Recent stock market volatility and worries about an artificial intelligence (AI) bubble are driving many investors to diversify. If you want an easy, low-cost way to own a broadly diversified portfolio of stocks, the Schwab U.S. Broad Market ETF (SCHB +1.38%) could be a solid choice.
This low-cost index fund charges a rock-bottom expense ratio of only 0.03%, and it gives you exposure to the biggest U.S. stocks. But can it make you a millionaire? SCHB has a long track record of strong growth that could get you there -- if you're patient.
Let's see why SCHB could be a good choice for future millionaires.
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SCHB has more than 16 years of annual returns averaging 14.09%
The Schwab U.S. Broad Market ETF owns 2,398 stocks and intends to track the performance of the Dow Jones U.S. Broad Stock Market Index. If you want to buy a total stock market ETF that lets you own a diversified range of U.S. stocks, SCHB fits that purpose.
The fund's top 10 holdings are mostly major tech stocks like Nvidia (6.8% of the fund), Apple (5.9%), and Microsoft (4.4%). Almost 33% of the fund's holdings are in the Information Technology sector. The only non-tech stock in the top 10 holdings is Berkshire Hathaway Class B.
SCHB was launched in November 2009, and the past 16 years since then have mostly been a good time to own U.S. stocks and especially major tech names. The ETF has delivered average annual returns (by net asset value) of 13.66% in the past 16 years since inception. That's significantly better than the stock market's usual long-term average return of 10% per year.
NYSEMKT: SCHB
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SCHB: How fast can your money grow to $1 million?
There's no guarantee that any stock ETF can deliver returns high enough, consistently enough, for long enough to make you a millionaire. But let's assume that the SCHB track record of 13.66% average annual returns can keep going for a while longer.
If you invested $10,000 into SCHB and left your money alone to compound, your money would grow to $129,465 after 20 years. After 30 years, you'd have $465,832. And after 36 years, you'd reach $1 million.
This is a powerful example of how just by investing in U.S. stocks through a broadly diversified index fund like SCHB, patient long-term investors can build substantial wealth. SCHB could be a good choice if you want a low-cost total U.S. stock market index fund in your portfolio.
