Investing in index funds is an excellent way to benefit from long-term market gains. Tapping into the power of the broader market, which has gained 75% over the past three years and about 12% annualized over the past 20 years, helps you grow your money safely and protects your portfolio from short-term ups and downs.
But you can take that up a notch by investing in exchange-traded funds (ETFs) that track growth and tech stocks. These are often safer alternatives to risky tech stocks, and they can help you reach millionaire status. In fact, if you invest just $150 monthly in the Vanguard Information Technology ETF (VGT 0.05%), there's a significant chance you could have nearly $700,000 in 30 years.
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Leading the market forward
The information technology (IT) ETF has just over 300 components and invests across a wide range of technology. That's a large distribution that offers healthy diversification and protects your money. Because it's centered around large tech stocks, it's growing faster than a standard S&P 500 ETF. In fact, it has the highest 10-year returns of any Vanguard ETF, with an average annualized return of more than 22% over the past decade.
However, looking further back, over multiple market cycles, the ETF has an average annualized gain of just over 14% since its inception in 2004.
If you start with only $150 and invest the same amount monthly, and the IT ETF continues to generate this average gain -- a more realistic return rate over longer timeframes -- you would have nearly $700,000 after 30 years, before accounting for taxes. There's no guarantee the fund can keep this up, but it gives you a sense of the power of investing in this tech ETF.
