Investing in growth stocks can be a great strategy for building up your portfolio. But picking the best ones to buy is not necessarily easy. It wasn’t all that long ago that metaverse stocks were all the hype on Wall Street. Nowadays, it’s artificial intelligence stocks that people are rushing out to buy. There are also GLP-1 weight loss stocks, which have enormous potential in the long run.
It’s easy to get overwhelmed trying to pick the right growth stocks and the right mix of them for your portfolio. Exchange-traded funds (ETFs), however, essentially take care of that for you — buying a share of one means you’re investing in all the stocks the fund owns. It’s just a matter of picking the fund that’s most suitable for your investment goals and strategy.
If you’re buying and holding for the long term with the ultimate goal of retiring with $1 million, a good option to consider is the Vanguard S&P 500 Growth Index Fund ETF Shares (NYSEMKT: VOOG).
This ETF tracks growth companies in the S&P 500
What’s attractive about the fund is that it focuses on growth stocks within the S&P 500. That means you’re getting exposure to blue chip stocks that have the potential to achieve significant long-term growth. Apple, Nvidia, and Microsoft are the top three stocks in the fund and account for a little over 35% of its overall weight. Top weight loss and GLP-1 drugmaker Eli Lilly is also among the fund’s top 10 holdings. But the fund is tech-heavy, with that sector making up roughly half of its overall portfolio.
The fund has a low expense ratio of 0.1%, making it an attractive option for long-term investors, as fees won’t take a big chunk out of your overall returns. Over the past 10 years, the ETF has outperformed the S&P 500, with total returns (which include dividends) of around 300%, which averages out to a compounded annual growth rate of 14.9%.
How much would you need to invest to get to $1 million with the ETF?
While this fund has generated impressive annual returns of around 15% per year on average for the past decade, it may be a bit optimistic to expect these high returns to continue for the years ahead. Given the market’s strong returns over the past few years, it may be a good idea to be conservative and project out a much lower rate of return in the long run.
Assuming just an 8% growth rate for the long term, here’s how much investments ranging from $25,000 to $75,000 could be worth in the future.
| Investment | 30 Years | 35 Years |
|---|---|---|
| $25,000 | $251,566 | $369,634 |
| $30,000 | $301,880 | $443,560 |
| $35,000 | $352,193 | $517,487 |
| $40,000 | $402,506 | $591,414 |
| $45,000 | $452,820 | $665,340 |
| $50,000 | $503,133 | $739,267 |
| $55,000 | $553,446 | $813,194 |
| $60,000 | $603,759 | $887,121 |
| $65,000 | $654,073 | $961,047 |
| $70,000 | $704,386 | $1,034,974 |
| $75,000 | $754,699 | $1,108,901 |
Calculations by author.
Given the expected returns, you would need to invest at least $70,000 today and hang on for a period of 35 years to expect it to grow to $1 million. But these are also conservative estimates. The good news is that if the ETF performs better, even slightly, it can make a big difference. At a 9% annual return, for instance, a $50,000 investment would be sufficient to grow to $1 million over 35 years.
Returns may vary, but the strategy remains the same
There’s no crystal ball that can definitively tell you what kind of return you will end up generating over such a long timeframe, whether you’re investing in the Vanguard fund or the S&P 500. But one thing is definitely clear: Buying and holding, and putting your money into a growth-oriented fund, can significantly grow your portfolio’s balance in the long run. If you can afford to do so, it can be a no-brainer decision.
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*Stock Advisor returns as of November 18, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. 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 disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
