Three Long-Term Expanding ETFs to Invest in by 2025
Dabbling in the stock market can aid in creating long-term wealth, but the investments you pick can dramatically impact your earning potential.
If you're searching for an uncomplicated and minimum-effort method to enter the market, you might think about exchange-traded funds (ETFs). ETFs can make investing in numerous stocks at once a hassle-free venture, and there are three ETFs specifically that could skyrocket your savings by 2025 and beyond.
1. Charles Schwab U.S. Large-Cap Growth ETF
The Charles Schwab U.S. Large-Cap Growth ETF (SCHG -2.11%) is an ETF that concentrates on large companies that exhibit growth potential. It consists of 229 stocks, representing various sectors, with nearly half (49%) of the fund allocated to stocks within the tech industry.
This ETF can be an astute choice for those seeking a balanced growth fund with lower investment risk. Although no investment is inherently risk-free, large-cap stocks are often more stable than smaller stocks.
The top three holdings in this ETF are Apple, Microsoft, and Nvidia, which, combined, make up approximately 30% of the entire fund. Even market leaders like these are not immune to volatility, but they are more likely to survive market downturns and deliver positive long-term returns.
Growth ETFs are designed to deliver above-average returns, and this ETF has delivered so far. For the past 10 years, it has earned an average annual return of 16.55%, surpassing the S&P 500 by a wide margin.
If this ETF maintains its 16% annual return rate, investing just $200 per month could help you accumulate over $600,000 after 25 years.
2. Vanguard S&P 500 Growth ETF
The Vanguard S&P 500 Growth ETF (VOOG -2.14%) is quite similar to the Charles Schwab ETF, containing 234 stocks in total, with approximately half (49%) of the fund dedicated to tech stocks, similar to the Schwab ETF. The top three holdings are Apple, Nvidia, and Microsoft, making up around 35% of the ETF.
However, the major distinction between the two ETFs is that the Vanguard ETF only includes stocks from the S&P 500. To be a part of the S&P 500, companies must meet certain criteria, and the index is widely regarded as a reliable indicator of the stock market's overall performance.
In other words, all companies within the S&P 500 are strong, limiting your investment risk. However, since this ETF only includes stocks that are projected to grow significantly, there is also potential for above-average returns.
Over the past 10 years, the Vanguard S&P 500 Growth ETF has earned an average annual return of 14.95%, marginally lower than the Charles Schwab ETF, but still significantly higher than the S&P 500 itself during the same timeframe.
If you invest $200 per month while earning a 15% average annual return, that could amount to approximately $511,000 after 25 years.
3. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT -2.23%) takes a somewhat distinct approach, as it focuses solely on technology companies.
Industry-specific ETFs can be riskier than multi-sector ETFs, as you are investing in fewer diversified stocks. However, you could also earn more significant returns, especially considering the tech sector often includes faster-growing companies than other industries.
Whether this increased risk is worth the potential rewards will depend on your risk tolerance. Those who prefer a more balanced approach may find this ETF too risky. But if your portfolio is well-diversified, and you are seeking to maximize your earnings, the added risk could be worthwhile.
The Vanguard Information Technology ETF has significantly outperformed the S&P 500 over the past 10 years, earning an average annual return of 20.59%.
It's essential to remember that there is no guarantee that this fund will maintain its 20% annual return rate in the future. Tech ETFs can be highly volatile in the short term. Nevertheless, if you continue to earn 20% average annual returns while investing $200 per month, you could potentially accumulate more than $1.1 million after 25 years.
Investing in ETFs can help bolster your savings with minimal effort, and growth ETFs can be a smart way to enhance your earnings. By carefully considering your risk tolerance and personal preferences before investing, you could be well on your way to creating life-changing wealth.
- To maximize your long-term earning potential, you might consider investing in growth ETFs, such as the Charles Schwab U.S. Large-Cap Growth ETF, as they can offer higher returns than traditional index funds.
- When it comes to managing your finance and investing, diversification is key. This includes considering different types of ETFs, like the Vanguard Information Technology ETF, which focuses on technology companies, to potentially boost your returns and mitigate risk.
