Could Investing $500 a Month in MAGS Make You a Millionaire?

The "Magnificent Seven" tech stocks have been major drivers of growth in the U.S. stock market for the past several years. What if you could own all seven stocks in a single tech ETF?

You can. The Roundhill Magnificent Seven ETF (NYSEMKT: MAGS) gives you one-stop shopping for seven of the most prominent tech stocks. You might wonder if it's a good idea to invest in only seven stocks. Well, if this fund keeps delivering world-beating returns, it might be the only investment you need to become a millionaire.

Let's look at how long it could take to become a millionaire by investing in this Magnificent Seven ETF, and how investors should decide whether this fund is a good buy -- or if it's putting too many eggs in one magnificent basket.

Image source: Getty Images.

MAGS: Three years of annual returns averaging 34.27%

The Roundhill Magnificent Seven ETF only holds seven stocks. But those seven stocks are the biggest names in tech. Since its launch on April 11, 2023, MAGS has delivered impressive returns, averaging 34.27% per year.

The fund's holdings as of April 9 are:

• Amazon (15.8%)
• Alphabet (15.1% of fund)
• Meta Platforms (15.0%)
• Nvidia (14.3%)
• Apple (13.9%)
• Microsoft (13.6%)
• Tesla (12.6%)

The ETF also holds 7.9% of its assets in a short-duration fund. MAGS is rebalanced each quarter to equal weight, so it shouldn't become too top-heavy with any one stock. The fund charges an expense ratio of 0.29%.

MAGS: How soon can it make you a millionaire?

It's unlikely that the Magnificent Seven or any other collection of only seven stocks are going to strongly outperform the S&P 500 index forever. But let's just pretend that MAGS can keep up its three-year track record and keep growing at 34.27% for years to come.

If you invested $500 per month into MAGS and let that money keep compounding at 34.27% annually, after five years, you'd have $58,899. After 10 years, you'd have $315,939. And after 14 years, your money would reach $1 million.

But beware: Popular investment trends like the Magnificent Seven don't last forever. Year to date,, MAGS is down 9.4% and has underperformed the S&P 500 and the tech-heavy Nasdaq-100 index.

MAGS data by YCharts

Just because these seven stocks performed so well for the past few years doesn't mean they're guaranteed winners for the future. Tech stocks have been struggling recently, and buying MAGS means making a concentrated bet on some major tech names that might be past their prime.

Another reason not to buy this fund: Why pay a 0.29% fee just to own seven stocks that you could buy yourself? If you're still a big believer in the Magnificent Seven, you can buy stocks yourself with fractional shares in a brokerage account. No management fees required.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla and is short shares of Apple. The Motley Fool has a disclosure policy.