Investing in the stock market is one of the most surefire ways to build life-changing wealth, and the right investment can transform your savings.
Owning an exchange-traded fund (ETF) is a fantastic way to gain exposure to high-growth stocks with minimal effort on your part. A single ETF can contain dozens or hundreds of stocks, and you'll own a stake in all of them by owning just one share of that fund.
If you're looking for a high-powered ETF with a history of earning significantly above-average returns, the Vanguard Information Technology ETF (VGT +1.72%) could potentially turn just $100 per month into $2 million or more over time. Here's how.
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A simple way to invest in tech stocks
The technology sector has a long track record of outperforming the market, and investing in a tech-focused ETF -- like the Vanguard Information Technology ETF -- can make it easier to invest in these stocks without having to research dozens of individual companies.
One of this ETF's major strengths is its balance between industry-leading giants and smaller corporations. Around 44% of this fund is allocated to Nvidia, Microsoft, and Apple -- the three largest holdings by a substantial margin. But it also contains an additional 313 stocks from all corners of the technology sector.
NYSEMKT: VGT
Key Data Points
Major companies like Nvidia, Microsoft, and Apple are often more stable than their smaller counterparts. While they can still face significant volatility during economic rough patches, they're very likely to recover and go on to see positive total returns over the long term.
Up-and-coming companies can be shakier than the industry titans, but these stocks also have more potential for explosive growth. If even one of them becomes the next tech powerhouse, investing now could set you up for substantial gains.
Building a $2 million portfolio
There are never any guarantees in the stock market, and past performance doesn't predict future returns. That said, it can sometimes be helpful to look at historical returns to get an idea of roughly how much you might earn with a particular investment.
Over the last 10 years, the Vanguard Information Technology ETF has earned an average rate of return of more than 22% per year. For context, the market itself has earned an average return of around 10% per year over the last 50 years.
Again, this ETF may or may not continue earning 22% average annual returns. So to play it safe, let's assume that going forward, you could earn either a 22%, 16%, or 11% average annual return. If you were to invest $100 per month, here's approximately what you could accumulate over time.
| Number of Years | Total Portfolio Value: 22% Avg. Annual Return | Total Portfolio Value: 16% Avg. Annual Return | Total Portfolio Value: 11% Avg. Annual Return |
|---|---|---|---|
| 15 | $102,000 | $62,000 | $41,000 |
| 20 | $286,000 | $138,000 | $77,000 |
| 25 | $781,000 | $299,000 | $137,000 |
| 30 | $2,120,000 | $636,000 | $239,000 |
Data source: Author's calculations via investor.gov.
To build a portfolio worth $2 million or more, you'd need to invest consistently for around 30 years while earning returns in line with this ETF's 10-year average. But even if you can't invest that long or this fund underperforms in the future, you could still rack up hundreds of thousands of dollars over time.
Keep in mind, too, that if you decide to invest in this ETF, double-check that the rest of your portfolio is well-diversified. While this fund has a diverse assortment of tech stocks, investing in just one sector of the market -- especially an industry as volatile as tech -- increases risk.
Technology ETFs can supercharge your net worth with next to no effort on your part. By starting early and investing consistently, the Vanguard Information Technology ETF could turn small monthly contributions into millions.
