ETFs
1 Gorgeous Tech ETF That Could Turn $200 a Month into $704,000 or More
Investing in exchange traded funds (ETFs) is one of the most effective ways to generate wealth in the stock market with minimal effort.
ETFs can provide instant income diversification because many of them contain hundreds of stocks within a single investment, saving you countless hours of research compared to purchasing individual stocks. Greater diversification can also limit your risks, adding more variety to your portfolio to protect against market volatility.
Sector-specific ETFs, in particular, can help you boost your income. An ETF that tracks a particular market sector can make it easier to gain exposure to that sector without all the research required to invest in individual stocks.
If you want to invest in the technology sector, a technology ETF could help you turn $200 a month into $704,000 or more. Here’s how.
Building a Strong Portfolio
THE Vanguard Information Technology ETF (NYSEMKT: VGT) is a leading technology fund with a track record of significantly outperforming the market.
This fund includes 321 stocks from various areas of the technology industry. The three largest stocks are Microsoft, AppleAnd NVIDIA, respectively. Collectively, these three stocks represent nearly 47% of the entire fund.
While you can simply invest in Microsoft, Apple, and Nvidia individually, investing in an ETF creates greater diversification. When Nvidia eventually pulls back (because it can’t maintain this phenomenal trend forever), having hundreds of other stocks in your portfolio can help cushion the blow.
This ETF also has a relatively low expense ratio of 0.10%, which means you’ll pay $10 per year in fees for every $10,000 in your account. Given that many similar funds charge fees around 1% or more, a lower expense ratio could potentially save you thousands of dollars over time.
Boost your savings
One of the main benefits of investing in a sector-specific ETF is the potential for above-average returns – and this fund has significantly outperformed the market.
Over the past 10 years, the Vanguard Information Technology ETF has generated an average rate of return of 20.35% per year. For comparison, the Vanguard S&P 500 Exchange Traded Fund (which tracks the S&P 500 Index) returned an average of just 12.66% per year during this period.
However, at least some of these incredible returns may be due to Nvidia’s astonishing performance this yearknowing that the action represents a significant part of the composition of this fund. However, this ETF has still generated an average return of 13.25% per year since its inception in 2004, which is higher than the historical market average of around 10% per year.
The story continues
It’s unclear how this fund will perform in the future, because past performance doesn’t guarantee future returns. But if you invest $200 a month, here’s roughly how much you could accumulate over time, depending on whether you earn an average annual return of 10%, 13%, or 20%:
|
ten |
$38,000 |
$44,000 |
$62,000 |
|
20 |
$137,000 |
$194,000 |
$448,000 |
|
30 |
$395,000 |
$704,000 |
$2,837,000 |
Data source: Author’s calculations via invest.gov.
If you get an average annual return of 13%, investing consistently for about 30 years would be worth about $704,000. But if this fund manages to generate returns closer to its most recent annual average of 20%, you could potentially earn much more over time.
Consider the risk factor before purchasing
There are never any guarantees in the stock market, and this is especially true when it comes to technology investments. This sector tends to thrive when the market is booming, but it also typically takes a hit during downturns.
Before investing, make sure you are willing to take this risk. Your investment may generate above-average returns in the future, but it may also generate average or even below-average returns in some years. If the potential for reward outweighs the risk for you, this could be a wise addition to your portfolio.
Also keep in mind that when you invest in a fund like this, the rest of your portfolio should be well diversified. Since this ETF only contains tech stocks, you’ll need a variety of stocks from other sectors to properly limit your risk.
The Vanguard Information Technology ETF is a powerful fund that has consistently generated above-average returns and has the potential to boost your gains. However, it is not without risks. By considering your goals and risk tolerance, you can decide if it’s right for you.
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Katie Brockman has positions in the Vanguard S&P 500 ETF and the Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool has positions and recommends Apple, Microsoft, Nvidia, and the Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 buy Microsoft and short January 2026 $405 buy Microsoft. The Motley Fool has a position in the Vanguard S&P 500 ETF and the Vanguard World Fund-Vanguard Information Technology ETF. disclosure policy.
1 Gorgeous Tech ETF That Could Turn $200 a Month into $704,000 or More was originally published by The Motley Fool