Growth stocks can generate returns far superior to those of value stocks or dividend stocks in the long run. These are the types of companies that investors are drawn to because if they're growing, they are expanding their operations and likely innovating and potentially diversifying along the way.
Names like Amazon and Nvidia are two exceptional examples. Over the past 20 years, the former has produced returns of 12,000% while the latter is up more than 60,000%. Investing $30,000 into either one of the stocks back then would have made you millions of dollars.
Picking the next big growth stock is easier said than done. But the good news is that you don't have to pick the next Amazon or Nvidia to achieve great results. The Invesco QQQ Trust (QQQ -0.40%) is an exchange-traded fund (ETF) that will give you exposure to the top 100 nonfinancial stocks in the Nasdaq exchange, also known as the Nasdaq 100. Amazon, Nvidia, and many other top tech names are included in that list.
Here's how a $30,000 investment in the fund might grow over the long haul.
Image source: Getty Images.
The Invesco ETF is a no-brainer option for growth investors
The best growth stocks in the world are often found on the Nasdaq. And by targeting the top 100 nonfinancial companies, you won't have to worry about keeping an eye on which growth stocks to buy. The Invesco fund will adjust its holdings over time, removing poor-performing stocks and replacing them with rising stars.
Some of the top holdings in the ETF today include Costco Wholesale, Netflix, and Broadcom. While it is a tech-heavy fund (tech stocks account for 57% of its holdings), about 20% of the portfolio is also in consumer discretionary stocks, followed by smaller positions in other sectors. And more than 97% of the holdings are U.S. stocks, which can minimize your exposure to international markets.
It's little surprise, with so much focus on growth, that the Invesco QQQ Trust widely outperformed the S&P 500 over the past decade. At 430%, it has averaged a compound annual growth rate of more than 18%.
QQQ Total Return Level data by YCharts.
How much can the ETF grow a $30,000 investment in the long run?
As impressive as the Invesco ETF's returns have been over the past decade, they've also been skewed in recent years by a flurry of tech spending, which may not persist in the very long term.
That's why it may be a good idea to scale back expectations of what its future returns may look like. Rather than 18%, perhaps closer to the long-run average of 10% for the S&P 500 might be appropriate. The table below shows what a $30,000 investment might grow to at varying rates after 30-plus years.
| Years | 9% Growth | 10% Growth | 11% Growth | 12% Growth | 13% Growth |
|---|---|---|---|---|---|
| 30 | $398,030 | $523,482 | $686,769 | $898,798 | $1,173,477 |
| 31 | $433,853 | $575,830 | $762,313 | $1,006,653 | $1,326,029 |
| 32 | $472,900 | $633,413 | $846,168 | $1,127,452 | $1,498,413 |
| 33 | $515,461 | $696,755 | $939,246 | $1,262,746 | $1,693,206 |
| 34 | $561,852 | $766,430 | $1,042,564 | $1,414,276 | $1,913,323 |
| 35 | $612,419 | $843,073 | $1,157,246 | $1,583,989 | $2,162,055 |
Table and calculations by author.
There's no way to know what growth rate the Invesco ETF will end up averaging, especially when you're looking at such a long period of time.
But the big takeaway is that with the effects of compounding, you can potentially build up a significant portfolio simply by putting $30,000 into a top growth fund like the Invesco QQQ Trust and letting it sit. It's a perfect example of a buy-and-forget type of investment.
