1 Top Vanguard Fund That Can Turn $350 Per Month Into $1 Million
Key Points
The Vanguard Growth ETF focuses on top growth stocks, and its returns in recent years have been impressive.
Assuming a 10% annual return, it could take approximately 33 years for regularly monthly investments of $350 in the fund to grow to over $1 million.
- 10 stocks we like better than Vanguard Growth ETF ›
Vanguard funds are popular options for investors due to their low fees and solid diversification. They can be great investments to hold for the long term and to routinely add money into on a regular basis.
One exchange-traded fund (ETF) that stands out for its long-term growth potential is the Vanguard Growth ETF (NYSEMKT: VUG). As its name suggests, its focus is on growth stocks. Here's how investing $350 per month into the fund could set you on a path to one day having a portfolio worth over $1 million.
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The ETF has soundly outperformed the market over the past decade
Investing in funds that track the S&P 500, which is a broad mix of the top 500 stocks on U.S. markets, can often be the default option for investors, but it may not necessarily be the best one. Focusing on growth can often yield better returns, and the Vanguard Growth ETF is proof of that, with its gains over the past decade being far higher than those of the broader index.
VUG Total Return Level data by YCharts
During the past 10 years, the Vanguard fund has averaged a compounded annual growth rate of 18% versus less than 16% for the S&P 500. It's worth noting, however, that these gains are a bit stronger than usual due to the excitement around tech and artificial intelligence stocks of late. The S&P 500 historically averages a much more modest growth rate of 10% per year. But by focusing on high-powered growth stocks, you can put yourself in a great position to outperform the market, which can be key to growing your portfolio significantly in the long run.
How a $350 monthly investment can create a portfolio worth more than $1 million
The Vanguard Growth ETF may not be able to sustain such a high growth rate over the long term, especially with many growth stocks already trading at inflated valuations. However, if it can average a more modest 10%, which is in line with how the S&P 500 has historically performed, then here's how a $350-per-month investment in the ETF could grow over the years.
| Year |
Portfolio Balance (Assuming 10% Growth) |
|---|---|
| 5 | $27,329 |
| 10 | $72,293 |
| 15 | $146,273 |
| 20 | $267,994 |
| 25 | $468,262 |
| 30 | $797,764 |
| 33 | $1,090,276 |
Calculations and table by author.
It would take about 33 years of monthly investments in the fund to grow your portfolio to $1 million. If the ETF ends up averaging an even higher rate, as it has recently, then you could get there even quicker.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Growth ETF. The Motley Fool has a disclosure policy.
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