Want a $1 Million Investment Portfolio? This ETF Could Get You There.

Building a portfolio worth $1 million isn't easy, but it's achievable. It just takes consistent investing over the course of decades, the discipline to see the process through, and a little good fortune along the way.

Picking the right investment goes a long way, too.

With years to invest, you can be more aggressive in your approach. It'll likely come with some above-average volatility, but the added return potential can often make up for it. The key is to ride out that volatility. If you can't do that, there's a good chance you'll do more harm than good.

If you can, I suggest looking at the Vanguard Growth ETF (NYSEMKT: VUG) for your portfolio. Over its history, it has demonstrated a clear ability to produce strong returns.

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Why VUG's fundamental selection criteria make it a winner

The definition of "growth" can vary widely. Any particular ETF's performance can be significantly impacted if the selection criteria are too vague or don't look at the right metrics.

The Vanguard Growth ETF uses a smart combination of backward- and forward-looking metrics:

• Expected long-term growth in earnings per share (EPS)
• Expected short-term growth in EPS
• Three-year historical growth in EPS
• Three-year historical growth in sales per share
• Current investment-to-assets ratio
• Return on assets

A lot of funds will look at just earnings and/or revenue growth. Worse, they'll look only at historical rates instead of understanding where the business is going.

The Vanguard Growth ETF looks at these measures in both directions to help ensure that growth trends are sustainable. Using return on assets (ROA) as a measure helps indicate that positive results are being delivered. The investment-to-assets ratio shows how much capital is being put into future growth.

It's this last piece that helps us understand why the artificial intelligence (AI) names are such a big part of this ETF. They're certainly seeing earnings growth, but they're also building the business to accelerate existing growth.

These factors taken in aggregate do a good job of properly identifying and sizing the best stocks.

Why a growth ETF works for your portfolio

Many investors are using growth and tech ETFs interchangeably. It's understandable because both look pretty similar right now. In the Vanguard Growth ETF, tech accounts for 70% of the overall portfolio.

But I don't think you want to restrict yourself to tech for growth. Even in this concentrated fund, 30% of assets come from non-tech sectors, including consumer discretionary, industrials, and healthcare. If conditions change and growth comes from elsewhere, such as the medical field, the Vanguard Growth ETF will adjust its allocation based on fundamentals and performance. With a tech fund, you're restricted to what happens within that specific sector.

If you're looking to grow your portfolio to $1 million over time, the Vanguard Growth ETF deserves a look. It uses a smart, growth-oriented strategy that could deliver above-average returns while limiting any unusually high risk factors.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Growth ETF. The Motley Fool has a disclosure policy.