A Monthly Investment of Just $250 in This Vanguard ETF Could Turn Into a Mind-Boggling Sum in 30 Years

The Vanguard Morningstar Growth ETF (NYSEMKT: VUG) is an exchange-traded fund (ETF) that mimics the Morningstar U.S. Large Cap Growth index. The ETF exclusively holds 147 of the most valuable growth stocks listed on U.S. exchanges, which is why it has consistently outperformed the broader market since it launched in 2004.

Growth stocks are known for producing high capital gains, separating them from value stocks that offer modest returns supplemented by dividend income. Volatility is often the price of admission when investing in growth versus value, but it can also be very rewarding over the long term.

Here's how a monthly investment of $250 in the Vanguard Morningstar Growth ETF could turn into a mind-boggling sum of money in 30 years.

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A high degree of exposure to booming industries like artificial intelligence

The Vanguard Morningstar Growth ETF invests across 11 different sectors of the economy, but it has a whopping 69.8% of its assets parked in companies from the technology sector alone. These companies operate in industries like cloud computing, semiconductor manufacturing, and enterprise software, which are central to the artificial intelligence (AI) revolution.

In fact, each of the top three holdings in the Vanguard ETF are from the technology sector, and they represent a combined 36.2% of the value of its portfolio:

1. Nvidia (NASDAQ: NVDA): 13.61%
2. Apple (NASDAQ: AAPL): 12.48%
3. Microsoft (NASDAQ: MSFT): 10.11%

Nvidia supplies the world's best graphics processing units (GPUs) for data centers, which are the main chips used in AI training and inference workloads. It was a $360 billion company at the start of 2023, and it's now worth over $5 trillion just three years later. But there is still plenty of growth left in the tank, because CEO Jensen Huang says chip sales could double next year compared to 2026.

Apple isn't spending hundreds of billions of dollars to build data center infrastructure like many of its peers. Instead, it wants to leverage the 2.5 billion active iPhones, iPads, and Mac computers globally to become the biggest distributor of AI software to consumers. It's trying to achieve this through Apple Intelligence, a suite of AI-powered features and applications designed to make its devices more intuitive.

Then there is Microsoft, which is taking a multi-faceted approach to AI. It built an AI assistant called Copilot which is embedded in legacy software products like Windows and the 365 productivity suite. But it also provides access to data center capacity, ready-made models, and other tools through its Azure cloud platform, making it easy for businesses of all sizes to adopt AI.

Some of the other technology stocks in the Vanguard ETF include Broadcom, Advanced Micro Devices, and Palantir Technologies. But the fund also holds many stocks from tech-adjacent sectors, like Alphabet, Amazon, Tesla, and more.

A monthly investment of $250 could be worth this much in 30 years

The Vanguard Morningstar Growth ETF has delivered a compound annual return of 12.1% since it launched in 2004, outpacing the S&P 500 (SNPINDEX: ^GSPC) index, which gained an average of 10.8% per year over the same period.

The 1.3-percentage-point difference in annual returns might not sound like much, but it would make a monumental difference in dollar terms over a 30-year period thanks to the effects of compounding. Here's how much a monthly investment of $250 in the Vanguard ETF could be worth in three decades, compared to the same investment in the S&P 500.

Data source: calculations by author.

Even if returns slow down across the broader market, I think the Vanguard ETF is likely to continue outperforming the S&P 500 because it exclusively holds America's largest growth stocks, which consistently lead the way in terms of revenue and earnings. And while AI is driving the Vanguard ETF higher right now, future technologies like autonomous driving, robotics, and quantum computing could contribute significant returns in the coming decades.

However, I want to reiterate that investing exclusively in growth stocks can lead to more volatility compared to taking a more conservative approach. Investors have to be comfortable with steeper corrections during periods of market turmoil if they decide to make regular investments in the Vanguard ETF. Fortunately, history suggests these often produce the best buying opportunities.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Microsoft, Nvidia, Palantir Technologies, Tesla, and Vanguard Morningstar Growth ETF. The Motley Fool has a disclosure policy.