The Vanguard Information Technology ETF has produced a total annualized return of more than 17% in the past two decades.
While the top holdings in this ETF have earned the respect of shareholders, investors should set the right expectations about what the future will bring.
Buying and holding exchange-traded funds (ETFs) is a smart way for the average investor to build sizable wealth in the long run. And it's difficult to find options that have outperformed the Vanguard Information Technology ETF (NYSEMKT: VGT).
Over the past 20 years, this supercharged ETF has generated a total return of 2,320% (as of Sept. 28). If you invest $300 per month in it over a two-decade span, here's what you could end up with.
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It should go without saying, but past returns are no guarantee of future results. Nonetheless, if we assume that the Vanguard Information Technology ETF performs similarly in the coming 20 years as it did in the prior two decades, then a $300 monthly investment would be worth a jaw-dropping $527,000 in September 2046.
Allocating capital like this on a recurring schedule is a widely used strategy known as dollar-cost averaging. The evidence clearly shows that the results can be exceptional.
The Vanguard Information Technology ETF has been such a strong performer because it has benefited from the monster successes of companies like Nvidia, Apple, and Microsoft. Their dominance has been impressive. Given their extensive exposure to the artificial intelligence wave, bullish investors believe their futures are bright.
But don't be surprised if investment gains decline in the years ahead. While owning technology stocks has been quite lucrative in the past, it's best to set the right expectations.
Before you buy stock in Vanguard Information Technology ETF, consider this:
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.