Investing in ETFs requires minimal effort yet has the potential to significantly enhance your savings over time.
As we find ourselves just over two years into a robust bull market, the opportunity to invest at this moment can be an excellent strategy for building long-term wealth. With prices continuing to climb, now is an ideal time to consider investing in funds that can capitalize on this upward trend.
Exchange-traded funds (ETFs) offer an accessible entry point into the stock market, allowing investors to buy a single share that represents ownership in hundreds of stocks simultaneously. This approach saves you the time and effort required to individually research numerous companies, making it a practical alternative to purchasing individual stocks.
However, the choice of where to invest is crucial, as not all ETFs are created equal. If your goal is to find a high-performing fund that could yield substantial returns over time, there is one standout option from Vanguard that stands out in the current market.
Boost Your Investment Strategy with a Leading Technology ETF
The Vanguard Information Technology ETF (VGT -0.10%) focuses on the technology sector and encompasses 316 stocks from various technology niches—from semiconductors and software solutions to hardware and data storage. This diversity within the tech industry makes it a compelling choice for investors looking to capitalize on technology’s rapid growth.
Image source: Getty Images.
The ETF’s three largest holdings include Apple, Microsoft, and Nvidia, which together account for just over 44% of the total fund. This concentration in major tech stocks indicates a significant potential for growth, especially given the ongoing advancements in technology.
By investing in this ETF, you gain exposure to high-performing stocks while still having the opportunity to benefit from smaller, emerging companies within the fund. If any of these lesser-known stocks find success, the overall value of your investment could increase substantially, providing you with significant returns.
However, it’s important to note that industry-specific ETFs, particularly those focused on technology, often carry higher risks compared to more diversified funds. Although this ETF includes over 300 stocks, they all belong to the same sector, which may not offer the same level of diversification as a fund that spans multiple industries.
This characteristic isn’t inherently negative, but those considering an investment in this ETF should ensure that their overall portfolio includes a variety of stocks or funds from different sectors. The more diverse your portfolio, the more you can mitigate risks associated with market fluctuations.
Exploring Potential Earnings from the Vanguard Tech ETF
Investing in tech-focused ETFs can lead to greater volatility compared to broader market funds, especially in the short term. The technology sector is known for its rapid changes and can experience significant price fluctuations, making it challenging to predict how this fund will perform in the near future or over the next few years.
Nevertheless, historical performance is impressive; over the past decade, this ETF has achieved an average annual return of an astounding 20.37%. Its overall performance since its launch in 2004 stands at a slightly lower yet still substantial 13.45% per year—outpacing the stock market’s traditional average of 10% per year.
^SPX data by YCharts
While the future performance of this ETF could align more closely with either the 20% or 13% averages, it’s also possible that it may not perform as expected, resulting in below-average returns. Such risks are an inherent part of pursuing investments with the potential for substantial growth.
For instance, if you project an 18% average annual return moving forward and invest $1,000 now without making any additional contributions, that initial investment could grow to approximately $143,000 over a 30-year period with minimal effort.
To maximize your earnings potential, consider making regular monthly contributions. If you invest $1,000 initially and then add just $50 each month, your total accumulation could vary significantly based on your average annual returns:
| Number of Years | Total Portfolio Value: 10% Avg. Annual Return (In Line with Market’s Long-Term Avg.) | Total Portfolio Value: 13% Avg. Annual Return | Total Portfolio Value: 18% Avg. Annual Return | Total Portfolio Value: 20% Avg. Annual Return |
|---|---|---|---|---|
| 20 | $41,000 | $60,000 | $115,000 | $150,000 |
| 25 | $70,000 | $115,000 | $268,000 | $379,000 |
| 30 | $116,000 | $215,000 | $618,000 | $947,000 |
Data source: Author’s calculations via investor.gov.
If this ETF continues to deliver returns in line with its historical average, investing just $50 per month could potentially lead you to nearly $1 million. Even if its future performance is less than expected, it’s still feasible to accumulate significant wealth through consistent small contributions.
Ultimately, investing in ETFs presents a strategic approach to building wealth with less effort compared to selecting individual stocks. However, the key to success lies in choosing the right ETF. If you are open to embracing a bit more risk for the prospect of considerable returns, the Vanguard Information Technology ETF may be a valuable addition to your investment portfolio.
Katie Brockman has positions in Vanguard World Fund-Vanguard Information Technology ETF. 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.
