobile devices, and home appliances and provide products and services related to information technology.

Below we look at the 10 biggest companies in the technology field, as measured by market capitalization. The list is limited to publicly traded companies in the U.S. or Canada, either directly or through ADRs. Data is courtesy of Yahoo! Finance, as of March 1, 2025.

Important

Some of the stocks below are only traded over-the-counter (OTC) in the U.S., not on exchanges. OTC stocks often carry higher trading costs than trading stocks on exchanges. This can lower or even outweigh potential returns.

#1 Apple Inc. (AAPL)

• Market Cap: $3.633 trillion
• Earnings per share (TTM): 6.31
• Exchange: Nasdaq

Apple (AAPL) designs, manufactures, and markets a broad range of consumer technology products. These include smartphones, personal computers, tablets, wearable devices, home entertainment devices, and much more. Some of its most popular products include its iPhone smartphones and Mac computers. Apple has dramatically expanded its sales from services in recent years. It operates digital content stores and has several streaming services, including Apple+, a platform for on-demand entertainment content.

#2 Microsoft Corp. (MSFT)

• Market Cap: $2.95 trillion
• Earnings-per-share (TTM): 12.43
• Exchange: Nasdaq

Microsoft is a global developer and licensor of software, devices, solutions, and services. The company is known for its Windows and Office Suite software but nets a growing share of its profit and revenue from cloud computing and its cloud platform, Azure. Microsoft also owns and operates LinkedIn, the social networking site for job seekers.

#3 NVIDIA Corp. (NVDA)

• Market Cap: $2.94 trillion
• Earnings-per-share (TTM): 2.94
• Exchange: Nasdaq

NVIDIA is a newcomer to this list, having risen to the top as the dominant player in artificial intelligence. The Santa Clara, California, company specializes in graphics processing units (GPUs) and related products for specialized uses in scientific research as well as in industries including automotive, entertainment, and engineering.

#4 Taiwan Semiconductor Manufacturing Co LTD (TSM)

• Market Cap: $782.56 billion
• Earnings-per-share (TTM): 6.90
• Exchange: New York Stock Exchange

Taiwan Semiconductor Manufacturing manufactures microchips and semiconductors used in cell phones, medical equipment, video game consoles, computer hardware, and more. The company had 528 client companies as of 2023.

#5 Samsung Electronics Co. Ltd. (SSNLF)

• Market Cap: $301.846 billion
• Earnings-per-share (TTM): 4.81
• Exchange: OTC Markets

Samsung Electronics competes with Apple and other major tech companies worldwide in key product areas. It’s engaged in a broad range of industries, including consumer electronics, information technology, and communications. The South Korean company sells mobile phones, tablets, wearable devices, virtual reality products, TVs and home theaters, computers, printers, home appliances, and more. In the U.S., Samsung is best known for its Galaxy smartphones.

#6 Sony Corp. (SONY)

• Market Cap: $150.81 billion
• Earnings-per-share (TTM): 1.25
• Exchange: New York Stock Exchange

Sony is a Japanese technology company that designs and produces electronics products worldwide for consumer, professional, and industrial markets. The company sells a variety of products, including personal computers, mobile phones, video game consoles and software, and video cameras. It also produces and distributes recorded music and live-action and animated motion pictures. In addition, it makes and sells the PlayStation, a popular video game console.

#7 Intel Corp. (INTC)

• Market Cap: $102.35 billion
• Earnings-per-share (TTM): -4.38
• Exchange: Nasdaq

Intel is a global producer of computer chips and a provider of computing, networking, data storage, and communication solutions. The company offers platform products for the cloud, enterprise, and communication infrastructure markets. In addition, Intel provides flash memory, programmable semiconductors, and processors for notebooks, mobile devices, and desktop computers. The company is well known for its high-performance processors used in PCs worldwide.

#8 Hon Hai Precision Industry Co. Ltd. (HNHPF)

• Market Cap: $73.24 billion
• Earnings-per-share (TTM): 0.69
• Exchange: OTC Markets

Hon Hai Precision, also known as Foxconn, is a Taiwan-based multinational electronics manufacturer. The company produces electronics and electronic components for use in the information technology, communications, automotive equipment, automobile, precision molding, and consumer electronics industries. Foxconn is a key supplier in Apple’s supply chain, manufacturing a significant proportion of its iPhones. It also manufacturers Amazon’s Kindle and Sony’s PlayStation.

#9 Dell Technologies Inc. (DELL)

• Market Cap: $71.70 billion
• Earnings-per-share (TTM): 6.38
• Exchange: New York Stock Exchange

Dell Technologies makes and sells hardware, information technology products, and services worldwide. The company sells desktop and laptop computers, traditional and next-generation storage solutions, and networking products. Dell also sells a cloud-native platform and cloud management solutions. Dell’s best-known products are its personal computers.

#10 Panasonic Corp. (PCRFF)

• Market Cap: $29.009 billion
• Earnings-per-share (TTM): 0.96
• Exchange: OTC Markets

Panasonic is a Japan-based developer, manufacturer, and servicer of electronic products primarily for the consumer market. The company offers personal computers, tablets, projectors, and broadcast and professional AV systems. Panasonic also makes appliances such as air conditioners, TVs, refrigerators, and washing machines.

What Are the Sectors Within the Technology Industry?

The three main sectors within the technology industry are:

• Software and services
• Semiconductors and semiconductor equipment
• Technology hardware and equipment

Many companies cross those lines. Microsoft is certainly a software and services company but it also makes PCs and laptops and tried, unsuccessfully, to make phones.

Are Any Computer Products Made in the U.S.A.?

Yes. Apple’s Mac Pro is made in Austin, Texas. Samsung makes some of its microprocessors in Austin. Texas Instruments makes chips in Texas, Maine, and Utah.

Which Companies Have a Market Cap Above $1 Trillion?

They’re not all technology companies. As of this writing, companies that have a market capitalization above $1 trillion include Amazon, Tesla, Saudi Aramco, Berkshire Hathaway, and Meta, as well as Apple, Microsoft, and NVIDIA,

The Bottom Line

What is a technology company? It’s hard to define. Is Amazon a technology company or a retailer? How about Google or Facebook? In this selection, we narrowed the definition to include the key players in producing the hardware and software that make our modern world run.

Reviewed by Margaret James
Fact checked by Vikki Velasquez

Apple Inc. (AAPL) is the world’s largest company by market value. It designs, manufactures, and sells a wide range of consumer technology devices including smartphones, tablets, personal computers, and wearables. Some of its best-known products include the flagship iPhone brand, the iPad, and Mac lines. Apple has expanded its service revenue by dramatically growing its cloud services business and by selling streaming entertainment like Apple TV+, Apple Music, and other digital content.

The top shareholders of Apple are The Vanguard Group, BlackRock Inc. (BLK), Arthur Levinson, Tim Cook, and Jeff Williams.

Here’s a more detailed look at Apple’s five biggest shareholders.

Key Takeaways

• Apple Inc. is the world’s largest company by market value.
• The company’s market cap was about $3.63 trillion as of February 28, 2025.
• The Vanguard Group was Apple’s top shareholder as of December 29, 2023 with more than 1.3 billion shares representing 8.76% of total shares.
• Arthur Levinson was Apple’s top individual insider shareholder as of January 2, 2025 with more than 4.2 million shares.

Top 3 Individual Insider Shareholders

Arthur Levinson

Arthur Levinson owned 4,217,092 shares of Apple stock as of January 2, 2025. Levinson has been the chair of the board of Apple since 2011.

Levinson is a former chief executive officer (CEO) of biotech company Genentech Inc. and is the CEO of biotech company Calico.

Important

“Insider” refers to individuals in senior management positions and members of the board of directors, as well as people or entities that own more than 10% of the company’s stock.

Tim Cook

Tim Cook owned 3,280,180 shares of Apple stock as of January 2, 2025. Cook rose to CEO of Apple in 2011 after the death of founder and longtime CEO Steve Jobs. Cook arrived at Apple in 1998 and was the chief operating officer (COO) responsible for all worldwide sales and operations before being named CEO.

Cook also headed Apple’s Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships. Cook was Vice President for Corporate Materials for Compaq and Director of North American fulfillment for IBM before joining Apple.

Jeff Williams

Jeff Williams, the COO at Apple, owned 389,944 shares of Apple stock as of January 2, 2025. Mr. Williams oversees Apple’s global operations and the development of Apple Watch and Apple’s health initiatives. Mr. Williams held previous positions after joining Apple in 1998 that included Head of Worldwide Procurement. Mr. Williams worked in several roles at IBM from 1985 to 1998 before joining Apple.

Note

Apple briefly became the world’s first $3 trillion company during intraday trading on January 3, 2022. The iPhone maker also holds the distinction of being the world’s first company to reach $1 trillion and $2 trillion.

Top 2 Institutional Shareholders

Vanguard Group Inc.

Vanguard Group owned more than 1.3 billion shares of Apple, representing 8.76% of total shares outstanding as of December 29, 2023. Vanguard is primarily a mutual fund and exchange traded fund (ETF) management company with about $9.3 trillion in global assets under management (AUM).

The Vanguard S&P 500 ETF (VOO) is one of the company’s largest ETFs with about $1.4 trillion in net assets as of January 31, 2025.

BlackRock Inc.

BlackRock owned 1.043 billion shares of Apple, representing 6.94% of total shares outstanding as of December 31, 2023. BlackRock is also a mutual fund and ETF management company with approximately $10.473 trillion in AUM as of March 31, 2024.

The iShares Core S&P 500 ETF (IVV) is among one of BlackRock’s largest ETFs with more than $594 billion in net assets as of February 28, 2025.

What Are Some of Arthur Levinson’s Other Achievements?

Levinson is the author or co-author of 80-plus scientific articles. He holds 11 U.S. patents and was inducted into the Biotech Hall of Fame in 2003.

What Is Apple’s Stock Price in 2025?

Apple Inc. shares closed at $241.84 on February 28, 2025. Its intraday market cap was $3.633 trillion on the same date.

What Are Some Other Services and Products Offered by Vanguard?

The Vanguard Group offers the Situational Advisor service that provides clients with a one-time consultation with a financial advisor. The topic doesn’t have to be stock-related. It can be the pros and cons of buying a home, a question about your retirement, or just about any other financial issue. The advisor can’t manage your money for you but can provide you with knowledgeable guidance.

The Bottom Line

Apple’s top shareholders are Vanguard, BlackRock, Arthur Levinson, Tim Cook, and Jeff Williams.

Apple’s 12-month trailing revenue and net income were $391.04 billion and $93.74 billion, respectively, as of February 28, 2025. The company’s market cap was about $3.63 trillion as of February 28, 2025.

For many people, a house is their largest and most important investment. A house is not just a place to live and raise a family but also an asset with a fairly stable growth rate. Homeownership can unlock financial security, especially as you reach milestones like starting a family or retirement.

However, housing has become increasingly expensive in recent years. The median sales price for a house in the U.S. was $419,200 in the fourth quarter of 2024, but it was almost double that in places like New York and nearly triple in San Francisco.

To make the goal of homeownership more attainable, you need to start saving money as soon as you can. That’s because there’s more to the cost of buying a home than the monthly mortgage payment—consider upfront costs like the down payment, which typically must be at least 20% of the purchase price if you want to avoid paying private mortgage insurance (PMI).

To save 20% for a $419,200 home, you will need $83,840. If you earn the median national income of $80,610 for households and set aside as much as $0.25 for every $1 you make, you must save for more than four years to afford the down payment.

Saving for a house may seem daunting, but with careful planning, you can make that dream more realistic. We’ve compiled a step-by-step guide of the most crucial steps you need to take to accelerate your home-buying goals.

Key Takeaways

• Do your housing research. It’s important to assess your housing needs and market housing prices before evaluating how much you need to save for a down payment.
• Set a clear savings goal based on the size and location house you decide meets your needs.
• Assess your financial situation, including credit score, income, expenses, and the value of any investments or current savings account balances.
• Develop a savings plan with automatic deposits and focus on trimming expenses until your goal is met.

1. Do Your Housing Research

 Before you even move $1 into your housing fund, the first step you need to take is to research properties. For one, if you’re just getting started on your home-buying quest, you might not even know what you want. Where can you afford to live? How many bedrooms do you need? Do you require a Whole Foods within driving distance or are you fine with shopping at your local farmer’s market for groceries?

 All of these factors can affect the price of housing–even the proximity to grocery stores. 

Once you’ve settled on your baseline needs for your home, you can plug ZIP codes into housing search apps like Zillow to see what it’ll cost you for a home that meets all or most of your needs. You can also contact a trusted local real estate agent who can help you understand market trends and potential ways to save money. They may have access to other pricing data than what you’re seeing online.

After you have a good idea of housing prices, it’s time to start saving.

2. Set a Clear Savings Goal

A savings goal can ensure you’re putting away enough money to afford a home within your desired moving time frame. To get a rough estimate, set a target purchase date and work backward over the months it’ll take you to afford a down payment at your current saving rate.

However, there are several points to consider when turning that rough estimate into something more exact.

What Size Down Payment Can You Make?

You don’t always need to make a 20% down payment. A lower down payment may be easier to afford in the immediate future and get you into a home sooner, which could help you build equity faster. But, unless you qualify for special down payment programs offered by your lender, you’ll need to pay private mortgage insurance, a separate fee assessed by your mortgage lender until your home equity is greater than 20% of the home value, which could take years.

You also could consider paying even more than 20%. Doing so could improve the long-term affordability of your home by taking out a larger chunk of your mortgage principal. You may be offered lower interest rates if you pay a higher down payment (i.e., you’ll start with a lower loan-to-value ratio, which lenders look upon favorably) and potentially save tens of thousands of dollars over the life of the loan. 

Where Are You Saving for Your Down Payment?

Different types of savings vehicles offer benefits and trade-offs. A savings account offers the most ready access to your cash and could pay interest as high as 4.75% APY or more as of February 2025. Your bank may allow you to create saving buckets for your account to categorize deposits as intended for the home purchase.

Another option is a certificate of deposit (CD). While CDs require you to commit your cash to a specific term to earn the full value of interest, you may find slightly higher rates of return on CDs than savings accounts. If you’re willing to wait out the term, that could get you closer to homeownership.

A third option is a taxable brokerage account. While investing in stocks and funds is riskier—in an economic downturn, your losses could be severe—your rate of return could outpace returns with savings accounts and CDs over a comparable length of time. Remember that you’ll need to pay capital gains tax on realized earnings.

3. Assess Your Current Financial Situation

Circumstances change, often dramatically. Economies go boom, and economies go bust. When deciding how much you need to save for a house, you need to plan for both good times and bad. Ask yourself whether you have enough savings to work towards homeownership and to cushion yourself and your family from job loss, an expensive medical bill, or other unexpected expenditures.

“Buying a home is emotional, but making decisions based on affordability—not excitement—is key,” said Thao Truong, CFP, CDFA, a wealth advisor at Morton Wealth. “Sit down and assess your income, expenses, and savings potential. Identify areas to cut back to accelerate savings. You will know how much time you have to save for your down payment once you have clarity of your numbers.”

Take stock of your household income, current investments, liquid cash funds, and any debt you owe. Lay out your current expenses in a budget, including day-to-day spending and long-term costs like loan payments, future vacations and leisure activities, and major purchases. Given those financial constraints, this will help you visualize how much of your income goes toward these spending categories and whether buying a house is realistic.

In addition, your budget will show you where you can reduce spending. Keep in mind, however, that saving a few hundred bucks here or there likely won’t speed up your housing savings by any material degree since smaller savings would represent only a fraction of the down payment amount and could be offset by the increase in housing prices over time. 

Finally, if you expect your parents or other family members to help, start having those conversations now. Factor in gift money that covers part of the mortgage or down payment.

Once you have done your high-level financial assessment, here is a list of how to financially prepare for homeownership:

• Credit score: Obtain your current credit report to determine your credit score. Most lenders require a minimum credit score of 620 or above for conventional mortgages. 
• Debt-to-income ratio: Ensure your debt-to-income ratio (DTI), i.e. what you owe to lenders divided by your household income, aligns with lender standards. DTI ratio measures the percentage of your gross income you pay out each month to satisfy debts. Banks generally set a DTI ratio maximum limit of 43% but prefer to lend to borrowers with a DTI ratio of less than 36%. 
• Documentation: Collect past pay stubs, tax returns, bank statements, and investment account statements to document your employment and revenue sources before applying for a mortgage or getting prequalified for a loan.

4. Explore Eligibility for Low Down Payment Mortgages

Many lenders offer home buyers more favorable down payment requirements. This means you can take out a mortgage with roughly the same interest rate as a comparable mortgage without paying a 20% down payment. In many cases, the down payment is just 3%. Other programs offer a grant toward paying your interest rate if you qualify, which could be worth thousands of dollars and save you money on your monthly mortgage payments.

You’ll need to meet the lender’s requirements to qualify for these loans. These may include limits on the price of the home, minimum income thresholds, and minimum credit scores.

You could also consider an FHA loan, said Christian Maldonado, co-founder of TaxAdvisor365, an accounting and bookkeeping services firm. “This is a very popular mortgage loan option for first-time homebuyers due to its lower cost, especially when it comes to the down payment of your first home,” he said. “The minimum down payment in most cases if you meet the minimum requirements such as a 570ish credit score is about 3.5%.”

Your state may also offer down payment assistance that could cover a significant portion of the down payment. Usually, this assistance comes in the form of a low-interest loan, but you may need to meet strict income requirements and home purchase price limits. The down payment assistance loan is forgivable in some states after a set period.

Down payment assistance can reduce the money you’ll need to save for your home purchase. There are many ways to purchase a home with little to no money down—from 0% down loans to government and bank-sponsored assistance. Depending on where you’re buying, funds could be available at the city, county, state, and federal levels. 

In the meantime, here are some options to explore:

• FHA loans
• VA loans 
• USDA loans
• HUD Good Neighbor Next Door Program
• NACA housing program
• Local homebuying programs (based on city, state, and county)

5. Develop a Savings Plan

Your savings plan comprises the actions you must take to achieve your savings goal. It’s a series of strategies, including increasing your income, reducing spending where needed, and forcing yourself to save money.

“Writing down your plan—including how much you need for a down payment, estimated closing costs, and a timeline—can help you understand how hard the path is and what might delay a successful outcome,” said Heather Winston, chief product officer, Principal Advised Services at Principal Financial Group.

Automate Your Savings

You may be able to set up your direct deposit to automatically split your earnings between your checking account and savings account. Your banking app may also allow you to set up automatic recurring transfers.

Setting Up a Separate Savings Account

Attempting to save money in the same transaction account you use for daily expenses can complicate things by mixing discretionary funds with non-discretionary home down payment savings. Also, most checking accounts typically offer little or no interest unless it is a high-yield checking account. It’s better to separate your down payment funds into a dedicated savings account. Make sure it pays a decent interest rate to boost your savings. 

Increase Your Income

You may have untapped sources of income you hadn’t considered. Some people take on a side hustle, which could mean everything from gig work to contacting your network about freelancing. You may also consider starting your own online business, which might be a store or a creative endeavor, like blogging, vlogging, podcasting, or selling arts and crafts on Etsy. Consider asking your boss for a raise, or even a promotion, at your next performance review.

Save Every Windfall

If you receive a lot of money unexpectedly, be sure to save as much as you can in your housing fund. You may get windfalls in the form of tax refunds, insurance payouts, inheritances, and so on, which could put you significantly closer to your goal.

Cut Back on Big Expenses

Rather than solely focusing on small expenses like your morning latte or an online news subscription, look for ways to cut back on expenses that could have a more material impact on your savings. If you like to travel, consider flying to more domestic destinations, and opt for the two-star hotel instead of the three- or four-star one. Or, if you enjoy dining out, you might save a few hundred bucks per month by learning to cook similar dishes at home. However, the cumulative effect of cutting streaming and subscription services can add up to substantial savings, even though each one is a relatively small expense.

Tap Your 401 (K)

While it is not an advisable way to save for a home down payment, there are IRS rules that allow employees to borrow money from their employer-sponsored 401(k) retirement account to purchase a primary residence. 

It’s important to note that you must repay the loan from a 401(k) within five years. If you quit or are fired from your job, you will have to repay the loan much quicker or face penalties and fees for what the IRS would consider an early withdrawal, which can make this move risky for some people.

Regularly Adjust Your Savings Plan

By closely monitoring the progress of your savings plan, you can make regular changes to it. Track how major life changes affect your finances, such as getting a new job, losing a job, starting a family, moving, or losing a loved one, and adjust your savings to make sure you’re still on target or that you have enough liquid cash to cover unexpected costs.

Additionally, broader economic shifts could impact your savings plans, such as if mortgage rates increase or if the housing market continues to be affected by low supply and high housing prices. You may need to save more than you had budgeted for.

How Long Does It Take To Save a Down Payment?

Although the median price for a newly built home in the U.S. was $419,200 in Q1 2024. average home prices vary depending on the region of the country you live in:

• Northeast: $798,800
• Midwest: $368,400
• South: $377,200
• West: $560,900

Regardless of housing prices in your city, you shouldn’t assume your only option is to save the full 20% of the cost of a home before buying. According to a National Association of Realtors (NAR) report, most first-time homeowners will put between 6% and 7% down on home purchases. In addition, you can expect to pay another 3%-6% of the home’s purchase price in closing costs. 

As an example, let’s assume you’re a first-time homebuyer. After getting some help from family, you’ll need an extra $40,000 to cover the down payment and closing costs on your home. If you could manage to save $1,000 a month, it would take 40 months (a bit over 3 years) to reach your goal. If you’re able to live with family or friends without paying rent, you might be able to save more aggressively and cut that time in half or more, however.

The Bottom Line

It can take years to pull together enough cash to buy a house, even with careful savings. You should start saving as early as possible and proactively review your financial plan regularly to ensure you’re maximizing your savings. A robust system for growing your housing fund can help ensure that you’re not buying more than you can afford. Educate yourself on what’s available in your local housing market and what it costs to buy the home that fits your needs.

Get the most passive income possible with these top dividend stocks

Dividend stocks are shares of companies that distribute a portion of their profits to shareholders on a regular basis in the form of dividends. Dividend payments, typically distributed quarterly, can be a source of passive income for investors and a sign of the continued financial well-being of the distributing company.

Key Takeaways

• Dividend stocks are companies that regularly pay out a portion of their profits to shareholders in the form of dividends. These may be distributed quarterly, semiannually, or yearly.
• Dividend yield measures the yearly dividend amount a company pays in comparison to its stock price and is expressed as a percentage.
• Dividend yield fluctuates constantly as a company’s share price moves.

Below, we look at 10 dividend stocks to watch for March 2025 as measured by forward dividend yield. We exclude companies with payout ratios that are either negative or higher than 100%. A detailed explanation of our methodology is below. Data throughout are current as of Feb. 28, 2025.

Best Dividend Stocks to Watch in March 2025
Ticker	Company	Sector	Market Cap ($B)	Dividend Yield (%)	Price ($)
CMBT	CMB.TECH NV	Transportation	1.74	65.07	8.91
TRMD	TORM PLC	Transportation	1.71	31.61	17.59
BWLP	BW LPG Limited	Transportation	1.71	23.71	11.34
PBR	Petróleo Brasileiro SA	Energy Minerals	82.23	19.98	13.35
ACP	abrdn Income Credit Strategies Fund	Miscellaneous	0.76	19.83	6.05
ZIM	ZIM Integrated Shipping Services Ltd.	Transportation	2.43	19.63	20.22
KSS	Kohl’s Corporation	Retail Trade	1.27	17.53	11.41
INSW	International Seaways, Inc.	Transportation	1.64	17.31	33.33
SBLK	Star Bulk Carriers Corp.	Transportation	1.86	15.99	15.63
EC	Ecopetrol S.A.	Energy Minerals	20.5	15.90	9.88

Why Are These the Best Dividend Stocks?

The dividend stocks included on our list represent companies trading on the Nasdaq or the New York Stock Exchange with share prices of $5 or more, a market capitalization of $300 million or more, and a daily trading volume of at least 100,000. Companies with payout ratios that are either negative or over 100% were also excluded from the list. From the pool of companies remaining, we selected those with the highest forward dividend yield for inclusion on our list. Because dividend yield changes all the time with the price of a company’s stock, this list is also likely to change quickly. Further, these are not the best dividend stocks of all time; they represent those that rose to the top of the list based on our methodology for this month.

Investors prioritize dividend stocks because they provide a steady passive income stream and enjoy the potential for share price growth in the future. Dividends are not necessarily a given, however, even among companies with a history of paying them for many years. Investors should remember that:

Market conditions impact dividends. The broader economic environment has a significant impact on dividend payments. When there is concern about the ability to maintain operations and top- and bottom-line performance due to external market factors, companies may move to reduce or even eliminate dividends as an early protective measure. This allows them to preserve capital in case of turbulent times to come. On the other hand, booming economies can sometimes prompt companies to increase their dividend payments.

Dividend yields may be misleading: Dividend-paying companies may increase a dividend yield to entice investors, but higher dividend payments can be unsustainable. Similarly, a dividend yield may appear higher because of falling stock prices. These are reasons why the payout ratio is an important metric to monitor for dividend stocks.

How to Pick Dividend Stocks

Strong dividend stocks tend to be those of companies with solid fundamentals, a strong profitability horizon, and a sustainable dividend yield that has maintained or, ideally, increased over a period of years.

How to Find Dividend Stocks

Not all sectors and industries are the same when it comes to dividend-paying companies. Finance and energy tend to be sectors with higher dividend payments than others, and real estate investment trusts (REITs) are required to pay out a substantial portion of their income in dividends to shareholders. But it’s also important for investors to look not just at a company’s sector, but also at its dividend performance relative to other companies in that sector.

What Should Investors Look For in Dividend Stocks?

Dividend Payout Ratio (DPR)

DPR is a measure of how much of a company’s earnings are paid to shareholders. The DPR is calculated by dividing total dividends by net income and is often included on brokerage platforms as well as financial news sites.

As an example, if Company X reported a net income of $50,000 and paid $10,000 in yearly dividends, its DPR would be 20% because $10,000 / $50,000 = 20%. In other words, Company X pays 20% of its earnings to shareholders each year. A DPR of under 50% is typically considered stable and sustainable and may be indicative of long-term growth potential. Higher percentages may mean that a company is overpaying on dividends.

Dividend Yield

Dividend yield is a measure of the annual value of dividends received by a shareholder relative to the security’s per-share market value. It can be calculated by dividing the annual dividend per share by the current stock price. Like DPR, this information is often easily found online.

If Company X pays $5 in dividends annually and has a current share price of $100, its dividend yield is 5% because $5 / $100 = 5%. Investors sometimes begin a search for dividend stocks by screening for companies with dividend yields above a certain percentage.

Dividend Coverage Ratio

The dividend coverage ratio measures the number of times a company is able to pay dividends to shareholders and is calculated by dividing annual income by annual dividend per share.

Company X generated $5 million in net income and pays $1 million annually in dividends, hypothetically. In this case, the company has a dividend coverage ratio of 5, or $5 million / $1 million. Higher dividend coverage ratios mean companies can pay dividends a greater number of times based on current income levels.

Besides these metrics, there are other fundamentals that investors should consider as well, including earnings per share (EPS) and total return.

The Bottom Line

For investors looking to generate income from their investments, dividend-paying companies may be a good option. However, before investing in a dividend stock, it is important to research the overall financial health of that company. Higher dividend yields are generally seen as attractive but may be misleading and even a sign of financial instability.

Investors pursuing dividend stocks may be able to reinvest dividends to buy more shares, therefore taking advantage of compounding returns.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above stocks.

Growth stocks can be a good way to build wealth. These are some of the best growth stocks for March 2025

Growth stocks are companies that investors expect to outperform industry peers or the broader market in earnings, revenue, and share price increases. Unlike more established firms, which may return these profits to shareholders in the form of dividends or use them to buy back stock, growth stocks tend to reinvest these gains in expansion, research, development, and similar areas. However, although growth stocks may generate sizable returns for investors, they also carry a higher degree of risk as a result of market volatility. Growth is one key factor investors consider, along with others such as value and momentum.

Below, we explore the best growth stocks to watch this month and offer a detailed explanation of our methodology for compiling this list. All data are current as of Feb. 28, 2025.

Best Growth Stocks to Watch in March 2025
Ticker	Company	Sector	Market Cap ($B)	Price ($)	30-Day Return (%)
GRRR	Gorilla Technology Group Inc.	Technology Services	0.56	30.28	116.29
ORGO	Organogenesis Holdings Inc.	Health Technology	0.79	6.21	74.44
CYD	China Yuchai International Limited	Producer Manufacturing	0.78	19.12	71.48
SLDB	Solid Biosciences Inc.	Health Technology	0.43	5.59	70.95
GDS	GDS Holdings Limited	Technology Services	6.93	38.05	70.02
PRCH	Porch Group, Inc.	Technology Services	0.71	6.99	63.70
ROOT	Root, Inc.	Finance	2.05	135.17	62.86
SWTX	SpringWorks Therapeutics, Inc.	Health Technology	4.33	57.76	61.75
VNET	VNET Group, Inc.	Technology Services	3.13	11.73	60.91
INOD	Innodata Inc.	Technology Services	1.65	52.72	54.74
RUA	Russell 3000	N/A	N/A	3,389.87	-2.32

Growth Stocks in the Current Market Environment

In general, growth stocks tend to perform better in periods of economic expansion when the cost of borrowing is low. Though inflation is lower than it has been in recent years, higher interest rates and slowing economic growth mean that the current environment may not be ideal for these firms.

That said, not all growth stocks benefit from the same market conditions. For example, companies that enjoy a particular competitive edge within their industries or a dominant position in the market may be more likely to grow regardless of the macroeconomic environment. Similarly, firms in a hot industry that is experiencing significant growth may also outperform independently of other factors. A recent example has been technology stocks focused on AI, although an industry sell-off following the unveiling of a competitive AI platform by Chinese firm DeepSeek in January 2025 is a reminder that these conditions may change suddenly.

Health technology and biotech firms are often present in lists of top growth stocks thanks to their potential for massive breakouts following strong data about a new product or launches of a blockbuster drug or piece of equipment. Despite turbulence due to inflation and a slowdown in product launches, this sector may still be poised for significant growth due to an aging population and increased health care spending, with national health expenditures climbing to $4.9 trillion in 2023.

How We Chose the Best Growth Stocks

In our growth stocks screen, we focused on companies listed on either the Nasdaq or the New York Stock Exchange. To ensure that the firms we screened are well-established, we excluded stocks trading under $5 per share, those with a market capitalization under $300 million, and any with a daily trading volume under 100,000. Additionally, companies with growth in excess of 1,000% were excluded as outliers.

From this list, we selected the stocks with the highest 30-day returns to complete our ranking. In many cases, companies with a strong recent history of outperformance relative to industry peers or the broader market have built momentum thanks to positive company or external news, favorable market sentiment, or appealing technicals. If these conditions remain the same, these companies may experience continued growth in the future, though past performance is not an indicator of future returns.

How to Invest Wisely in Growth Stocks

Besides 30-day return, there are many key financial ratios that are helpful to use to identify potential growth stock investments. Using multiple metrics provides a fuller picture of the benefits different candidates offer, their financial positions, and how the market views them with respect to potential future gains.

Earnings Per Share (EPS) Growth

Earnings per share (EPS) growth is a measure of the percentage increase in a company’s earnings per share over a given period, typically year-over-year. Positive or accelerating EPS growth indicates underlying financial health and suggests the potential for future returns.

Price-to-Earnings (P/E) Ratio

Price-to-earnings (P/E) ratio is a comparison of a company’s stock price and its EPS. Higher P/E ratios suggest that investors are bullish about a company but may also signal that it is overvalued. On the other hand, a low P/E ratio may mean that a stock is undervalued relative to the industry or the broader market, or that investors are not especially optimistic about its prospects.

Price-to-Book (P/B) Ratio

Price-to-book (P/B) ratio is a measure of a firm’s market value against its book value, or the net value of the assets on its balance sheet. Some contrarian investors believe that a low P/B ratio indicates an undervalued stock that may have growth potential. However, P/B ratios can vary significantly from industry to industry, so it’s important to take stock of how a particular company compares with its peers.

How to Find Growth Stocks

Investors don’t have one single method for identifying promising growth stocks. Factors such as financial health, management, returns, and market position relative to industry peers are all helpful to consider.

Looking at a prospective growth stock investment, you should consider the company’s revenue, EPS, and profit margin history. Companies with a consistent record of increasing earnings may be likely to continue to grow into the future. It’s best to avoid stocks paying a dividend if you’re interested in growth potential—companies paying a dividend are opting to not reinvest profits back toward investment in company growth.

Identifying firms with a relative industry advantage over their peers depends upon the specific sector and industry. For instance, some industries—like health care—may be quite opaque to investors without special expertise. In other cases, it may be easier to identify a sustainable competitive edge in the form of a unique product, technology, or service that a company offers. An example of a competitive edge is NVIDIA Corp.’s (NVDA) data center processors, widely viewed as advantageous over rival products thanks to their system-scale integration capabilities.

A company’s management and corporate governance can also be helpful clues to its growth potential. How have the firm’s leaders navigated challenges and taken advantage of opportunities in the past? Looking to historical earnings reports can show whether a firm has been able to meet its goals, including in the area of forecasted EPS and revenue performance.

Lastly, share price performance can be an indicator of future growth potential. Look for companies that have higher stock price gains than their industry or the broader market. When making a comparison, it’s helpful to benchmark a firm’s performance against the Russell 1000 Index. As of Feb. 28, 2025, the Russell 1000 had returned -2.27% in the last 30 days. The stocks in our screen above have all significantly outperformed this level, potentially suggesting the prospect of future growth as well. A metric like compound annual growth rate (CAGR) can also help to compare two companies more directly.

Are These the Best Growth Stocks?

It is difficult to assess which growth stocks are the “best.” In reality, growth stocks in general—and these companies in particular—may not be suitable for each type of investor. Growth stocks may exhibit a higher degree of volatility than some more established, larger peers. Because many growth stocks are companies making aggressive maneuvers to expand operations, and because these moves may or may not succeed, investing in growth stocks can carry certain risks. Further, it can be difficult to predict which stocks exhibiting growth characteristics, such as the metrics identified above, will successfully generate outsized returns.

Investors interested in growth stocks should keep in mind that recent performance history is not a guarantee of future returns.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

The widely followed Standard & Poor’s 500 Index is the standard by which stock market performance in the U.S. is often measured, as it tracks 500 of the largest and most stable publicly traded companies in the country. The index is weighted by market capitalization, which gives more significance to companies with larger market values. The top 25 stocks in the S&P 500 by weight are the largest, most influential companies in the index.

Key Takeaways

• The S&P 500 is widely considered to be one of the best measures of stock market performance and the health of the U.S. economy.
• The 500 stocks tracked by the index represent the nation’s largest, most economically significant companies
• The S&P 500 is weighted by market cap. The larger the company, the more influence its stock price has on the overall index.
• The top 25 stocks in the index are important to follow because of their strong influence on the performance of the index and the economy at large.

As of Feb. 24, 2025, the S&P 500 had gained .02% since the beginning of the year. The large-cap index rallied to another new high by mid-month before selling wiped out much of the gain for February. The Fed’s decision to leave interest rates unchanged may have been one economic factor affecting stocks. Another may have been the uncertainty about federal budget cuts announced by President Trump’s Department of Government Efficiency, led by Elon Musk.

How are Stocks Selected for the S&P 500?

To be included in the S&P 500, a company must:

• Be based in the United States and trade publicly on a major U. S. exchange
• Maintain a market capitalization of $20.5 billion and a float-adjusted market cap of at least 50% of the index’s total company-level minimum market capitalization threshold
• Have reported positive earnings in the most recent quarter, along with the past four consecutive quarters
• Have a float-adjusted liquidity ratio of 0.75 or greater.
• Have traded a minimum of 250,000 shares in the previous six months before evaluation

The S&P 500 reconstitutes each June. Companies removed from the index are not replaced until the next annual reconstitution.

Top Sectors in the S&P 500

The table below lists the S&P 500’s top sectors by weighting as of Feb. 24, 2025. The information technology, financials, health care, and consumer discretionary sectors carry a cumulative weight of about 68%. Meanwhile, the least-weighted sectors include energy, utilities, and real estate—which have a combined weight of just 7.77%.

Top 10 Sectors in the S&P 500 by Weight
Information Technology	33.75%
Financials	13.15%
Consumer Discretionary	11.42%
Health Care	10.11%
Communications Services	9.38%
Industrials	7.25%
Consumer Staples	5.52%
Energy	3.17%
Utilities	2.51%
Real Estate	2.09%

Top 25 Companies by Index Weight

These are the top 25 companies by index weight. Since the S&P Global website fails to disclose the weighting of component stocks, we used the S&P 500 exchange-traded fund (ETF), the SPDR S&P 500 ETF Trust (SPY), in order to cite index weighting. The ETF’s holdings are a bit different, but SPY closely reflects the S&P weights.

As of Feb. 24, 2025, here are the largest SPY holdings by weight:

Top 25 Companies by Index Weight
1	APPLE (AAPL)	7.16%
2	NVIDIA (NVDA)	6.62%
3	MICROSOFT (MSFT)	5.96%
4	AMAZON.COM, INC (AMZN)	4.02%
5	META PLATFORMS (META)	2.92%
6	ALPHABET CLASS A (GOOGL)	2.08%
7	BROADCOM (AVGO)	2.04%
8	TESLA (TSLA)	1.91%
9	ALPHABET CLASS C (GOOG)	1.71%
10	BERKSHIRE HATH (BRK.B)	1.70%
11	JP MORGAN (JPM)	1.45%
12	ELI LILLY (LLY)	1.32%
13	VISA INC. (V)	1.17%
14	EXXON MOBIL (XOM)	0.95%
15	UNITED HEALTHGROUP (UNH)	0.89%
16	MASTERCARD (MA)	0.89%
17	COSTCO (COST)	0.88%
18	NETFLIX (NFLX)	0.84%
19	WALMART (WMT)	0.81%
20	PROCTER AND GAMBLE (PG)	0.76%
21	HOME DEPOT (HD)	0.75%
22	JOHNSON & JOHNSON (JNJ)	0.74%
23	ABBVIE (ABBV)	0.68%
24	SALESFORCE (CRM)	0.59%
25	BANK OF AMERICA (BAC)	0.58%

Why Are the S&P 500’s Top 25 Stocks Important?

The top 25 stocks in the S&P 500 by index weight are important to analyze because they can be used to gauge the health of the stock market and broader economy. These companies reflect the performance of key sectors and the benchmark itself.

The current period of outperformance by the technology sector, for example, shows how declining inflation, strong margins, and competitive positioning resulting in good cash flow can contribute to gains in the overall index.

How Do I Invest in the S&P 500 Index?

The simplest and easiest way to invest in the S&P 500 is to purchase the popular SPDR S&P 500 ETF (SPY), which reflects the minute-by-minute movements of the index. Other ETFs that also track the S&P 500 this way include the iShares Core S&P 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO).

There are also index funds that reflect only the closing price at the end of the day, including the Vanguard 500 Index Fund (VFIAX) and Fidelity 500 Index Fund (FXAIX). For those interested in more complex strategies, options and futures are also available, such as E-mini S&P Futures contracts, although these are only for those wishing to speculate on the future value of the index.

Advantages and Disadvantages of Investing in the S&P 500 Index

The central advantage of investing in the S&P 500 is the wide diversification it offers across many sectors and industries. By investing in the index, an investor generally reduces the risk associated with buying individual stocks. Over the years, an investment in the S&P 500 can produce long-term growth for those willing to wait out the accompanying short-term volatility.

A disadvantage of S&P 500 investing is how concentrated the index is in the top-performing stocks, a factor that sometimes skews results and can result in increased volatility. Some investors prefer an S&P 500 Equal Weight Index, where each component has an equal weight without regard to the size of its market capitalization.

The Bottom Line

The S&P 500 index weights companies according to their market caps. Larger firms are more heavily weighted than small firms, which carries some risks. The tech sector, which includes giants like Apple, Microsoft, and Nvidia, has an enormous influence on index results. In general, the stock market’s health and that of the U.S. economy can be measured by analyzing the S&P 500’s top 25 components.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

Choosing How to Invest Will Depend on Financial Goals and Risk Tolerance

Reviewed by JeFreda R. Brown
Fact checked by Vikki Velasquez

Dividend exchange-traded funds (ETFs) look for value stocks with higher-than-average dividend yields, making them a good choice for income-oriented investors. The Standard & Poor’s (S&P) 500 is a broad index of large-cap American stocks. Some pay dividends but others don’t.

You can’t invest directly in the S&P 500. You must buy a mutual fund or ETF that mirrors the S&P 500 such as the SPDR (SPY) to gain exposure to the whole of the S&P 500. The S&P 500 is often better for those who are looking to balance capital growth and income potential. It offers diversification across several sectors and has a history of steady long-term returns.

Making an informed decision between investing in dividend ETFs or the S&P 500 index requires identifying your financial goals, risk tolerance, and investment timeline. Both are solid vehicles for long-term investment but they offer distinct advantages and disadvantages.

Key Takeaways

• Dividend ETFs invest in high-yielding dividend stocks to maintain a stable, steady income.
• The S&P 500 is a broad-based index of large U.S. stocks that provide growth and diversification.
• Both have unique advantages and disadvantages.
• The best choice for you will depend on whether you’re looking for income or growth from your investments.

Dividend ETFs vs. S&P 500: An Overview

There are two fundamental investment approaches: dividend investing and broad-based index investing. Each serves a distinct purpose and appeals to different investors based on factors like risk tolerance, financial goals, and the need for income or growth.

Dividend ETFs are tailored for investors who seek a consistent and reliable income stream. These funds invest in companies that are known for paying out dividends regularly. The S&P 500 aims for a more balanced approach. It does include some dividend-paying companies but it’s focused on offering investors a snapshot of the U.S. economy’s overall performance. It attracts investors who are interested in income and capital growth.

Dividend Investing

Dividend investing is a strategy that’s centered on acquiring the stocks of companies that pay dividends to their shareholders. These dividends are usually distributed as cash payments or additional shares of stock. Dividends are appealing because they provide a regular income, making them popular with retirees or those seeking to supplement their earnings.

Companies that pay dividends are also likely to be more durable and financially stable and this can translate to less volatility in your portfolio. Dividend investing often leans toward particular sectors that aren’t known for outsized growth, however, such as utilities or consumer staples. This could limit your chances for capital appreciation.

Important

Reinvesting dividends can significantly increase long-term returns thanks to the power of compounding. This process can lead to exponential growth in the value of your investment because both your initial investment and the reinvested dividends earn returns.

Dividend ETFs are generally more stable when it comes to market fluctuations, but not always. Dividend funds primarily invest in well-established companies with a history of profitability and dividend payments. They’re usually less sensitive to ups and downs in the market. The S&P 50 reflects a broader range of the market, including stable giants and more volatile growth companies. It tends to be more susceptible to market volatility as a result.

You might find dividend ETFs more suitable if you’re a risk-averse investor or looking for a less tumultuous investment experience.

Index Investing

Index investing aims for a more comprehensive and diverse exposure to the market. This strategy isn’t confined to a particular sector or type of stock but distributes the risk by holding various assets and tracking a benchmark index.

The focus is generally on long-term growth, capturing the movement of the overall market. Index funds usually have lower fees than actively managed funds for this reason, allowing you to keep more of your returns. The primary aim is growth but many indexes like the S&P 500 also include dividend-paying stocks, offering a modest income stream.

A significant advantage of investing in the S&P 500 is its inherent diversification. It includes hundreds of companies across various sectors so you automatically get a diversified portfolio when you invest in this index. This broad exposure can help mitigate the risks associated with downturns in any particular sector.

Dividend ETFs are diversified to some extent but they often have a heavier concentration in sectors that are known for dividend stability. This focus can be beneficial for income and lower volatility but it might expose you to sector-specific risks and limit your portfolio’s growth potential.

Pros and Cons of Dividend ETFs

Dividend ETFs are designed to generate consistent income. They might not always grow dramatically but they’re often perceived as stable and somewhat conservative. They tend to attract income-oriented investors. These ETFs often hold high-dividend-paying common stocks, preferred stocks, and real estate investment trusts (REITs) to earn a high dividend yield.

Pros

• Consistent income

• Less volatility

• Potential tax benefits

Cons

• Limited growth potential

• Vulnerability caused by sector concentration

• Taxes on dividend income

• Sensitive to interest rate changes

Advantages

You’re essentially signing up for a more predictable and consistent income stream when you invest in dividend ETFs. They’re relatively stable in turbulent markets because they usually invest in financially solid companies that have proven track records. These stocks often act as buffers, protecting your investment in a volatile market.

Don’t overlook the potential tax benefits, either. The Internal Revenue Service often taxes qualified dividends at a lower rate than ordinary income. This favorable tax treatment can make a noticeable difference in your returns over time.

Disadvantages

One of the tradeoffs for consistent income and lower risk is a lesser growth potential. Companies that regularly pay out dividends tend to be more conservative in reinvesting profits for expansion. This can be a drawback if you’re looking for strong capital gains over the long term.

Sensitivity to interest rate changes is another factor to consider. The fixed income from dividends can become less appealing than bonds and other interest-bearing assets when interest rates climb. This shift in investor preferences can lead to a drop in the share prices of dividend-paying companies and affect the overall value of your ETF.

Note

You must pay taxes on the dividends you receive as well, even if you reinvest them.

Then there’s the issue of sector concentration. Many dividend ETFs are heavily invested in specific industries with dividend-paying track records. This focus can add predictability but it can also make your portfolio less diversified and more vulnerable to sector-specific risks.

Pros and Cons of the S&P 500

The S&P 500 is often the benchmark index for the health of the overall U.S. stock market. It includes the 500 largest American companies that amount to approximately 80% of total market capitalization.

The S&P has long been a reliable performer that balances capital growth and income, making it a versatile choice for various types of investors. It’s well-diversified, holding a range of stocks from each sector.

Pros

• Broad diversification

• Low-cost investments

• Potential for growth

Cons

• Market sensitivity

• No guaranteed income

• Short-term volatility

Advantages

You’re not putting all your eggs in one basket but rather in 500 baskets when you invest in a mutual fund or ETF that mirrors the S&P 500 index. You’re getting a slice of the broader U.S. economy, diversifying your investment across industries such as technology, healthcare, finance, and consumer goods. This diversified approach can be a financial safety net that reduces your exposure to downturns in any sector.

The index captures the performance of the largest and most influential companies in the United States and many of them are growth-oriented. This translated into an average annual return of around 9.75% from 2003 to 2023, not adjusted for inflation. The S&P 500 includes some dividend-paying companies but its primary appeal lies in its ability to capture market-wide growth.

The S&P 500 is also one of the most traded indexes in the world, attracting a wide range of investors from individuals to massive institutional funds. This high level of trading activity means you can easily buy or sell shares at market prices with minimal delay. High liquidity translates to more flexibility, allowing for quicker adjustments to your portfolio in response to market changes or your financial needs.

S&P 500 index funds and ETFs are also very low-cost investments because they’re passively managed and simply mirror the index’s returns.

Disadvantages

The S&P 500’s broad representation of the U.S. economy is an advantage in good times but it can be a liability during market downturns. Your investment is essentially a bet on the overall health of the U.S. stock market and the U.S. economy by extension. Your S&P 500 investment will also likely take a hit when the market suffers. It’s important to be aware of this vulnerability and consider how it aligns with your risk tolerance and investment strategy.

The S&P 500 can experience short-term volatility because of various market events ranging from economic data releases to geopolitical tensions. Such fluctuations are often temporary but they can be unsettling for conservative investors who prefer a more stable investment environment. The S&P 500 may not be the best investment for you if you’re uncomfortable with these ups and downs.

Dividend ETFs focus on income-generating stocks but the S&P 500 has more balanced goals. Some of its constituent companies do pay dividends but there’s no assurance of consistent income. The S&P 500 might not fully meet your needs if a steady income stream is a crucial part of your investment strategy.

Choosing Between ETFs and the Index

It’s tempting to simplify the choice between dividend ETFs and the S&P 500 to a matter of risk tolerance and financial goals but there are other factors to consider.

Time Horizon

Dividend ETFs may offer less pressure on those with a shorter time horizon due to their focus on income and stability. They give you the flexibility to exit the market without significant losses. The S&P 500 is generally better suited for those with longer investment horizons who can ride out market volatility for the promise of higher long-term returns.

Tax Implications

Tax considerations are a factor that’s often overlooked. Qualified dividends are usually taxed at a lower rate than ordinary income but you still have to pay those taxes. Dividends could be more tax-efficient because you won’t be taxed on gains until you make withdrawals, however, or not at all if they’re held in a Roth 401(k) or Roth IRA subject to certain rules.

Economic Conditions

The state of the economy can also influence your choice. Growth stocks in the S&P 500 often outperform others in a booming economy but the reliable dividends from a dividend ETF could have a financial cushion in a recession or a stagnant economy. The state and trajectory of the broader market and economy can help inform your decision.

Investment Costs

Consider the cost of investment. Dividend ETFs and S&P 500 index funds generally offer lower expense ratios than actively managed funds but some dividend ETFs charge slightly higher fees because of the additional research and selection involved in picking dividend-paying stocks.

Do Dividend ETFs Outperform the S&P 500?

Not necessarily. Dividend ETFs can offer stable income but their growth potential is generally lower over the long run. Dividend ETFs may outperform the S&P 500 during particular time frames, however, such as during a recession or a period of easing interest rates.

What Is the Largest ETF in the U.S.?

The largest ETF in the U.S. as measured by assets under management (AUM) is the SPDR S&P 500 ETF Trust (SPY). It tracks the movement of the S&P 500 and had $590.7 billion in AUM as of Nov. 1, 2024.

Does the S&P 500 Pay Dividends?

The S&P 500 doesn’t pay dividends itself but many of the individual companies within the index do so.

You’re effectively investing in a basket of 500 large-cap U.S. stocks when you invest in an S&P 500 index fund or ETF and a significant portion of them are dividend-paying companies. These dividends are usually collected by the fund and then distributed to investors quarterly. The dividend yield of an S&P 500 ETF was around 1.27% as of December 2024.

The Bottom Line

Dividend ETFs and the S&P 500 serve different needs and they both have advantages and disadvantages. Both can potentially be valuable parts of a balanced investment portfolio but they are typically held for different purposes: steady income versus growth. Assess your financial goals, risk appetite, and diversification requirements to make a more informed choice.

Disclosure: Investopedia does not provide investment advice. Investors should consider their risk tolerance and investment objectives before making investment decisions.

These are the best undervalued stocks to keep an eye on this month

Value investors seek stocks that are trading on the market at a price point below their fundamental value. These stocks typically represent high-quality companies that are either emerging or whose shares have otherwise fallen. While it can be difficult to execute successfully, value investing allows investors to buy stocks at a relatively low price point and then benefit when the market eventually corrects itself and the price rises to be more in line with the company’s underlying value.

In March 2025, some likely candidates for value investors to keep an eye on include pre-clinical biotechnology firm Spyre Therapeutics Inc. (SYRE), shipping firm ZIM Integrated Shipping Services Ltd. (ZIM), and utilities outfit Korea Electric Power Corp. (KEP), among others.

Key Takeaways

• Undervalued stocks on the NYSE and the Nasdaq have 12-month trailing P/E ratios as low as 1.07.
• Value investors believe it is possible to identify companies with shares trading below their fundamental value. Later, when the market corrects this pricing error, investors achieve gains as share prices rise.
• P/E ratio is a key metric used to identify value stocks, but this figure can vary significantly from one sector or industry to the next.
• For this reason, it’s most helpful to compare potential value plays against other peers in the same sector.
• Other common value metrics include forward P/E ratio, price-to-book ratio, and price/earnings-to-growth ratio.

Below, we consider some of the top undervalued stocks for this month, as measured by 12-month trailing price-to-earnings (P/E) ratio. A detailed explanation of our methodology is found below. All data are as of Feb. 24, 2025.

Top Undervalued Stocks By Sector, Based on Lowest 12-Month Trailing P/E Ratio
Ticker	Company	Sector	Market Cap ($B)	12-Month Trailing P/E Ratio	Price ($)
PARR	Par Pacific Holdings Inc.	Energy	0.9	3.02	15.58
MUX	McEwen Mining Inc.	Materials	0.4	3.46	7.23
ZIM	ZIM Integrated Shipping Services Ltd.	Industrials	2.6	1.83	21.85
STLA	Stellantis N.V.	Consumer Discretionary	41.4	3.01	13.97
HLF	Herbalife Ltd.	Consumer Staples	0.9	3.48	8.70
SYRE	Spyre Therapeutics Inc.	Healthcare	1.3	2.31	21.26
SITC	SITE Centers Corp.	Financials	0.8	1.07	14.64
CCSI	Consensus Cloud Solutions Inc.	Information Technology	0.5	5.61	25.90
TGNA	TEGNA Inc.	Communication Services	2.8	6.15	17.46
KEP	Korea Electric Power Corp.	Utilities	9.7	3.61	7.78
REFI	Chicago Atlantic Real Estate Finance Inc.	Real Estate	0.3	7.95	15.87

Why Are These the Top Undervalued Stocks?

Our screen for the best undervalued stocks includes firms listed on either the New York Stock Exchange (NYSE) or the Nasdaq and with a price of at least $5 per share, a daily trading volume of 100,000 or more, and a market capitalization of $300 million or more. From that list, we ranked the companies in our screen by 12-month trailing P/E ratio and then selected the stock with the lowest P/E ratio from each sector.

While there are many different metrics used in value investing, P/E ratio is one of the most common. It is a measure of the price of a company’s shares against its earnings. A low P/E ratio often suggests that a firm’s recent earnings have performed well relative to its price, meaning that it is undervalued in the market.

When looking for undervalued stocks, investors should keep in mind that P/E ratio is just one of many measures of a company’s value. It’s important to look at the firm’s financials as well as other metrics like P/S ratio (for firms that have yet to achieve profitability), price-to-book ratio, and price/earnings-to-growth ratio for a fuller picture. That said, it is also inherently difficult to calculate a company’s intrinsic value, and market unpredictability means that even legitimately undervalued firms may never see a stock price increase in the future.

What Should Investors Look For in Undervalued Stocks?

While we looked at trailing P/E ratio in our screen, forward P/E ratio is also a helpful metric to use to identify undervalued stocks. The forward P/E ratio makes use of Wall Street analyst predictions of a company’s future earnings. It can be a helpful way to take stock of how developments on the horizon could impact the company’s performance, although it’s also important to note that forward P/E ratio is intrinsically speculative.

Another way of comparing price and earnings is the price/earnings-to-growth ratio, which also includes an estimate of future earnings growth. This may provide investors with a better sense of how a company is likely to fare with regard to future earnings, as well as whether the firm may be undervalued relative to potential earnings growth.

Price-to-book ratio is a measure of a company’s share price against its net value (assets less liabilities). By looking at the firm’s book value per share, investors can get a fuller view of a company’s financial wellbeing. The price-to-book ratio suggests how much investors may be willing to pay for each dollar of the company’s net value.

Finally, regardless of which metrics one uses to evaluate a company, it’s essential to consider a benchmark. When it comes to value investing, it’s impossible to determine whether a company is undervalued unless one has a sense of how it compares to peers in its industry or sector. Because P/E ratios differ significantly from one sector to another, this information helps investors make the most educated guesses possible about a company’s underlying value.

The Bottom Line

Undervalued companies may have the potential to experience outsized returns if the market corrects the price to more closely match their underlying value. Investors seeking a value play might look to metrics like 12-month trailing P/E ratio as one indicator. Our screen has revealed a selection of stocks across sectors that could be undervalued, although there is no guarantee that investors in these stocks will achieve better-than-expected results.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above stocks.

London is the world’s financial capital

Fact checked by Suzanne Kvilhaug
Reviewed by Samantha Silberstein

London is the capital of England and the United Kingdom. It’s home to several prominent districts that play a crucial role in the global financial landscape. London’s financial districts include Canary Wharf, the Square Mile, and Lombard Street. Each has its distinct characteristics but they all epitomize London’s financial prowess, combining modern infrastructure, historical heritage, and a concentration of financial powerhouses.

Key Takeaways

• London’s financial districts include Canary Wharf, the Square Mile, and Lombard Street, each with its distinct characteristics.
• Canary Wharf is situated in the East End and stands as a modern hub of finance, boasting impressive skyscrapers and hosting the headquarters of major banks and corporations.
• The Square Mile is commonly known as “the City” and encompasses the historical core of the city while serving as a thriving center for finance, governance, and professional services.
• Lombard Street is located within the city and holds historical significance as a street associated with banking and finance.

Canary Wharf

Canary Wharf is situated in the East End on the Isle of Dogs. It stands as a modern hub of finance and commerce, boasting impressive skyscrapers and hosting the headquarters of major banks and corporations. The district is home to some of the tallest buildings in the U.K., including the famous One Canada Square, which was once the tallest building in England.

Once a thriving docklands area, Canary Wharf underwent massive redevelopment in the 1980s and 1990s, transforming it into a modern business district. It was named after the historic West India Docks where ships carrying goods, particularly from the Canary Islands, docked in the 19th century.

Canary Wharf is primarily known for hosting the headquarters of numerous major banks, financial institutions, and professional services firms. Many multinational corporations also have a presence in the area, including those in the fields of media, technology, and law. It’s considered a vital part of London’s economy and a key contributor to the city’s status as a global financial capital.

Canary Wharf benefits from excellent transportation links. It has its own underground station that’s served by the Jubilee Line and provides easy access to other parts of London. The district is also well-connected by various forms of public transportation including Docklands Light Railway (DLR), buses, and riverboat services along the Thames.

The Square Mile

The Square Mile or the City of London (“the City”) encompasses the historical core of the city and serves as a thriving center for finance, governance, and professional services. It boasts iconic landmarks such as the Bank of England and the London Stock Exchange. It occupies a small area of approximately 1.12 square miles or 2.90 square kilometers but the Square Mile holds immense significance as a global financial center despite its relatively small size.

The Square Mile has a rich history that dates back to Roman times when it was established as a trading settlement known as Londinium. It’s grown into a center for commerce, finance, and governance over the centuries, serving as a major hub for banking, insurance, professional services, and other financial activities.

The district is characterized by a blend of historic and modern architecture. Towering skyscrapers dominate the skyline beside ancient landmarks like the Tower of London and St. Paul’s Cathedral. Notable architectural icons include the Gherkin at 30 St. Mary Axe, the Shard, and the Walkie Talkie at 20 Fenchurch Street.

The Square Mile is home to the headquarters of many international financial institutions including the Bank of England, the London Stock Exchange, Lloyd’s of London, and numerous banking corporations.

Important

The Square Mile attracts a wide range of professionals including bankers, lawyers, accountants, and consultants, making it a hub for financial and professional services.

The City has a unique political structure. It’s a separate entity from the rest of London with its own local government known as the City of London Corp. The corporation is headed by the Lord Mayor of London and governs the districts and promotes its interests. These include maintaining the City’s global financial status.

Lombard Street

Lombard Street is located within the City and holds historical significance as a street that’s associated with banking and finance, surrounded by financial institutions. It has connections to London’s financial and banking history. It stretches from the bank junction to Gracechurch Street in the eastern part of the City and is surrounded by numerous financial institutions including offices of financial services companies.

The street has a long association with banking and finance that dates back to the Middle Ages when it was home to many Italian bankers who were known as “Lombards.” These Lombard bankers played a significant role in facilitating trade and financial transactions.

Lombard Street is known for its architectural charm. The street is lined with a mix of historic buildings and modern office blocks, offering a glimpse into London’s architectural heritage. It’s also close to other notable landmarks in the City including the Bank of England and the Royal Exchange.

History of London’s Financial Districts

Each of these districts has a storied past.

Canary Wharf

The history of Canary Wharf is intertwined with the transformation of London’s docklands. The area was originally home to the West India Docks that were constructed in the early 19th century to trade with the West Indies. The decline of traditional port activity and the advent of containerization led to a decline in the use of West India Docks by the mid-20th century. The docks eventually closed in 1980, leaving behind a vast expanse of derelict land.

The British government initiated an ambitious redevelopment plan in the 1980s to revitalize the docklands area. The London Docklands Development Corp. (LDDC) was established to oversee the regeneration efforts. The former West India Docks site was identified for a new financial district as part of this plan.

Construction of the Canary Wharf development began in the late 1980s and continued into the 1990s. The project involved massive infrastructure works including the creation of a new dock, the excavation of a vast area, and the construction of high-rise office buildings. The redevelopment aimed to attract financial institutions and businesses to the area and it established Canary Wharf as a major financial district.

The Canary Wharf development project gained momentum in the mid-1990s and it began to attract major financial tenants including banks, investment firms, and media companies. Canary Wharf has continued to expand and evolve. Additional office buildings, residential developments, shops, restaurants, and cultural spaces have been added to the area.

Square Mile

The history of the Square Mile or the City is closely intertwined with the broader history of London. It’s the historic core of the city and has been a center of commerce, governance, and finance for centuries.

The origins of the Square Mile can be traced back to the Roman settlement of Londinium in the 1st century A.D. The Romans established a fortified settlement on the north bank of the River Thames that served as a trading hub and administrative center for Roman Britain. The city gradually expanded within the confines of the Roman walls, encompassing an area roughly equivalent to the present-day Square Mile.

London went through a period of decline following the departure of the Romans from Britain in the 5th century but it began to revive in the medieval era. Alfred the Great re-established the city as a trading center and fortified its defensive walls in 886.

London flourished as a hub of trade and commerce during the medieval period. Associations of craftsmen and merchants referred to as guilds played a crucial role in the city’s governance and economic activity. The city obtained a series of charters from the monarchy, granting it significant self-governing powers and privileges.

London has faced numerous challenges throughout its history including outbreaks of plague and political conflicts. One of the most significant events was the Great Fire of London in 1666 which destroyed much of the city including the medieval St. Paul’s Cathedral. The fire led to a major rebuilding effort with renowned architect Sir Christopher Wren overseeing construction of new churches and public buildings including the iconic St. Paul’s Cathedral that stands today.

London solidified its position as a global financial center during the 19th and 20th centuries. The Bank of England which had been founded in 1694 became a central institution in the city’s financial system. The London Stock Exchange which had been established in the 17th century facilitated the trading of stocks and securities.

The Square Mile has undergone significant modernization and redevelopment. It’s seen the construction of modern office buildings, skyscrapers, and iconic landmarks such as the Gherkin and the Shard. The area continues to be a thriving center of finance.

Lombard Street

Lombard Street in London has a long and significant history, particularly relating to banking and finance. The name “Lombard” derives from the Lombards, a medieval Italian merchant community known for their banking activities.

Lombard Street became a hub for Lombard merchants who had migrated to London during the medieval period. They established themselves as moneylenders and money changers, conducting business and providing financial services in the area. Lombard Street became synonymous with banking and finance, attracting other moneylenders and traders.

Lombard Street consolidated its reputation as a financial center in the 16th century when several prominent banking institutions set up offices there. One notable example was the Royal Exchange which was established in the 16th century as a hub for commerce and banking. It became a symbol of London’s growing financial power.

The Great Fire of London in 1666 also had a significant impact on Lombard Street. The fire destroyed many buildings in the area, including the original Royal Exchange. It was rebuilt, however, and the area continued to flourish as a financial district.

Where Is the Financial Hub of the U.K.?

The financial hub of the U.K. is primarily centered in the City of London or “the City.” It’s often referred to as the Square Mile.

What Is the Most Famous Financial District?

The most famous financial district globally is arguably Wall Street, located in Lower Manhattan in New York City in the United States.

What Are the Big Five Banks in London?

London’s “Big Five” banks are HSBC Holdings plc (HSBC), Barclays plc (Barclays), Lloyds Banking Group plc (Lloyds), NatWest Group plc, and Standard Chartered plc (Standard Chartered).

The Bottom Line

London’s financial areas include Canary Wharf, the Square Mile, and Lombard Street.

Canary Wharf is a modern district in the East End, characterized by impressive skyscrapers and serving as a global finance and commerce hub. The Square Mile, also known as the City of London or “the City,” represents the historical and financial core, housing major institutions like the Bank of England and the London Stock Exchange. Lombard Street, situated within the City, has historical significance associated with banking.

These areas collectively exemplify London’s financial prowess, combining modern infrastructure, historical heritage, and a concentration of financial institutions.