Growing your portfolio to a value of $1 million is a milestone event. Once you've done that, investing that sum into a conservative, dividend-focused exchange-traded fund (ETF) that yields 4% would generate $40,000 in income for you annually. Not bad for retirement, especially if that's on top of any other income you're saving or collecting from other sources.
However, investing is a long-term activity -- you're not likely to get to a seven-digit portfolio tomorrow. While you may be tempted to jump on some hot meme stocks to speed things up, the safer strategy is to buy and hold solid investments for not just years, but decades. Below, I'll show you a couple of ETFs that could turn $50,000 into $1 million over a period of 25 years.
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Your target: annual returns of 13%
Starting with just an initial $50,000 investment, you would need annual average growth of 13% to reach $1 million after 25 years. But it's not as if the share price gains need to be that high -- you can achieve those returns through a combination of dividends and an appreciation in capital. It's nonetheless an ambitious target, but if you're investing in high-growth sectors, then it could be attainable.
Analysts are most bullish on new technologies -- like 5G -- and also cannabis, an industry that is not fully legal in the U.S., but that likely will be within the next few years. Those two segments could generate robust returns over the long term.
Market Research Future projects a compound annual growth rate (CAGR) of 70.83% through 2025 for the 5G technology market, at which point it is forecast to be worth more than $700 billion. 5G is still relatively new, so its growth will likely continue well beyond 2025.
One ETF that gives you terrific exposure to that market is the Defiance 5G Next Gen Connectivity ETF (FIVG -1.53%). The fund holds many top telecom and tech stocks, including Qualcomm and Verizon. Over the years, its makeup will likely change as businesses evolve and new companies enter the sector. Since its inception in 2019, the fund has gained 52%, slightly underperforming the S&P 500 which is up 60% during that time. However, as 5G becomes more prevalent, this ETF will likely outperform the broader market.
The legal cannabis industry is also still in its early innings. It's no doubt a risky sector right now as many businesses within it are struggling to turn a profit. They also face unique and challenging headwinds, including a lack of access to banking. However, over the long term, the opportunities for these companies could be significant. Analysts from Grand View Research forecast a CAGR of 26.7% for the global legal marijuana market, anticipating it will be worth $70.6 billion by 2028.
The estimates for this market are always changing due to the unpredictable legal landscape, but even so, it's clear that there's lots of potential here. And one ETF you can buy to attempt to tap into that potential is the AdvisorShares Pure US Cannabis ETF (MSOS -1.87%), which is comprised of U.S.-based multi-state operators. Support for marijuana legalization has been growing in the U.S., and now that the Democrats are in power in Washington, the odds that this will occur have improved markedly. Senate Majority Leader Chuck Schumer is pushing for significant cannabis reform (which includes outright legalization). It could still be years before legalization happens in the U.S., but when it does, MSOs like Trulieve Cannabis and Curaleaf Holdings -- which are among the holdings of the AdvisorShares Pure US Cannabis ETF -- will likely take off. In just the past year, the ETF has risen by 49%, well above the S&P 500's 38% increase over that period.
Investing in ETFs is the safe, diversified way to grow your portfolio's value
Regardless of what sectors you want to invest in, you should consider ETFs. Because they offer instant diversification, they carry less risk than picking individual stocks. For example, while the cannabis industry can be expected to grow over the long term, it's difficult to predict whether Trulieve or Curaleaf will turn out to have been the better buy. An ETF gives you broad exposure, ensuring that all your money isn't in just a few picks.
Both of these ETFs can set you up for some long-term gains, potentially turning a $50,000 investment into $1 million. With a sector like cannabis that's still a bit risky right now, you'll need to exercise some patience. But if you can do that, putting money into these funds could help keep you on track for a more comfortable retirement.
