Could This Unstoppable Vanguard ETF Make You a Millionaire? Here's What History Says.

Within the Vanguard exchange-traded fund (ETF) lineup, one fund has delivered the best performance across the past three-, five-, and 10-year timeframes -- the Vanguard Information Technology ETF (NYSEMKT: VGT).

There's no question about what's been driving it. Momentum for tech stocks had been strong in the late 2010s, but they got another boost coming out of COVID, due to huge amounts of liquidity in the economy and ultra-low interest rates. Over the past few years, the artificial intelligence (AI) revolution has driven huge growth in revenues and earnings.

That's helped deliver an average annual return of 25.2% for shareholders of the Vanguard Information Technology ETF over the past decade. At that rate of return, an initial investment of roughly $105,000 in this ETF 10 years ago would have gotten you to $1 million today.

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This would be the ideal time to remind you that past performance is not a predictor of future results. Given that the S&P 500 has returned around 10% annually over the past century, a 25% average annual return is far above the historical trend. Expecting these kinds of returns over the next decade would be unwise and probably unrealistic.

That being said, the idea that investing in tech stocks over the long term could turn you into a millionaire is reasonable. Given enough time, discipline, and continued contributions in both up and down markets, the long-term power of compounding could easily turn even modest regular investments into a substantial portfolio over time.

Why investing in tech stocks is the right choice for long-term growth

In the short term, volatility can be high, and returns can vary. Coming into 2022, tech stocks were roaring. Then they fell by 30% when the Fed started aggressively raising interest rates.

But the long-term investing narrative remains the same. Many of the biggest innovations, both now and in the future, are likely to come out of the tech sector. That sets the stage for above-average growth potential, but it also has the potential for above-average risk.

If you're willing to accept that the lows might be lower over the course of a long-term investment in the Vanguard Information Technology ETF, and you're willing to ride those lows out, this fund could certainly make you a millionaire over time.

Here's an example of what it would take.

If the long-term average annual return of the S&P 500 is 10%, let's say that you could earn 12% annually with tech stocks (this is just an assumption; returns could be higher or lower). If you make an initial investment of $3,000 and add a $500 monthly investment, that would turn into roughly $1 million in 25 years.

It's not necessarily a fast wealth generator, but it's the type of outcome investors can enjoy with a steady, long-term plan.

The Vanguard Information Technology ETF has been serving investors for years. It can continue doing so well into the future, too.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.