When all is said and done, the goal of investing is to make money. Of course, the more you make, the better. But not everyone will hit the jackpot with once-in-a-generation investments that take them from thousands to millions in a relatively short time. For most investors, the goal should be to, at minimum, keep up with the market average (usually based on the S&P 500's returns).
You don't have to settle for just the average, though; plenty of stocks offer market-beating opportunities. Here's a blue chip stock and an exchange-traded fund (ETF) to consider to help your portfolio beat the average.
1. Berkshire Hathaway
Led by famous investor Warren Buffett, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) has become one of the world's most valuable companies, valued at just under $800 billion. Berkshire is known for its savvy investments, owning shares in some of the world's top companies across various sectors -- over 45 in total -- including Apple, Bank of America, Coca-Cola, and Chevron.
This not only allows Berkshire Hathaway to benefit from their growth but also allows the company to receive billions in passive dividend income. It expects to bring in over $6 billion in dividend income alone in the next year. That's more than Starbucks' trailing-12-month profits.
Although it's mostly known for its investments, insurance is a large part of Berkshire Hathaway's business. It owns GEICO, Alleghany, National Indemnity, Berkshire Hathaway Reinsurance Group, and a handful of others, making it the second-largest insurer in the U.S. behind State Farm.
Insurance will continue to be Berkshire Hathaway's bread and butter for the foreseeable future. It's an industry with predictable cash flow and lots of profit potential. Through the first three quarters of 2023, Berkshire Hathaway earned $61.7 billion in insurance premiums. That's more than the $57.4 billion it earned in all of 2018 and over $25 billion more than it earned in all of 2013.
From 1965 through 2022, Berkshire Hathaway's stock enjoyed a compound annual growth rate of 19.8% compared to the S&P 500's 9.9%. In the past decade, it has outperformed the S&P 500 by 220% to 150%, and in six of the 10 years. With over $157 billion of cash on hand, Berkshire Hathaway should be able to continue making strategic investments that return market-beating shareholder value.
2. Vanguard Growth ETF
The Vanguard Growth ETF (VUG 1.82%) contains over 220 of the largest growth stocks on the market. Although growth stocks are often associated with younger companies, many top companies fit into the growth category as well. For perspective, the median market cap of companies in the Vanguard Growth ETF is over $760 billion.
The Vanguard Growth ETF can provide investors with the best of both worlds. On one end, its top holdings are market leaders that can provide more stability and predictability than is typically experienced with growth stocks. On the other end, the focus on growth has propelled the ETF to market-beating returns since its January 2004 inception.
In the past five years, the Vanguard Growth ETF has averaged around 17.5% annual returns compared to the S&P 500's 13%. There's no way to predict market movements, but the Vanguard Growth ETF should be positioned to continue this trend.
To begin, roughly 75% of the Vanguard Growth ETF's top holdings are in the S&P 500, providing some alignment between the ETF and the market. However, since the ETF focuses on growth, you get to avoid some of the income-focused companies that aren't necessarily out to beat the market's stock price returns year in and year out.
With top tech companies leading the way and emerging technologies like AI and cloud computing that have sparked a new wave of growth, the Vanguard Growth ETF can be a great addition to help your portfolio beat the average.
