1 Unstoppable Vanguard ETF to Buy and Hold for the Next Decade
Key Points
The Vanguard Mega Cap Growth ETF has a proven track record of beating the market.
ETFs perform best when given decades to grow.
Small, consistent contributions can add up over time.
- 10 stocks we like better than Vanguard World Fund - Vanguard Mega Cap Growth ETF ›
Investing in exchange-traded funds (ETFs) is one of the easiest ways to build wealth, as this type of investment requires next to no effort on your part. Most ETFs are also well-diversified, holding dozens of stocks in a single fund, which can help reduce risk.
ETFs perform best with years of uninterrupted growth, making them fantastic "set it and forget it" investments. And there's one powerhouse Vanguard ETF that could turn just a couple hundred dollars per month into $2 million or more over time.
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A powerful ETF with a strong track record
If you're looking for a way to invest in the nation's largest and strongest growth stocks, the Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) could be a smart buy right now.
This fund holds 60 mega-cap stocks, which are generally defined as those with a market cap of at least $200 billion.
Many of these companies are industry leaders with decades-long histories of consistent growth despite short-term volatility, making this ETF a solid choice if you're concerned about a recession. While all stocks can experience drawdowns during a bear market, larger companies are generally more likely to pull through.
Because the Vanguard Mega Cap Growth ETF is focused on large growth stocks, it is also more likely to deliver above-average returns over time.
In fact, over the last 10 years, this ETF has delivered total returns of around 403%, compared to 258% for the S&P 500, as of this writing. In other words, if you'd invested $10,000 a decade ago, you'd have accumulated around $50,000 with the Mega Cap Growth ETF versus $36,000 with an S&P 500 ETF.
Building a $2 million portfolio
First, it's important to note that past performance can't predict future returns. However, it can sometimes be helpful to look at historical returns just to see what an investment is capable of.
Over the last 10 years, the Vanguard Mega Cap Growth ETF has earned an average rate of return of 18.83% per year. Say you invest $250 per month, and you earn either an 18%, 15%, or 12% average annual return. (For context, the market itself has earned an average rate of return of around 10% per year.) Here's approximately how your money would add up in each scenario:
| Number of Years | Total Portfolio Value: 12% Avg. Annual Return | Total Portfolio Value: 15% Avg. Annual Return | Total Portfolio Value: 18% Avg. Annual Return |
|---|---|---|---|
| 10 | $53,000 | $61,000 | $71,000 |
| 15 | $112,000 | $143,000 | $183,000 |
| 20 | $216,000 | $307,000 | $440,000 |
| 25 | $400,000 | $638,000 | $1,028,000 |
| 30 | $724,000 | $1,304,000 | $2,373,000 |
Data source: author's calculations via investor.gov.
If this ETF continues earning returns in line with its 10-year average, you could accumulate around $71,000 after a decade. With more time to grow, though, you could earn exponentially more. And even if this fund underperforms going forward, it's still possible to accumulate hundreds of thousands of dollars.
The Vanguard Mega Cap Growth ETF has a history of outperforming the market, and its focus on the largest growth stocks can potentially set it up for even more lucrative returns going forward.
Should you buy stock in Vanguard World Fund - Vanguard Mega Cap Growth ETF right now?
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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