ETFs
This Simple ETF Could Turn $500 a Month Into $1 Million
This large-cap ETF offers investors the potential for above-market returns while minimizing risk.
It’s always inspiring to hear stories of people who invested in a company and made tons of money as the company grew and became successful. While these stories are a testament to the power of investing, they can also be misleading. That’s not because it doesn’t happen often, but because you don’t have to make a big splash on a single company to make a lot of money in the stock market.
Invest regularly in exchange traded funds (AND F) is a great way to build wealth. ETFs allow you to invest in dozens, hundreds, and sometimes thousands of companies in a single investment. For investors looking for an ETF that can help them become millionaires, look no further than the Vanguard Growth ETFs (VUG 0.61%).
A history of outperforming the market
Since its launch in January 2004, this ETF has outperformed the market (based on S&P 500 Back), with an average total return of around 11.6%. The returns are even more impressive when looking back over the past decade, with the ETF posting an average total return of around 15.7%.
Total VUG Performance Level data by YCharts
The ETF’s past success doesn’t mean it will continue on this path, but for the sake of illustration, let’s take a middle ground and assume it averages about 13% annual returns over the long term. Averaging those returns, monthly investments of $500 could top the $1 million mark in just over 25 years.
Assuming (emphasis on the word “assume”) that the ETF continues to generate an average total return of 15.7% over the past decade, investing $500 a month could get you past $1 million in about 23 years. At an annual return of 11.6%, that would take nearly 28 years.
There is no way to predict the future performance of the ETF, but the most important thing is the power of time and Compound profit. Earning $1 million by saving alone is a difficult and unachievable task for most people. However, it becomes much more achievable if you give yourself time and make regular investments, no matter how small.
So why choose the Vanguard Growth ETF?
This ETF can offer investors the best of both worlds. On the one hand, since it only contains large cap stocksIt offers more stability and less volatility than you typically find with smaller growth stocks. At the other end, the focus on growth means it is built with the goal of outperforming the market.
Investing involves a tradeoff between risk and return, and this ETF falls somewhere in the middle for the most part. That’s not just because it only contains large-cap stocks. It’s also because large-cap stocks are leading the way. Here are the ETF’s top 10 holdings:
- Microsoft: 12.60%
- Apple: 11.51%
- Nvidia: 10.61%
- Alphabet (both share classes): 7.54%
- Amazon: 6.72%
- Meta-platforms: 4.21%
- Eli Lilly: 2.88%
- You’re here: 1.98%
- Visa: 1.72%
The Vanguard Growth ETF is not as diversified as other broad ETFs, with the top 10 holdings making up nearly 60% of the fund and the “The Magnificent Seven” with stocks accounting for about 55%. However, many of these companies (particularly mega-cap technology stocks) have been among the best performers in the stock market over the past decade and still have great growth opportunities ahead of them.
MSFT Total Return Level data by YCharts
Big tech stocks are expected to continue to see growth in areas such as cloud computing, artificial intelligenceand cybersecurity; Eli Lilly will benefit from advances in biotechnologyTesla is one of the leaders in electric vehicles, which are still in the early stages of development; and Visa is expected to be one of the forerunners as the world moves toward more digital payments.
ETF concentration adds risk, especially if Microsoft, Apple or Nvidia is experiencing a slowdownBut these companies are well positioned to drive long-term growth despite any short-term setbacks that may arise. Consistent investments over time in the Vanguard Growth ETF should pay off for investors.
Randi Zuckerberg, former head of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard Index Funds-Vanguard Growth ETF, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in shares of Apple and Microsoft. disclosure policy.