Generating a 10x return in the stock market doesn't have to be difficult -- if you're willing to be patient. By investing your money into a solid exchange-traded fund (ETF) and letting it grow, you can position yourself for some excellent gains, thanks to the effects of compounding.
One of the better ETFs to hold for the long haul is the Vanguard Growth Index Fund ETF (VUG -1.46%). As its name suggests, it holds growth stocks, and that has yielded some impressive returns for investors in recent years. Here's why this can be a great investment to hang on to, and why over a period of 25 years it could turn a $50,000 investment into $542,000.
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A top growth ETF to buy and forget about
The Vanguard Growth ETF can be an ideal fund to pile money into, simply because it'll give you exposure to many of the best growth stocks in the world. It specifically focuses on top U.S. stocks, which can be important if you want to limit international exposure.
As of April 30, there were 166 stocks in the ETF, which gives you some excellent diversification. And at the same time, it's not overly diverse where top holdings account for just tiny pieces of its overall net assets. With an expense ratio of only 0.04%, you'll also barely get hit with any fees from this fund. Fees can add up significantly with an ETF, especially as your investment rises in value, which is why this Vanguard fund can be an excellent option to hang on to for years as it'll allow you to keep the vast majority of your gains.
VUG vs S&P 500 data by YCharts
Why the fund can continue to outperform the market
In recent years, the Vanguard Growth ETF has been a market-beating investment to hold on to. And when you consider that the majority (57%) of its holdings are in tech stocks, which have been red hot of late due to the boom in artificial intelligence (AI), that should come as little surprise. Tech giants Nvidia, Apple, and Microsoft are its three largest holdings. Together, they make up more than 31% of the ETF's overall net assets.
As these companies invest in AI and continue to grow their operations, there can be more gains ahead for them. While their valuations are undoubtedly high and there may be a period of slowdown in the future, especially amid worries of a recession and trade war on the horizon, the ETF still has the potential to outperform the broader market in the long run.
Even if you assume that the ETF slows down and merely does as well as the S&P 500 -- its historical average is an annual return of 10% -- that can still be sufficient to turn your investment into more than 10x its original value. If you invest $50,000 into the ETF today and it grows by an average of 10% for 25 years, it'll grow to be worth approximately $542,000.
A buy-and-forget ETF to hold on to for years
Future returns are never a guarantee, but historically, growth stocks have generated fantastic gains for investors, and with this ETF, you can gain exposure to the best of the best. Regardless of where you think the market may be headed in the short term, as long as you're willing to hang on for the long haul, it's not likely you'll go wrong by investing in the Vanguard Growth Index Fund ETF. This can be a solid investment to build your portfolio around for decades.
