We’re just over two years into the current bull market, and with prices continuing to rise, investing now can be a fantastic way to generate long-term wealth.
Exchange traded funds (ETFs) can be a way to get involved in the stock market with less effort. If you buy just one share of an ETF, you can acquire a stake in hundreds of stocks at once, without having to research dozens of different companies as you would by investing in individual stocks.
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However, it does matter where you decide to buy, as not all ETFs are strong investments. If you’re looking for a higher-yielding fund that can make you a lot of money over time, there’s one Vanguard ETF you may want to consider.
The Vanguard Information Technology ETF (NYSEMKT: VGT) is a technology-focused ETF that includes 316 stocks from different corners of the technology industry – from semiconductors to systems software to hardware and storage and more.
The three largest holdings in this ETF include Apple, MicrosoftAnd Nvidiarespectively. Combined, these three stocks alone make up just over 44% of the entire fund.
Investing in an ETF can be a smart way to invest in high-performing stocks while gaining exposure to hundreds of potential stars in the making. Not only do you get a stake in big stocks like Nvidia, but if any of the smaller stocks within the fund become superstars, you also reap the rewards.
However, an important factor to consider is that sector-specific ETFs (particularly technology ETFs) can carry more risk than many other types of funds. Although this ETF contains more than 300 stocks, because they are all from the same sector, it will not provide as much diversification as a broad-market fund that contains stocks from all sectors of the stock market.
This isn’t necessarily a bad thing, but if you choose to invest in this ETF, double-check that the rest of your portfolio is well diversified with stocks or funds from other sectors. In general, the more variety you can add to your portfolio, the lower your risk.
Tech ETFs can be much more volatile than broad market funds, especially in the short term. This sector tends to have more severe ups and downs, so it’s anyone’s guess how this fund will perform over the next few months or even the next two years.
That said, this ETF has delivered an astonishing average annual return of 20.37% over the past decade. Its performance since inception in 2004 is a slightly less impressive 13.45% per year, although that is still higher than the stock market’s historical average of 10% per year.
Again, it’s unclear whether the return on this investment will be closer to the average of 20% per year or 13% per year in the future, and there’s even a chance that the investment will underperform altogether and deliver below-average returns. But that’s a risk you should be willing to take when investing in a potentially high-earning ETF.
Let’s say you earn an average annual return of 18% in the future. If you were to invest $1,000 now and make no additional contributions, that initial investment could easily grow to about $143,000 in 30 years.
However, to potentially earn exponentially more, you can continue to invest a small amount each month. If you invest €1,000 now and continue to invest only €50 per month in the future, this is approximately the amount you can accumulate in total, depending on the returns you achieve:
|
Number of years |
Total Portfolio Value: 10% Avg. Annual return (in line with the long-term average of the market) |
Total portfolio value: 13% Avg. Annual return |
Total portfolio value: 18% Avg. Annual return |
Total Portfolio Value: 20% Avg. Annual return |
|---|---|---|---|---|
|
20 |
$41,000 |
$60,000 |
$115,000 |
$150,000 |
|
25 |
$70,000 |
$115,000 |
$268,000 |
$379,000 |
|
30 |
$116,000 |
$215,000 |
$618,000 |
$947,000 |
Data source: Author’s calculations via investor.gov.
If this ETF continues to deliver returns in line with its 10-year average, you could potentially earn almost $1 million by investing just $50 per month. But even if future returns fall short, it is still possible to make a lot of money even with small monthly contributions.
Investing in ETFs can be a smart way to build wealth with less effort than buying individual stocks, but choosing the right investment is critical. If you’re willing to take on a little more risk for the chance of potentially life-changing income over time, the Vanguard Information Technology ETF could be a smart addition to your portfolio.
Consider the following before buying shares in Vanguard World Fund – Vanguard Information Technology ETF:
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Katie Brockman holds positions in Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool holds positions in and recommends Apple, Microsoft and Nvidia. 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 Unstoppable Vanguard ETF That Could Turn $1,000 Into $143,000 or More with Almost No Effort was originally published by The Motley Fool
