A good way to build up and create a portfolio worth at least $1 million is by investing a regular amount each month. Rather than needing to save up a big lump sum and then investing, you can steadily add to your position over time. This also avoids the temptation of trying to time the market and worrying about whether it's a good time to invest. By investing in exchange-traded funds (ETFs), you can also minimize your risk over the long term, since you can have a position in not only multiple stocks but dozens and even hundreds of them, all through just a single investment.
Vanguard has many solid ETFs that can be suitable for growth investors, as they charge low fees and offer some great diversification. One particularly attractive Vanguard fund that I'm going to focus on is the Vanguard Growth Index Fund ETF (VUG 0.75%). As its name suggests, it focuses on growth. And below, I'll show you how investing $270 each month into this ETF can potentially put you on track to creating a million-dollar portfolio.
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Why the Vanguard Growth Index Fund is an ideal option for growth investors
There are a lot of ETFs to choose from in the markets, which can make it overwhelming and challenging to try to find the right one for you. But two things you'll want to consider are costs and quality.
Identifying low-cost funds is easy, as that can be measured through the ETF's expense ratio; anything less than 0.1% is pretty low. The Vanguard Growth Index Fund has an expense ratio of 0.04%, making it an incredibly cheap option. By keeping your fees minimal, you can ensure unnecessary costs aren't chipping away at your gains over the years.
The more challenging criterion is the quality of the ETF. After all, what good is a low-cost fund if it invests in stocks that you don't want? This is where targeting Vanguard ETFs is important. Those ETFs are among the best and most well-diversified investments to choose from. The Vanguard Growth Index ETF tracks the best growth stocks in the country. There are 165 stocks in the fund (as of June 30), and its top holdings are highly recognizable names that you'll likely be very familiar with -- Microsoft, Meta Platforms, Tesla, and many other top stocks. These companies are all focused on growing their businesses. With well over 100 holdings, the Vanguard fund does a great job of diversifying, but not so much that your exposure to individual stocks is minimal.
Over the past five years, the Vanguard fund has outperformed the S&P 500, with its total returns (which include dividends) coming in at 112%, versus 106% for the broad index.
How the Vanguard Growth Fund can grow a $270-per-month investment into $1 million
The Vanguard Growth ETF can be an ideal investment to put money into on a regular basis because of its potential to outperform the market. And that can be key in generating strong returns. With the S&P 500 at record levels, it may be due to underperforming its long-run average of 10% in the future. But by focusing on growth stocks, you might still be able to generate those kinds of gains.
And if your investment increases by an average of 10% per year, here's how large a $270-per-month investment in the VUG ETF might grow to be in the long run.
| Year | Investment Value |
|---|---|
| 5 | $21,082 |
| 10 | $55,769 |
| 15 | $112,840 |
| 20 | $206,738 |
| 25 | $361,230 |
| 30 | $615,418 |
| 35 | $1,033,635 |
| 40 | $1,721,731 |
Calculations and table by author.
It can take approximately 35 years before monthly investments into the fund are able to build up a balance worth over $1 million. It's a long time frame, but it's also without making any large lump sum investments along the way. If you can do that, then you can potentially get to the $1 million mark a lot earlier, depending on the size of any additional investments.
Your actual annual return may vary, but the key thing to remember is that by investing in quality growth stocks, you can put yourself in a position to achieve market-beating returns. And while there may be bad years along the way, if you're willing to stay invested over the long haul, the payoff can be well worth it.
