With 2025 just around the corner, some people may be sitting on a lump of cash they'd like to deploy to the market. It doesn't matter if it's $50 or $50,000; most brokerages give investors access to fractional shares so they can buy the same stocks as someone with a much larger account balance can (just in smaller quantities).
If you've got some cash on the sidelines and are looking to deploy it, I've got a few stocks worth buying right now.
S&P 500 index fund
OK, this one is cheating a bit. And it also comes with a caveat. If this is your first step into investing, then the best stock to purchase is an index fund, like the S&P 500 (^GSPC -1.11%). There are many options to invest in the S&P 500, but my favorites are the SPDY S&P 500 (SPY -1.05%) and the Vanguard S&P 500 (VOO -1.04%). Both of these low-cost ETFs act much like a stock and allow you to diversify to all corners of the market.
By buying this fund first, you don't have to worry about beating the market because you're matching it. With the market returning around 10% annually, it's a great first investment.
However, if you're a well-established investor, you are likely already diversified or own an S&P 500 index fund (like I do). If that's the case, you may also want to consider these individual stocks.
Taiwan Semiconductor
Taiwan Semiconductor (TSM -0.70%) is the world's largest chip manufacturer, making chips for some of the world's most important tech companies, like Apple (AAPL -1.32%) and Nvidia (NVDA -2.09%). Without Taiwan Semi's production capacity, technology wouldn't be at the level it is today.
Taiwan Semi is also a massive beneficiary of the artificial intelligence (AI) arms race. For 2024, management expects revenue associated with AI to triple and make up a mid-teens percentage of its total revenue. This demand isn't expected to slow anytime soon, which will benefit TSMC. Wall Street analysts project Taiwan Semi's revenue to rise by 25% next year, further illustrating its strength.
Although it's not the cheapest stock in the world, Taiwan Semi's forward price-to-earnings (P/E) ratio is in line with that of the other big tech companies.
TSM PE Ratio (Forward) data by YCharts
I think Taiwan Semi is still a solid buy here, as it has a strong upside as AI and broader chip demand continue to rise.
Meta Platforms
Meta Platforms (META -0.59%) is likely better known by its former name, Facebook. Meta makes most of its money from its social media platforms, including Facebook, Instagram, and WhatsApp. Its massive advertising income accounted for 98% of Meta's revenue and all of its profits.
This has allowed Meta to fund research into various projects. While the metaverse project looks like it flopped, the generative AI investments seem to be paying off. Meta has what many consider to be the top open-source platform, Llama. Open source allows developers to see what's going on behind the scenes and know where their data is going. Additionally, it doesn't cost anything to use.
While this may seem like a great idea from a developer standpoint, it doesn't make much business sense unless you consider that Llama is being trained by far greater and wider sources than its competitors. As a result, it can train its model faster and cheaper than its peers, potentially allowing Meta to launch a game-changing AI feature in the future, which it may charge for. Making Llama open-source is a long-term investment, but Meta's massive cash flows from advertising make this possible.
Meta trades around the same price tag as Taiwan Semi at 28 times forward earnings.
META PE Ratio (Forward) data by YCharts
Once again, this isn't a cheap stock, but it is in line with most tech companies. With massive upside potentially ahead from a generative AI business, there is a lot to like about Meta's prospects. However, if that doesn't pan out, Meta will still be a huge cash-generating machine thanks to its successful social media platform.
