The right investment can transform your finances, and exchange-traded funds (ETFs) are a low-effort way to build long-term wealth.
The Vanguard Information Technology ETF (VGT +1.32%) has been skyrocketing, earning total returns of more than 150% in the last five years alone. This means that if you'd invested $10,000 back then, you'd have over $25,000 by today.
Past performance doesn't predict future returns, but there's reason to believe this ETF could still have plenty of room for growth. Here's why.
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A powerhouse investment
The Vanguard Information Technology ETF holds 316 stocks from all areas of the technology industry, but its largest focus is semiconductor stocks -- with around 38% of the portfolio dedicated to this subsector.
Semiconductor companies have been lucrative lately. Perhaps most notable is Micron Technology, which has earned total returns of nearly 700% over the last 12 months. This ETF provides exposure to fast-growing companies like Micron, along with established giants like Nvidia, Apple, and Microsoft.
One advantage of the Vanguard Information Technology ETF, in particular, is its built-in risk protection. With over 300 stocks spanning the broader tech sector, that extra diversification can help cushion the blow if semiconductors falter in the future.
NYSEMKT: VGT
Key Data Points
This ETF has also become increasingly lucrative in more recent years. It's earned an average annual return of around 15% since its inception in 2004, around 25% over the last 10 years, and 33% over the last three years.
To play it safe, let's assume this ETF earns an average annual return of 15% going forward. At that rate, if you're investing $200 per month, here's approximately how your contributions could add up over time:
| Number of Years | Total Portfolio Value: 15% Avg. Annual Return |
|---|---|
| 10 | $49,000 |
| 15 | $114,000 |
| 20 | $246,000 |
| 25 | $511,000 |
| 30 | $1,043,000 |
Data source: Author's calculations via investor.gov.
If this ETF continues to outperform, as it has over the last couple of years, it could be a lucrative long-term investment. However, given the volatility of tech stocks, prepare for short-term turbulence if you choose to invest.
As part of a well-diversified portfolio, the Vanguard Information Technology ETF can help build life-changing wealth. While there are no guarantees in the stock market, this fund offers a solid track record for those seeking exposure to the fast-growing tech sector.
