This Underrated Value ETF Could Turn Long-Term Investors Into Millionaires
Key Points
Investing in a value ETF is a smart way to gain exposure to undervalued stocks.
With plenty of diversification, this fund can help minimize the impact of volatility.
Over decades, you could earn $1 million or more with just a few hundred dollars per month.
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It's possible to earn $1 million or more in the stock market, and by investing in exchange-traded funds (ETFs), you can reach that goal with next to no effort on your part.
Value ETFs contain stocks that are considered undervalued by the market. They're often particularly well suited for risk-averse investors, as these stocks often have solid fundamentals, strong financial positions, and healthy earnings -- all the ingredients for long-term growth. Compared with growth ETFs, value ETFs tend to be more stable and less volatile.
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The Vanguard Value ETF (NYSEMKT: VTV) can be a fantastic choice for many investors, and with the right strategy, it could even make you a millionaire. Here's how.
A powerful yet safe investment
The Vanguard Value ETF contains 315 large-cap stocks across all sectors of the market, offering ample diversification. It's not significantly tilted toward any one industry, which can further reduce risk. If a few of the stocks don't survive a downturn, it won't drag down your entire portfolio.
This ETF's fee structure can also save you thousands of dollars over time. It boasts a rock-bottom expense ratio of 0.04%, meaning you'll pay $4 per year in fees for every $10,000 invested. With many ETFs charging expense ratios of close to 1%, this ETF can help your money go further with increased savings.
Since its inception in 2004, the Vanguard Value ETF has earned an average rate of return of 9.09% per year. Assuming you continue earning 9% average annual returns, here's approximately what you'd need to invest each month to reach $1 million in total savings.
| Number of Years | Amount Invested per Month | Total Portfolio Value |
|---|---|---|
| 25 | $1,000 | $1.016 million |
| 30 | $650 | $1.063 million |
| 35 | $400 | $1.035 million |
| 40 | $250 | $1.014 million |
Data source: author's calculations via investor.gov.
It's unclear whether this ETF will continue earning returns in line with its historic average, so these figures are just guidelines. Value stocks, in particular, can take time to reach their full potential. That makes it even more crucial to maintain a long-term perspective to maximize returns from a value ETF.
Regardless of how much this fund earns, getting started investing sooner rather than later is key. The more time you can give your money to grow, the less you'll need to contribute each month to reach your goal. With a long-term outlook and consistent investments, it's far easier to build substantial wealth while barely lifting a finger.
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Katie Brockman has positions in Vanguard Index Funds-Vanguard Value ETF. The Motley Fool has positions in and recommends Vanguard Index Funds-Vanguard Value ETF. The Motley Fool has a disclosure policy.
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