Picking stocks and staying on top of them can turn into a time-consuming project. But if you don't want to do that, the good news is that a simple buy-and-hold investing strategy can yield great returns all on its own. As long as you diversify your position and focus on top growth stocks, it can be a way to drastically simplify your investing process while still potentially setting you up for some massive gains in the process.
What if you were to invest $50,000 into an exchange-traded fund (ETF) that holds growth stocks and just let it sit there for years? If you simply mirror the market's long-run average return of 10%, then you'll more than double your money after a little over seven years. And the longer you stay invested, the larger your gains may end up becoming.
One ETF that can give you exposure to some of the best growth stocks in the world and possibly enable you to turn a $50,000 investment into over $1 million is the Vanguard Growth Index Fund ETF (VUG 0.07%).
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Why the Vanguard Growth Index Fund ETF is an ideal option for the long run
Vanguard funds are generally terrific options for long-term investors because they charge minimal fees and usually have excellent diversification. The Vanguard Growth Index Fund is no exception. Its expense ratio is a minimal 0.04%, which is much lower than its yield of around 0.4% -- and the dividend is just a nice bonus.
The main reason for investing in the fund is for its growth potential. The ETF focuses on the largest growth stocks in the U.S., and it had 166 holdings as of the end of May. Since it prioritizes growth, it's inevitable that tech will have a big slice of the ETF's portfolio -- that sector accounts for close to 60% of its holdings.
That means that there will likely be some variability from one year to the next, but generally, having a significant exposure to tech should help the fund rise in value over the long haul. Big names such as Apple, Nvidia, and Microsoft are among its largest positions, since they are also among the most valuable companies in the world.
How the ETF can turn $50,000 into $1 million
Here's what the value of a $50,000 investment in the Vanguard fund could grow to over the long haul, if it ends up averaging the S&P 500's long-run average of 10%.
| Year | 10% Growth |
|---|---|
| 10 | $129,687 |
| 15 | $208,862 |
| 20 | $336,375 |
| 25 | $541,735 |
| 30 | $872,470 |
| 35 | $1,405,122 |
Data source: Calculations by author.
It would take a little less than 32 years for the fund to grow to a value of more than $1 million under these assumptions. If, however, the actual annual return turns out to be more than 10%, then it would get there faster. But if the market slows down and the Vanguard fund grows at a rate of less than 10%, it will end up taking more than 32 years to get to the $1 million mark.
Unfortunately, because it's impossible to be able to predict what kind of long-run growth rate the Vanguard fund will average, there's no way to definitely know whether a $50,000 investment in the ETF can ensure you end up with $1 million. But it certainly has the potential to do so. And with strong growth stocks in the fund and low fees, it can put you in a good position to outperform the market over the years.
While you may not necessarily want to invest as much as $50,000 into a single ETF, this is the type of fund where a large investment of this size can make sense, given how diverse it is and the quality of stocks it holds.
