A good way to invest in the best growth stocks in the world is to focus on the Nasdaq exchange. Specifically, the Nasdaq-100 index tracks the most valuable, nonfinancial stocks on the exchange, and it's a simple yet effective way to have exposure to many of the biggest names in tech.
An exchange-traded fund (ETF) that tracks the index is the Invesco Nasdaq 100 ETF (QQQM 0.27%). In the past five years, the fund has generated returns of around 120%, versus just 93% if you went with the S&P 500 (^GSPC +0.21%), which tracks the 500 leading companies on U.S. exchanges. It charges a relatively light expense ratio of 0.15%.
The Nasdaq 100 ETF can make for a good long-term option for you to consider. Even if you can't afford to make a large investment in the ETF today, making regularly monthly investments can also lead to significant long-term gains. Here's a look at how much your portfolio might be worth if you were to invest $300 per month in the fund, for 30 years.
Image source: Getty Images.
One important caveat about tracking the Nasdaq-100
Investing in the top stocks on the Nasdaq is generally a good move, but that doesn't mean the Nasdaq-100 is immune from downturns. In fact, with many top growth stocks trading at high valuations, there is a possibility that returns from tracking the index in the short term may not be a strong as they have been in recent years. In 2022, for example, when the stock market crashed and the S&P 500 fell by 19%, the Invesco Nasdaq ETF plunged by 33%.
The good news is that it has bounced back, and its five-year gains are still impressive. However, before getting involved heavily with tech stocks, it's important to understand the risk in the short run. There can be a bad year that may have you doubting your investment and whether you made the right move.
Having the right temperament, however, and knowing that a significant decline can happen is important to ensure you aren't expecting great returns every single year, and that can potentially help you resist the temptation to panic in a bear market. There is, after all, a fantastic incentive to remain invested: You could generate life-changing returns in the long run.
NASDAQ: QQQM
Key Data Points
What could a $300-per-month investment in the Nasdaq 100 be worth in 30 years?
The Invesco Nasdaq 100 ETF has more than doubled in the past five years, averaging an annual return of 15.8% during that time frame. But if there is a slowdown coming, which may happen with many growth stocks performing exceptionally well and trading near or at their highs, it's important to also factor in some conservatism and consider the possibility of lower average returns in the future.
Since it's impossible to project what the future returns from the ETF might be over a long time frame, I've created this table, which shows you how much a $300-per-month investment in the ETF could be worth over the years, based on varying average returns between 10% (the long-run average of the S&P 500) and 13%.
| Year | 10% Growth | 11% Growth | 12% Growth | 13% Growth |
|---|---|---|---|---|
| Five | $23,425 | $24,074 | $24,746 | $25,441 |
| 10 | $61,966 | $65,696 | $69,702 | $74,004 |
| 15 | $125,377 | $137,657 | $151,373 | $166,704 |
| 20 | $229,709 | $262,072 | $299,744 | $343,656 |
| 25 | $401,367 | $477,174 | $569,291 | $681,431 |
| 30 | $683,798 | $849,068 | $1,058,974 | $1,326,194 |
After a period of 30 years, there's a chance you could end up with a portfolio worth more than $1 million, but it'll depend on the overall growth rate. But even if it were to perform in line with how the S&P 500 has historically performed and generated returns of about 10% per year, you could still be up close to $700,000 -- far more than the sum of those $300-per-month investments, which would total $108,000 after 30 years.
By continually investing in this ETF and benefiting from the compounded gains over the years, you could put yourself in an excellent financial position by the time you retire.
