Investing in the stock market is a fantastic way to build long-term wealth, and exchange-traded funds (ETFs) are a smart option for those looking to potentially make a lot of money with very little effort.
Each ETF contains dozens or even hundreds of stocks, all bundled together into a single investment. This not only helps create a well-diversified portfolio, but it also takes much of the guesswork out of investing when you don't have to research individual stocks or keep up with industry trends.
Not all ETFs are created equal, however, and some are better investments than others. While there's no single correct way to invest, there's one growth ETF that could turn $300 per month into $869,000 or more with next-to-no effort on your part.
The right growth ETF to supercharge your savings
One growth ETF that I personally own and plan to continue buying for the long haul is the Vanguard Growth ETF (VUG 1.82%). This fund includes 222 stocks from 11 different sectors, though around half of the ETF is made up of stocks in the tech industry.
Growth ETFs, in general, are designed to earn above-average returns over time. While that often comes with more risk, the Vanguard Growth ETF aims to reduce that risk by balancing up-and-coming companies with blue chip stocks.
The fund's top 10 holdings make up around half of its overall composition, among them major stocks like Apple, Amazon, Microsoft, Nvidia, and Visa. While they may still see significant growth over time, they're also behemoth corporations and much less volatile than many smaller stocks.
The other half of the ETF, then, is comprised of up-and-coming stocks with the potential for explosive growth. These stocks do carry more risk than their blue chip counterparts, but if any of them take off, you could potentially make a lot of money.
Building an $869,000 portfolio
Over the last 10 years, the Vanguard Growth ETF has produced an average rate of return of 12.88% per year, which is higher than the market's historic average of 10% per year.
If you were investing $300 per month, here's how much you could accumulate over time depending on whether you're earning 12% or 10% average annual returns:
| Number of Years | Total Portfolio Value: 12% Avg. Annual Return | Total Portfolio Value: 10% Avg. Annual Return |
|---|---|---|
| 20 | $259,000 | $206,000 |
| 25 | $480,000 | $354,000 |
| 30 | $869,000 | $592,000 |
| 35 | $1,554,000 | $976,000 |
| 40 | $2,762,000 | $1,593,000 |
Data source: Author's calculations via investor.gov.
To reach $869,000 in total savings, you'll need to invest consistently for around 30 years earning a 12% average return. This doesn't mean you'll have to earn a 12% return each and every year. Some years will be better than others, but those highs and lows could average out to roughly 12% per year over time.
Keep in mind that there's always a chance this ETF may not earn those types of returns over the long haul. One downside of growth ETFs is that they are generally riskier than broad-based funds like S&P 500 ETFs, so there are no guarantees that they'll be able to beat the market.
However, if this fund is able to outperform the market even slightly, you could potentially earn hundreds of thousands of dollars or more over the long term. If that reward is worth the risk for you, this could be a smart investment right now.
Growth ETFs can help grow your savings exponentially over time, but it's important to consider the pros and cons before deciding whether it's the right investment for you. The Vanguard Growth ETF does a solid job of balancing risk and reward, and with enough time, it could potentially help you build life-changing wealth.
