Investing in the stock market is a fantastic way to generate life-changing wealth, but the investments you choose will make or break your portfolio.
Exchange-traded funds (ETFs) can be a smart option for anyone looking for a simple, no-fuss investment that can help you earn a lot over time with little effort on your part. Each ETF contains dozens or even hundreds of different stocks, taking the guesswork out of where to buy.
Not all ETFs are created equal, and risky funds could potentially put your portfolio at risk. However, there's one Vanguard ETF that I'm continuing to buy hand over fist, and it could be a smart investment in 2024. Here's everything you need to know.
A growth ETF that packs a punch
One ETF in my personal portfolio that I will continue buying into next year is the Vanguard Growth ETF (VUG 1.82%). This ETF contains 222 stocks, around half of which are from the tech sector. All the stocks in the fund, though, have the potential to see above-average growth.
Growth ETFs, in general, tend to earn higher returns over time than broad-market funds, such as S&P 500 ETFs. While they do carry more risk than their broad-market counterparts, they're also designed to beat the market over the long haul.
One advantage of the Vanguard Growth ETF, specifically, is its balance of established companies and up-and-coming growth stocks.
The fund's top 10 holdings make up around half of the ETF's total composition, and these 10 stocks are from behemoth corporations like Apple, Amazon, Nvidia, and Visa. While these stocks may not experience explosive growth, they're relatively stable companies that are very likely to survive periods of market volatility.
The rest of the fund is made up of smaller stocks with more potential for significant returns. These stocks are riskier, but if any one of them takes off, you could see substantial earnings.
This balance of risk and reward essentially makes this ETF the best of both worlds. It's still designed to earn above-average returns over time, and with dozens of up-and-coming stocks in its mix, there's plenty of room for growth. But because it also contains stocks from some of the largest and strongest companies in the world, it's also more stable and safer than many other growth ETFs.
How much could you earn?
It's impossible to say how this ETF will perform over time, so your returns will depend largely on how the market fares. Over the past 10 years, however, the Vanguard Growth ETF has earned an average rate of return of 12.88% per year.
Historically, the market itself has earned an average return of around 10% per year. If you were to invest, say, $200 per month, here's approximately how much you could earn over time, depending on whether you're earning 10% or 12% average annual returns:
| Number of Years | Total Portfolio Value: 10% Avg. Annual Return | Total Portfolio Value: 12% Avg. Annual Return |
|---|---|---|
| 20 | $137,000 | $173,000 |
| 25 | $236,000 | $320,000 |
| 30 | $395,000 | $579,000 |
| 35 | $650,000 | $1,036,000 |
| 40 | $1,062,000 | $1,841,000 |
Data source: Author's calculations via investor.gov.
While growth ETFs are designed to outperform the market, there are never any guarantees that you'll see these types of returns. Before you buy this type of investment, consider your risk tolerance. If you're willing to take on slightly more risk to potentially earn above-average returns, this ETF could be a good fit.
The right investment for you will depend on your tolerance for risk and your investing goals. The Vanguard Growth ETF is a smart choice if you're looking to balance risk and reward while also increasing your chances of beating the market over time.
