Investing in the world’s best growth stocks can be a recipe for success. The actions of the “Magnificent Seven”… Alphabet, Apple, Amazon, Metaplatforms, microsoft, NVIDIAand tesla — are synonymous with growth. These are the leading companies in the S&P 500, and its performance is often an indicator of the health of the overall market in recent times.
In 2025, as the S&P 500 has had another strong year, the Roundhill Magnificent Seven ETF (NYSEMKT: MAGS)which tracks these companies, has done even better. Since the beginning of the year, the exchange-traded fund (ETF) has risen about 21%, which is better than the S&P 500’s gains of just 14%.
However, the big question is: with valuations this high, is the fund still a good buy or is now a good time to pivot into other stocks?
Image source: Getty Images.
Magnificent Seven stocks may experience drops in value in a market correction, but as long-term investments, they are likely to continue to increase in value. These companies have established themselves as solid businesses with great growth prospects. They are not immune to falls, but they have proven effective in the long term.
Over the past five years, each of these stocks has been in positive territory. The worst performer during that stretch, Amazon, is up about 47%, but all the other Magnificent Seven stocks have at least doubled in value, with Nvidia leading the way, generating returns of over 1,100%.
Sticking with the Roundhill ETF, which tracks these top stocks, is a simple way to ensure you’re in a position to benefit from their continued growth in artificial intelligence (AI) and technology in general. These companies are in strong financial condition and are blue-chip stocks that can be bought and held for years. Doing so within a single ETF can be an easy way to get exposure to all of them at once.
Companies may be great businesses, but that doesn’t mean their stocks are good investments regardless of price. Carry Palantir Technologies as an example. The data analytics company is generating huge growth and its profits are rising, but it trades at more than 400 times its trailing earnings.
No matter how good the company is, that doesn’t mean it’s a buy in. any valuation. Ignoring valuations can be a costly mistake for investors because it can limit their returns (and even lead to significant losses) in both the short and long term.
By staying invested in the Roundhill ETF, which gives you exposure to all of these stocks, the danger is that some high-value stocks could reduce your overall returns. As you can see in the chart below, a couple of these stocks have price-to-earnings (P/E) ratios of over 50 right now.
TSLA PE Ratio data by YCharts.
I would also argue that Apple, whose business often generates single-digit growth, is also not worth paying more than 35 times its earnings; That seems expensive too.
Not all Magnificent Seven stocks are very expensive, but they can still affect their overall returns. That’s why it may be a good idea to consider other investments with more modest values rather than simply opting for the Roundhill ETF. It may require more research and effort, but it can generate better returns for your portfolio.
The Roundhill Magnificent Seven ETF has performed well this year, but could also be vulnerable to a correction if market conditions worsen, particularly because some of the shares are highly valued and trading at premiums.
I don’t see much incentive to hold the ETF simply because it focuses on investing in just seven stocks. This is not a fund that owns hundreds of stocks, which dramatically saves you time finding good investments and gives you plenty of diversification. Additionally, if you buy stocks individually, you may choose to simply choose the best-priced ones among the seven rather than being exposed to all of them.
Buying some of the Magnificent Seven stocks may still be a good decision, especially ones that aren’t grossly overvalued, but I wouldn’t simply own them all, so I wouldn’t choose to buy the Roundhill ETF, despite its impressive gains this year.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool positions and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
This “Magnificent Seven” ETF has been outperforming the market this year. Is it still a good buy? was originally published by The Motley Fool
