The top S&P 500 stock of 2024 returned 340.5%—it was not Nvidia.

In 2024, Nvidia received a lot of attention, but it did not end the year with the highest stock market return in the S&P 500. Instead, Palantir, a software company founded by Peter Thiel and specializing in data analytics, achieved a 340.5% return on its stock.

The utilities firm Vistra, United Airlines, and weapons manufacturer Axon Enterprise are the top five companies with growth rates of 261.3%, 135.3%, and 130.1%, respectively, while Nvidia comes in third with a growth rate of 171.2%.

As the year comes to a close, a philosophical question arises: Should I invest in last year's successful stocks or those that underperformed?

While some stocks in popular industries may still outperform the market, many investors, including Warren Buffett, have made significant profits by purchasing stocks when they are undervalued.

According to Sam Stovall, the answer is clear, although complex, when examining past market data.

"He states that history indicates that if the previous year was successful, one desires to own the previous year's winners. On the other hand, if the previous year was unsuccessful, one desires to own the previous year's losers."

Why 2025 may be a good year for last year's winners

In 2024, the stock market experienced significant growth, with the S&P 500 returning nearly 25%, building on the 26% increase seen in 2023.

Since 1991, when S&P sector data became available, a portfolio that owned the top-three performing stock market sectors from an up year in equal parts has outperformed the S&P 500 75% of the time, by an average of 3 percentage points, according to CFRA data.

It is not advisable to blindly follow the list of stocks and invest all your winnings in them without proper research and analysis.

When it comes to individual stocks, prices can fluctuate due to unique reasons. Stocks can move based on fundamental factors such as corporate earnings or balance sheet strength, which may not affect other companies in the sector. Additionally, investors may focus on company-specific news, such as product launches or executive hires.

Experts advise that it is crucial to make portfolio decisions based on your specific investment goals. Stovall suggests examining your reasons for owning a big winner in your portfolio.

"What motivated me to purchase this stock? Was it for the dividend yield, price appreciation potential, or diversification?" he inquires. "Then, you reflect on whether it has already achieved your objectives or if there is still potential for growth."

If your investment thesis remains intact, you may feel comfortable holding onto it. If you believe a stock has reached its upside potential, you may consider trimming your position or selling.

Set up rules for adding to or selling winning positions

It is challenging to decide whether to hold or sell investments, and this decision can be emotional. Therefore, it is crucial to have clear guidelines for managing your portfolio, advises Doug Boneparth, a certified financial planner and president of Bone Fide Wealth.

If a stock dominates too much of your portfolio, it can increase your concentration risk. Boneparth suggests setting a limit on your portfolio, even if it means selling some shares of a successful stock.

""I believe that 20% is the limit for concentration. Beyond that, there is an increased risk and volatility based on the performance of that one stock," he remarks."

If you've realized significant gains from an investment, even if you believe it has the potential to climb even more, it's wise to take some profits, advises Boneparth.

"He advises that if you have the chance to transform your life or reach a significant long-term financial objective, it's worth taking that opportunity, as it may be more advantageous than simply waiting to see if the market continues to rise."

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