Hitting the million-dollar mark may be far-fetched by strictly saving money, but it's doable when you invest and rely on compound earnings to make it happen. It's the gift that keeps giving in investing.
It doesn't take hitting big on the "next big thing," either. A simple exchange-traded fund (ETF) like the Vanguard Growth ETF (VUG 1.45%) has proven it can get the job done.
Since it began trading in January 2004 and over the past decade, VUG has averaged 11% and 17% annual returns, respectively. For the sake of illustration, let's meet in the middle and assume it averages 14% annual returns long-term. Investing $500 per month could get you over the million-dollar mark in close to 25 years.
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VUG focuses on large-cap growth stocks, so it's a two-in-one benefit. On one hand, the growth focus means your investment is going to companies growing revenue and profits faster than their industry average. On the other hand, large-cap companies tend to be more stable than smaller companies because they are solidified in their industries and have more resources.
NYSEMKT: VUG
Key Data Points
Averaging 14% annual returns over 25 years is far from guaranteed, but VUG's history of outperforming the market (15 out of 22 years) is an encouraging sign. Where it may come up short in time, you can make up for with more money. What you may lack in money, you can make up for with more time.
