The Best Growth ETF to Invest $1,000 in Right Now

Key Points

• The market's gains this year have largely been powered by top tech stocks.

• Investing in ETFs can give you exposure to growth stocks while mitigating your risk.

• The Vanguard Information Technology ETF has far outpaced the S&P 500's returns over time.

• 10 stocks we like better than Vanguard Information Technology ETF ›

It's a great time to be in the market. After some downward pressure earlier in the year, the S&P 500 is back in growth mode, and it's up nearly 11% year to date.

Concerns still abound. Is the market overvalued? Is inflation really moderating? Will tariffs cause more problems for manufacturers and retailers? Is the market due for a correction, or worse, a crash?

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You can't reliably time the market, and there's no way to know what will happen next, or if a black swan event will arise and change things up unexpectedly. What you can do as a retail investor, if you want to give yourself the best shot at growing your wealth in a meaningful way, is stay in the market for the long term and add to your investments consistently.

If you have $1,000 that you're ready to invest now and you're looking for a way to profit from the market's growth, consider the Vanguard Information Technology exchange-traded fund (ETF) (NYSEMKT: VGT). It provides robust growth opportunities while offering diversification, which minimizes your risk.

A leading technology ETF

The Vanguard Information Technology ETF is a growth fund focused on the technology sector. It has 317 stocks in its portfolio, which isn't super-large as far as ETFs go, but it still provides exposure to a lot of companies in the sector under the umbrella of a single investment. That minimizes some of the risk that you'll face that any particular company will perform poorly while giving you access to some of the stocks with the highest potential, including some you might find too risky to invest in individually.

Since it's a weighted index, the largest companies make up the biggest fractions of the portfolio. As you might have already guessed, the largest component is the world's largest company, Nvidia -- it accounts for 18% of the total portfolio. If you've been hesitant about investing in the chipmaker today, this is a great way to add it to your portfolio. Apple and Microsoft combine to make up another 28%.

Image source: Getty Images.

Most of the remaining stocks account for relatively minuscule fractions of the total, but you still get access to hot stocks like Palantir Technologies and the recently IPO'd Figma. These are stocks trading at astronomical valuations -- artificial intelligence specialist Palantir trades at 185 times forward, 1-year earnings, while digital design tech company Figma trades at a ratio of 339.

Premiums that high might deter many investors. Here, you can get a small piece of such businesses wrapped up in a bigger and more secure investment. However, this ETF gets Vanguard's highest risk rating. It has an average P/E ratio of 40, well over the S&P 500 average of 26, which is already expensive relative to its historic levels. This ETF is suitable only for the risk-tolerant investor.

However, some of the risk is mitigated in an ETF like this because many of its components are well-established industry leaders. Companies like HP and Adobe are more mature, and they both trade at a P/E ratio of 22.8.

Also, because it's an index fund, stocks that aren't performing well enough will be automatically traded out as soon as they don't meet the index's criteria. Another benefit of index funds is that they are passively managed and don't come with high management fees. The Vanguard Information Technology ETF's expense ratio is just 0.09%, in contrast with what Vanguard says is an average of 0.93% for similar ETFs.

One way to beat the market

Growth investors aim to beat the market. The risks they take in pursuit of that goal are usually in line with their potential for reward, and it works both ways. When the market is thriving, growth stocks are usually leading the way. When the market is sinking, growth stocks are typically tumbling the hardest.

Over time, though, that dynamic often ends up working in the growth investor's favor, because historically, the market has spent more time in growth mode than not. Over the past 10 years, for example, the ETF's annualized gains have more than doubled the S&P 500's.

VGT Annualized 10 Year Total Returns (Monthly) data by YCharts

In fact, the Vanguard Information Technology ETF's average annualized 10-year gain of 22.4% is the highest of any Vanguard ETF. It's also outperforming the market this year -- unsurprisingly, since the market is up.

If you have some appetite for risk and a long time horizon for your investments, the Vanguard Information Technology ETF could be a great addition to your portfolio.

Should you invest $1,000 in Vanguard Information Technology ETF right now?

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Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Adobe, Apple, HP, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.