Stock prices have soared over the past two years since the start of the last bull market, and this could be a fantastic opportunity to purchase new investments.
One of the simplest and easiest ways to generate wealth is by investing in exchange-traded funds (ETFs), which are bundles of securities grouped into a single investment. ETFs make it much easier to build a well-diversified portfolio, and require a fraction of the research associated with buying individual stocks.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
However, not all ETFs are created equal, and where you choose to buy depends on your priorities. But if you’re looking for a powerful fund that can help you earn above-average returns with less risk than many other types of investments, there’s one ETF I’m loading up on in 2025 and beyond: the Vanguard Growth ETF (NYSEMKT: VUG).
Growth ETFs differ from broad-market funds, such as the S&P 500 ETFs, in that they are designed to beat the market over time. All stocks in a growth fund have the potential to deliver above-average returns, and investing in hundreds of these stocks at once can boost your profits with little effort.
The Vanguard Growth ETF contains 182 stocks from different corners of the market. While 58% of the fund is allocated to stocks in the technology sector, it also includes stocks from sectors ranging from consumer discretionary to healthcare to industrials and more.
An advantage of this ETF over many other growth funds is its enormous size. The average market capitalization of the stocks in this fund is a whopping $1.4 trillion, with some of the largest holdings including industry giants like Apple, Nvidia, MicrosoftAnd Amazon. In fact, these four stocks alone make up almost 40% of the entire fund.
Because this ETF is so heavily weighted towards large and mega-cap stocks, it can help you reduce your risk. Giant companies like Apple and Microsoft may not experience the explosive profits of rising superstars, but they are much more likely to survive periods of market volatility.
That said, this fund still contains dozens of smaller stocks that do have the potential for serious growth. For example, if even one of these stocks becomes the next Amazon or Nvidia, it could take your portfolio to new heights. And because you don’t have to worry about manually selecting these stocks when you invest in an ETF, you can take advantage of those potential gains easily and with virtually no effort.
Growth ETFs can be more unpredictable than broad market funds, especially in the short term. It is therefore unclear exactly how this fund will perform in the coming months or years.
However, at the time of writing, the Vanguard Growth ETF has returned an average of 15.60% per year over the past ten years. That’s significantly higher than the stock market’s historical average of about 10% per year.
Again, these types of investments can be more unpredictable than some other ETFs, so the question is whether this ETF will be able to keep up with these types of returns. But even slightly higher-than-average returns can boost your earnings by hundreds of thousands of dollars over time.
For example, suppose you invest €200 per month in this ETF. Here’s roughly what you can accumulate over time, depending on whether you earn an average annual return of 11%, 13%, or 15%:
|
Number of years |
Total Portfolio Value: 11% Avg. Annual return |
Total portfolio value: 13% Avg. Annual return |
Total portfolio value: 15% Avg. Annual return |
|---|---|---|---|
|
20 |
$154,000 |
$194,000 |
$246,000 |
|
25 |
$275,000 |
$373,000 |
$511,000 |
|
30 |
$478,000 |
$704,000 |
$1,043,000 |
Data source: Author’s calculations via investor.gov.
Time is incredibly valuable when building wealth in the stock market, so the sooner you start investing, the easier it will be to amass hundreds of thousands of dollars or more. Even if this ETF can’t keep up with its 15% average annual return into the future, you can still make a lot of money with enough time and consistency.
The Vanguard Growth ETF could be a smart option for those looking for a growth fund with a history of delivering above-average returns with less risk than some other ETFs. By starting early and taking a long-term view, you can boost your savings with little to no effort.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $369,349!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $45,990!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $504,097!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman holds positions in Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool holds positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
1 Magnificent Vanguard ETF I’m Buying Hand Over Fist in 2025 was originally published by The Motley Fool
