History Says This ETF Is a Millionaire Maker. Here's What You'd Need to Invest Each Month to Get There.
Consistency is the biggest gift you can give yourself.
Achieving millionaire status via investing in an exchange-traded fund (ETF) is achievable for ordinary investors, and it doesn't necessitate striking it rich or discovering the next tech giant like Nvidia. Regularly investing in a high-quality ETF, such as the Vanguard Morningstar Growth ETF (VUG), is a proven strategy anyone can adopt. However, not all ETFs possess the same potential; while a broad S&P 500 ETF is an option, VUG has consistently outperformed the market and could fast-track you to the million-dollar goal.
VUG comprises 135 stocks, with the majority originating from the tech sector due to its emphasis on large-cap growth stocks. The tech sector has historically been the top-performing sector over the last 10-15 years, which explains the high concentration. Though this comes with risk, particularly as Nvidia, Apple, and Microsoft account for over 35% of the portfolio, sometimes it's necessary to let your winners run.
Over various periods, VUG has consistently outperformed the S&P 500, which is the goal when investing in growth ETFs.
While VUG's historical gains are impressive, past performance doesn't guarantee future results, and expecting it to maintain those returns for the next couple of decades might be unrealistic. To illustrate how VUG could help you achieve the million-dollar mark, let's assume a modest 10% annual average. In that scenario, investing $250 monthly for 38 years would require spending only $114,000 to reach $1 million, with the power of compounding interest doing the rest.
If you invest $500 monthly over 31 years, you'll only need to contribute $186,000, and with a $2,000 monthly investment over 18 years, $432,000 would be the total outlay. The low expense ratio of VUG is a significant advantage, as it only charges 0.03%, or $3 per $10,000 invested annually. Although minor differences in expense ratios may not seem significant, the difference in cost over time can easily amount to thousands of dollars.
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