ETFs are a great method to invest in the stock market and develop lifelong wealth with no effort. ETFs package dozens or hundreds of stocks into one investment. Some funds monitor the market, like S&P 500 ETFs, while others follow sectors or specialty stocks.
By investing in one ETF, you obtain exposure to several stocks. This decreases risk compared to buying one or two stocks and makes building a diverse portfolio easier and cheaper. There are many ETFs, but one Vanguard one might get you to $1 million without much effort.
Managing risk and reward Investors aiming to boost savings while minimizing risk could consider the Vanguard Growth ETF (NYSEMKT: VUG). In general, growth ETFs aim to outperform. The Vanguard Growth ETF holds 208 strong-growth equities from 12 industries, although 56% of the portfolio is in tech.
Growth ETFs are riskier than broad-market products like S&P 500 ETFs. Growth stocks are more volatile than established stocks, thus they may not beat the market. With its blend of blue chip and growth stocks, VUG hopes to reduce risk. Apple, Amazon, and Microsoft are among the fund's top 10 holdings, which make almost half of its total. These companies are more likely to grow long-term despite volatility.
About 200 smaller stocks with explosive growth potential make up the rest of the portfolio. Though riskier than the top 10 behemoths, these companies could deliver big gains if they become superstars.
At $1 million or more Growth ETFs have more volatile returns than broad-market funds. Growth companies are more volatile, so they may outperform the market during strong economic times but struggle during downturns. Over the past decade, the Vanguard Growth ETF has returned little over 15%, compared to the market's 10% average. To be safe, let's presume your investment may yield lesser returns in the future.
Say you put $200 each month in this ETF. This is how much you may make over time with a 10%, 12%, or 15% average yearly return. You need 35 years of regular investing and 12% annual returns to reach $1 million. You could get there in 30 years if this ETF earns 15% average annual returns.
Increasing your monthly contributions can help you earn more or give your money more time to develop. Starting investing early makes it easier to make a lot of money. Growth ETFs are riskier than broad-market funds, so not everyone should use them. If you're prepared to take on more risk for the possibility of larger earnings, the Vanguard Growth ETF may be a great addition to your portfolio.
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