This Unstoppable Vanguard ETF Could Turn $500 Per Month Into $1 Million Over the Long Term
This exchange-traded fund consistently outperforms the S&P 500 thanks to its concentrated portfolio of growth stocks.
The S&P 500 Growth index, a subset of the broader S&P 500 index, comprises the 151 top-performing growth stocks from the regular index. These growth stocks typically generate higher capital gains, outperforming value stocks that offer more modest returns supplemented by dividend income. The Vanguard S&P 500 Growth ETF (VOOG -0.18%) is an exchange-traded fund that mirrors this Growth index, and its strategy may turn a monthly investment of $500 into $1 million over the long term.
The ETF's focus on stocks with strong momentum and sales growth leads to a concentration in the information technology sector, where four of the top five holdings account for 36.5% of the portfolio value. Nvidia, Microsoft, Apple, Alphabet, and Broadcom have delivered an impressive 300% return since 2023, nearly tripling the S&P 500's performance during the same period.
This sector's dominance is attributed to the artificial intelligence (AI) boom, with Nvidia and Broadcom leading in data center chips and components for AI development.
Despite its higher volatility, the Vanguard S&P 500 Growth ETF has outperformed the S&P 500 over the long run, boasting a 16.9% annual return since 2010, compared to the S&P 500's 14.1% average annual return. Over the past three years, the ETF's return has been even more substantial at 28.4%, driven largely by AI stocks. Even with a below-average return of 14.1% per year (matching the S&P 500's performance since 2010), this ETF can still achieve the $1 million milestone in just under 23 years through consistent monthly investments of $500.
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