Investing in exchange traded funds (ETFs) can be a great way to generate wealth with less effort. An ETF is a basket of securities that track a particular index, and by investing in one share of an ETF, you immediately own a share of all the shares within that index.
Because each ETF can hold tens or hundreds of stocks, they can make it easier to build a diversified portfolio. Instead of buying 20 to 30 individual stocks, you can achieve instant variety with a single ETF.
In fact, with the right fund, it’s possible to beat the market over time with virtually no effort. While there’s never any guarantee when it comes to the stock market, investing in this Vanguard ETF 10 years ago would have quadrupled your money today — and it’s not slowing down yet.
The right ETF to boost your savings
The Vanguard Growth ETF (NYSEMKT: VUG) follows the CRSP US growth index for large companies, and it contains 200 stocks with the potential for above-average growth. The average market cap of stocks within the fund is a whopping $1.1 trillion, meaning most of the companies in this ETF are giant corporations.
The top five investments within the fund represent over 43% of the ETF’s total composition, and these stocks include leading companies such as Microsoft, Apple, Nvidia, AmazonAnd Alphabet. This can help reduce your risk, as larger companies are more likely to recover from periods of market volatility.
That said, the Vanguard Growth ETF is still a hit, and has a history of market success. Over the past ten years, it has delivered an average return of 14.89% per year. For context: the Vanguard S&P 500 ETF (that the S&P500 index) has achieved an average annual return of 12.66% over the past decade, and the market itself has historically averaged returns of around 10% per year.
If you had invested $5,000 in the Vanguard Growth ETF ten years ago while earning an average annual return of 14.89%, you would have about $20,035 today – and that’s assuming you just leave your money with no additional contributions to deliver.
How much could you earn in the future?
It is impossible to say how a stock or fund will perform in the future, and past performance is not always indicative of future returns.
In other words, there are no guarantees that the Vanguard Growth ETF will achieve similar returns in the future. There’s a chance it might not even beat the market, and that’s a risk you have to take with any growth ETF. Although they are designed to deliver above-average returns, they can be more volatile and carry more risk than broad-market funds such as S&P 500 ETFs.
But even if this fund only earns a slightly higher than average return, you can still make a lot of money. If you were to invest $200 per month, here’s how that could roughly add up, depending on whether you get an average annual return of 11%, 13%, or 15%.
|
Couple of years |
Total Portfolio Value: 10% Avg. Annual return (historical average of the market) |
Total Portfolio Value: 11% Avg. Annual return |
Total Portfolio Value: 13% Avg. Annual return |
Total Portfolio Value: 15% Avg. Annual return |
|---|---|---|---|---|
|
20 |
$137,000 |
$154,000 |
$194,000 |
$246,000 |
|
25 |
$236,000 |
$275,000 |
$373,000 |
$511,000 |
|
30 |
$395,000 |
$478,000 |
$704,000 |
$1,043,000 |
Data source: Author’s calculations via investor.gov.
Again, while this ETF has delivered an average annual return of almost 15% over the past decade, there are no guarantees that this ETF will be able to keep up with this performance. Before you buy, make sure you’re willing to take on the extra risk that comes with growth ETFs, and do your best to keep your expectations in check.
Is now a smart time to buy?
The Vanguard Growth ETF has hit new all-time highs in 2024, the most recent in early June. Growth ETFs generally tend to thrive when the market is rising, often significantly outperforming major market indexes like the S&P 500.
No one knows for sure how long this bull market will last, but there is a chance that stock prices will continue to rise. We are currently just over 600 days into a bull market, and the average bull market since 1929 has lasted over 1,000 days, according to investment firm Bespoke.
All bull markets are different, so this doesn’t necessarily mean we won’t see a downturn soon. But if this bull market follows a similar path to those throughout history, we could still have several months – or even years – of sustained growth ahead. If so, investing now can help maximize your long-term income.
ETFs can boost your portfolio with less effort, and the right fund can even help you beat the market. The Vanguard Growth ETF has a history of outperforming the market, and with enough time and consistency you could potentially make hundreds of thousands of dollars or more.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. 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 and Vanguard S&P 500 ETF. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard S&P 500 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.
This Vanguard ETF Would Have Quadrupled Your Money Over the Last Decade — and It’s at an All-Time High Originally published by The Motley Fool
