Investing in the stock market can help you build long-term wealth, but the investments you choose can make or break your earning potential.
If you're looking for a straightforward and low-maintenance way to jump into the market, you may opt for exchange-traded funds (ETFs). ETFs can be an effortless way to invest in dozens or hundreds of stocks at once, and there are three funds, in particular, that could supercharge your savings in 2025 and beyond.
1. Schwab U.S. Large-Cap Growth ETF
The Schwab U.S. Large-Cap Growth ETF (SCHG 1.42%) is a growth fund focused specifically on large stocks. It contains 229 stocks from a variety of industries, though around 49% of the fund is dedicated to stocks in the tech sector.
This ETF can be a smart option for those looking for a growth fund that's on the safer side. No investment is ever risk-free, but large-cap stocks tend to be more stable than their smaller counterparts.
Apple, Microsoft, and Nvidia are the top three holdings in this fund, and together these stocks make up close to 30% of the entire fund. Although even industry-leading juggernauts can still experience volatility, they're far more likely to survive market slumps and earn positive long-term returns.
Growth ETFs are designed to earn above-average returns, and so far, this fund has delivered. Over the past 10 years, it's earned an average rate of return of 16.55% per year -- far surpassing the S&P 500 (^GSPC 1.33%).
If this ETF manages to keep up its 16% average annual returns, at that rate, investing just $200 per month could help you accumulate close to $600,000 after 25 years.
2. Vanguard S&P 500 Growth ETF
The Vanguard S&P 500 Growth ETF (VOOG 1.58%) is similar to the Schwab growth fund in many ways. It contains 234 stocks in total, with around 49% of the fund dedicated to stocks in the tech sector. Also like the Schwab fund, the three largest holdings are Apple, Nvidia, and Microsoft, with those stocks making up around 35% of the ETF.
The biggest difference between the two funds is that the Vanguard ETF only contains stocks from the S&P 500. The are strict requirements companies need to meet to be included in the S&P 500, and the index is considered to be one of the strongest barometers of the stock market's overall performance.
In other words, all companies within the S&P 500 are absolute powerhouses, which can limit your risk. However, because this ETF only includes stocks within the index that are poised for significant growth, that could also create more potential for above-average returns.
Over the past 10 years, the Vanguard S&P 500 Growth ETF has earned an average rate of return of 14.95% per year. While that's slightly lower than the Schwab fund, it's still significantly higher than the S&P 500 itself over the past decade.
If you were to invest $200 per month while earning a 15% average annual return, that could add up to approximately $511,000 after 25 years.
3. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT 1.94%) is a bit different from the other two funds on the list, as it's focused solely on the tech sector.
Industry-specific ETFs can be riskier than funds that include stocks from a variety of sectors, as you're getting less diversification. However, you could also earn higher-than-average returns, especially considering the tech sector tends to include faster-growing companies compared to other industries.
Whether that's a worthwhile trade-off will depend on your risk tolerance. Some people prefer a more balanced approach, in which case this ETF may be too risky. But if the rest of your portfolio is well-diversified and you're looking to maximize your earnings, the higher risk might be worth the potential rewards.
The Vanguard Information Technology ETF has significantly outperformed the S&P 500 over the past 10 years, earning an average rate of return of 20.59% per year.
To be clear, nobody knows whether this fund will continue earning at that rate going forward. Tech ETFs can be incredibly volatile in the short term, and that's part of the risk. That said, if you were to continue earning 20% average annual returns, investing $200 per month could potentially add up to more than $1.1 million after 25 years.
Investing in ETFs can supercharge your savings with little effort on your part, and growth ETFs can be a smart way to maximize your earnings. By considering your risk tolerance and personal preferences before you buy, you could be on your way to generating life-changing wealth.
