These 3 Simple ETFs Could Turn $600 a Month into $1.6 Million

Almost all of us would like to have more money – and, ideally, a lot more money. Yes, you could achieve this goal by winning a Powerball jackpot, but this is unlikely. (The odds of winning were recently 1 in 292,201,338!) A much better way to try to achieve your financial goals is to invest in the stock market.

For best results, most of us should invest regularly and effectively. This means regularly paying significant sums — such as 10% of your incomebut ideally more – and this, every month, every quarter or every year, for many years.

Image source: Getty Images.

To get an idea of ​​what’s possible when you do, here’s a look at three exchange-traded funds (ETFs) with an impressive track record. Each of them could turn a $600 monthly investment into $1.6 million (or more!) over 25 years.

Discover ETFs

Without further ado, here are the three ETFs you might consider for your portfolio, along with their performance over the past five and 10 years. (Note that their “expense ratio” is basically the annual fee they charge. A 0.1% expense ratio means that for every $1,000 you invest, you’ll pay about $1 per year.)

Funds

Expense ratio

Average over 5 years. Annual return

Average over 10 years. Annual return

Data source: Morningstar.com, as of June 3, 2024.

Here’s a brief introduction to each:

• Vanguard S&P 500 Growth ETF: This ETF invests in the growth stocks of the S&P 500. So while the S&P 500 encompasses 500 of America’s largest companies (many of which are strong performers over the long term), this ETF recently held about 230 stocks. It can be more volatile than the S&P 500, but it tends to generate higher returns over time. His major titles recently included Microsoft (12.5% ​​of the fund), Apple (10.7%), and Nvidia (9.2%).

• Vanguard Information Technology ETF: As the name suggests, this ETF focuses on the information technology sector, so you won’t find companies like Walmart Or Nike among his assets. It recently included about 312 stocks, with the top holdings being Microsoft, Apple and Nvidia, as well as Broadcom And Salesforce.com.

• iShares Semiconductor ETF: This is another sector ETF, specializing in semiconductor companies and recently bringing together only 30 companies, such as Nvidia, QualcommBroadcom and Advanced microsystems.

While these are very promising ETFs, be sure to read and learn more about the sectors you are investing heavily in. You don’t want to hold, say, 40% of your holdings in an industry that’s imploding – or in an industry you don’t understand very well.

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It’s also smart to diversify, and the Vanguard S&P 500 Growth ETF above will diversify your dollars the most, although it will also exclude smaller and slower-growing companies.

How your money can grow

Now let’s see what these ETFs, or similar ETFs, can do for your portfolio. There’s no way to know for sure what kind of returns each of them will deliver in the future, so let’s try to be a little conservative in our speculation. Let’s use the lowest average annual growth rate from the top table: 14.4%.

And let’s look at two scenarios: someone who invests $600 per month ($7,200 per year) and someone who invests $1,000 per month ($12,000 per year). Your own situation is probably different, but you can adjust the numbers below accordingly.

Growing by 14.4% For:

$7,200 invested annually

$12,000 invested annually

Data source: author.

These are breathtaking numbers. Be aware that you can also get a sizable nest egg with less volatility by simply sticking with a simpler, lower-fee, broad-market ETF like Vanguard S&P 500 ETF (NYSEMKT:VOO). It has seen average annual gains of 12.7% over the past decade. If you do this and get an average growth of only 8%, you can still do very well:

Growth at 8% For:

$7,200 invested annually

$12,000 invested annually

Data source: author.

The hardest part of achieving the type of wealth shown in the charts above is sticking to your plan. Understand that your net worth will not increase linearly. The market goes through ups and downs, but it has always recovered from small and big dips and continued to set new records.

Trust the math, be diligent for a long, long time and you will probably do very well. It’s also good to continue reading and learning more about investing, so you can develop more confidence in what you’re doing.

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Selena Maranjian holds positions in Apple, Microsoft, Nvidia, Qualcomm, Salesforce and iShares Trust-iShares Semiconductor ETF. The Motley Fool holds positions and recommends Advanced Micro Devices, Apple, Microsoft, Nike, Nvidia, Qualcomm, Salesforce, Vanguard S&P 500 ETF, Walmart, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2025 $47.50 calls on Nike, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.

These 3 Simple ETFs Could Turn $600 a Month into $1.6 Million was originally published by The Motley Fool

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