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3 Vanguard ETFs That Could Help You Retire a Millionaire

By Chuck Saletta – Updated Nov 22, 2021 at 6:59PM

Key Points

  • The US stock market has long been an incredibly powerful wealth-building machine.
  • International stocks can be a way for investors to get an additional measure of diversification.
  • Real Estate has long provided a decent combination of growth and income.

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Low cost index funds that track key markets can provide an incredible foundation to build wealth over time.

Vanguard is well known in the investing industry as a low-cost provider of index-based funds. That makes many of their funds great choices for investors who are willing to accept market-like returns in exchange for low hassle, low-fee selections.

Indeed, because of the low fee, low churn way they're structured, making regular investments in Vanguard's Exchange Traded Funds (ETFs) can be an incredible way to build wealth over time. These three Vanguard ETFs could help your retire a millionaire if leveraged well throughout a career.

Exchange Traded Fund over hundred dollar bills

Image source: Getty Images

No. 1: Invest in the Total US Stock Market

Vanguard's Total Stock Market Index ETF (VTI 1.60%) attempts to track an index that covers the entire US Stock Market, crossing large-, mid-, and small-capitalization companies. With a minuscule 0.03% expense ratio and 8% asset turnover, the Vanguard Total Stock Market Index ETF lets investors essentially match the returns of the US stock market, by buying just one security.

If the US stock market returns 8% per year, you can reach millionaire status in under 34 years by investing $500 per month (around $17 per day) in that ETF. That's an achievable path for many people to reach $1 million within a career, and it doesn't rely on an inordinate amount of luck. That makes it an incredibly straightforward and low-cost way to build wealth.

Even better, that $500 per month works out to $6,000 per year, which conveniently is the amount of money most employed people under age 50 can put into a Traditional or Roth IRA  in a year. That makes it a path to millionaire status by retirement that doesn't depend on having a strong retirement plan at your job.

No. 2: Own the rest of the world

Although the United States had been a great place to invest, there are good reasons to diversify your portfolio beyond its borders. Vanguard's Total International Stock ETF (VXUS 0.50%) gives you the opportunity to buy a broad range of companies whose key characteristic is that they are headquartered outside of the United States. With a low 0.08% expense ratio , the fund gives you that international exposure without having to pay a huge cost for the privilege.

If, like a majority of Americans, you're worried about the state of the U.S. economy, having some of your money work for you outside its borders can be a great way to get international diversification. The thing to remember, though, is that the world's economy is incredibly intertwined. It would be unlikely for economic troubles to strike the United States and leave the rest of the world unscathed.

As a result, while you can get some diversification benefit by investing in Vanguard's Total International Stock ETF, you shouldn't expect miracles from it. Instead, like its US cousin, you should expect a decent likelihood of reasonable performance over time, in line with how international markets perform. With that in mind, the Total International Stock ETF also looks like a great candidate for making regular investments over time on your path to potential millionaire status.

No. 3: Real estate for the potential of both income and growth

Particularly if you're worried about inflation eating away the purchasing power of your cash, real estate can be an attractive long-term investment. Vanguard's Real Estate Index ETF (VNQ 2.10%) looks particularly interesting on that front, as it attempts to track an index made up of Real Estate Investment Trusts (REITs).  REITs must pay out at least 90% of their earnings as dividends to shareholders,  which means that as inflation drives up rents, its shareholders could see their incomes increase as well.

On top of that structural opportunity for income growth, the Vanguard Real Estate Index EFT offers investors the opportunity to benefit from property value growth as well. It does so by only charging a mere 0.12% expense ratio, thereby passing on nearly all the benefits of ownership of the underlying businesses and their assets to its shareholders.

Although the raw growth potential is likely lower in real estate than in ordinary stocks, the combination of income, the potential of income growth, and overall value growth does still exist. As a result, shareholders of Vanguards' Real Estate Index ETF do have the potential of decent total returns over time.

Note that a big part of those total returns are likely to come from dividends due to the mandatory payouts that REITs face. As a result, it might make sense to consider investing in the Vanguard Real Estate Index ETF inside of an IRA. That way, the taxes would be deferred while your money accumulates, and if the IRA is a Roth IRA, you might even be able to see those returns be completely tax free .

Low-cost index EFTs let more of your money work for you

All three of these ETFs are of the low-cost, index-tracker variety that Vanguard is famous for. By being low-cost, more of your money works for you, and by being index trackers, you should get performance very close to whatever the markets they track will deliver. Because they each track different parts of the market, they can all work together on your quest to retire a millionaire.

The key, though, is to get started early. The sooner you get started, the less you have to sock away each month to get there in the time you have available. You will never again have more time available before you have right now, so make today the day you start putting your money to work on your behalf.

Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Vanguard REIT ETF, Vanguard Total International Stock ETF, and Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.

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