Investing in growth ETFs is one of the simplest ways to generate life-changing wealth with minimal effort on your part.
Growth stocks have the potential to earn higher-than-average returns, and by investing in just one growth ETF, you can gain exposure to hundreds of these stocks at once. Over time, you could earn hundreds of thousands of dollars more than you might with a broad-market fund like an S&P 500 ETF. Here are two fantastic growth ETFs to buy now and hold for the long haul.
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1. Vanguard S&P 500 Growth ETF
An S&P 500 ETF tracks the S&P 500 index (^GSPC 0.49%) and includes all of the stocks within that index. The Vanguard Growth ETF (VOOG 0.74%) also tracks this index, but instead of including stocks from all 500 companies within the S&P 500, it only includes those with the most growth potential.
This ETF contains 213 stocks, and while around 42% of those stocks are from the tech industry, it offers plenty of diversification with companies from all 11 sectors of the market.
The Vanguard S&P 500 Growth ETF offers a strong mix of both stability and growth. The companies within the S&P 500 are among the largest and strongest in the world, making them far more likely to recover from periods of volatility. At the same time, though, because this ETF only contains stocks with more potential for growth, you're also more likely to earn above-average returns.
Over the last 10 years, this ETF has earned an average rate of return of 16.61% per year. For comparison, the market's historic average is around 10% per year. If you were to invest, say, $200 per month, here's approximately what you could accumulate over time depending on how long you let your money grow:
| Number of Years | Total Portfolio Value: 16% Avg. Annual Return | Total Portfolio Value: 10% Avg. Annual Return |
|---|---|---|
| 20 | $138,000 | $69,000 |
| 25 | $299,000 | $118,000 |
| 30 | $636,000 | $197,000 |
Data source: Author's calculations via investor.gov.
Past performance doesn't guarantee future earnings, and there's always a chance that this ETF may not continue to earn similar returns going forward. But even if it only earns slightly higher-than-average returns, you can accumulate hundreds of thousands of dollars or more over time.
2. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT 0.99%) is a fantastic option for gaining exposure to the tech industry without having to buy individual stocks.
This fund contains 317 stocks, all of which are from various corners of the technology sector. Its largest holdings include Nvidia, Microsoft, and Apple, and together these three stocks make up close to 44% of the entire fund.
Investing in this ETF can help supercharge your earnings, as the tech industry is a powerhouse sector known for explosive growth. In the last decade, this ETF has earned an average rate of return of 22.42% per year. At that rate, here's approximately how $100 per month would add up over time:
| Number of Years | Total Portfolio Value: 22% Avg. Annual Return | Total Portfolio Value: 10% Avg. Annual Return |
|---|---|---|
| 20 | $286,000 | $69,000 |
| 25 | $781,000 | $118,000 |
| 30 | $2,120,000 | $197,000 |
Data source: Author's calculations via investor.gov.
Again, there are no guarantees going forward that this ETF will be able to keep up the returns it's earned over the last 10 years. But the Vanguard Information Technology ETF has a long history of beating the market over time.
The biggest risk to consider with this fund is increased short-term turbulence. Tech stocks can be highly volatile in the short term, and during market downturns, this ETF may even underperform the S&P 500. If you choose to invest, be sure you're willing to ride out any waves of volatility and hold your investment for at least five to 10 years.
Also, because this fund only contains tech stocks, that limits your diversification and increases risk. It's wise, then, to ensure that you're investing in additional stocks or funds outside of the tech sector, as well.
Growth ETFs require next to no effort on your part, but they can help you generate life-changing wealth. By investing consistently and holding your fund for the long term, you could earn more than you might think with these two ETFs.
