1 Vanguard ETF to Invest In That Can Turn $500 Monthly Into $800,000
Key Points
The Vanguard Growth ETF (VUG) has averaged around 12% annual returns since its January 2004 inception.
Investing in large-cap growth stocks can provide growth opportunities and long-term stability.
VUG is tech-heavy, so it's best used as a complementary piece to a portfolio.
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Everyone invests for the same reason: to make money. And although nothing is ever guaranteed in the stock market, making money there is far from difficult. It doesn't have to involve spending hours researching companies and crafting the "perfect" portfolio; it can be as simple as investing in exchange-traded funds (ETFs) and letting many companies do the work for you.
There's one Vanguard ETF in particular that has shown its potential to take relatively small monthly investments and turn them into a nice amount over time. It's the Vanguard Growth ETF (NYSEMKT: VUG), one of Vanguard's best-performing ETFs over the past decade.
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With $500 monthly investments, you could potentially see your investment grow to around $800,000 in just a couple of decades.
Image source: Getty Images.
Access to high growth potential with relative stability
VUG gives you access to large-cap growth stocks, which can be the best of both worlds in many cases. On one hand, you get the market-beating potential that comes with investing in companies that are growing sales and earnings faster than their industry peers. On the other, the large size of these companies can provide more long-term stability than smaller growth companies because they typically have more financial stability, resources, and established competitive advantages.
The growth focus of the ETF means it's heavily skewed to tech companies, with nine of the top 10 holdings tech companies, and over 61% of the ETF being tech companies. Here are VUG's top 10 holdings:
| Company | Percentage of the ETF |
|---|---|
| Nvidia | 12.29% |
| Microsoft | 11.49% |
| Apple | 10.53% |
| Amazon | 6.53% |
| Broadcom | 4.41% |
| Meta Platforms (Class A) | 4.38% |
| Alphabet (Class A) | 3.68% |
| Alphabet (Class C) | 2.94% |
| Tesla | 2.89% |
| Eli Lilly & Co. | 1.98% |
Data source: Vanguard. Percentages as of Aug. 31.
Complement VUG with other ETFs to ensure you have diversification
Since the ETF is so tech-heavy, and many of its top holdings are also top holdings in S&P 500 ETFs or Nasdaq ETFs, it's important to check how much your investments overlap. For the sake of diversification, you don't want to invest in three different ETFs where the bulk of the investments are going to Nvidia, Microsoft, and Apple.
That's why VUG is best used as a supplemental ETF for many investors, rather than as the bulk or foundation of your portfolio. If anything, dedicate a certain amount of your portfolio to VUG, and then complement areas where it's lacking -- like consumer staples, energy, utilities, financials, and healthcare -- with other sector-specific ETFs.
How $500 monthly could turn into $800,000
Since its January 2004 inception, VUG is averaging 11% annual returns (12%, including dividends). Over the past decade, returns have been significantly higher, averaging around 16.7% annually (17.7%, including dividends).
Past performance doesn't guarantee future results, and we can't predict how the ETF will perform going forward. However, if we assume it averages 12% annual returns, here's how much $500 monthly investments could grow over different time spans:
| Years | Investment Total |
|---|---|
| 10 | $105,088 |
| 15 | $222,959 |
| 20 | $430,315 |
| 25 | $795,096 |
| 30 | $1.463 million |
Table by author. Investment totals rounded to the nearest dollar.
If VUG continues its 16% annual average, $500 monthly investments would reach $800,000 in around 21 years. These figures take into account VUG's 0.04% expense ratio, which is one of the lowest you'll find for an ETF of its kind.
These figures will, of course, vary by investment amounts and returns, but this speaks to the power of compound earnings in investing and how time can do much of the heavy lifting for you. It's one of the surest ways to build wealth in the stock market.
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Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool recommends Broadcom and 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.
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