The right investing can transform your finances, and exchange-traded funds (ETFs) are a low-effort way to build long-term wealth.
He Cutting Edge Information Technology ETF (NYSEMKT:VGT) has skyrocketed, earning total returns of more than 150% in the last five years alone. This means that if you had invested $10,000 back then, you would have more than $25,000 today.
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Past performance does not predict future returns, but there is reason to believe this ETF could still have plenty of room to grow. Here’s why.
A powerful investment
The Vanguard Information Technology ETF holds 316 stocks from all areas of the technology industry, but its biggest focus is semiconductor stocks, with about 38% of the portfolio dedicated to this subsector.
Semiconductor companies have been lucrative lately. Perhaps most notable is Micron technologywhich has obtained total returns of almost 700% in the last 12 months. This ETF offers exposure to fast-growing companies like Micron, along with established giants like NVIDIA, Appleand microsoft.
One advantage of the Vanguard Information Technology ETF, in particular, is its built-in risk protection. With more than 300 stocks spanning the broader technology sector, that extra diversification can help cushion the blow if semiconductors falter in the future.
This ETF has also become increasingly lucrative in recent years. It has earned an average annual return of around 15% since its inception in 2004, around 25% over the past 10 years, and 33% over the past three years.
To play it safe, let’s assume this ETF earns an average annual return of 15% in the future. At that rate, if you invest $200 per month, here’s roughly how your contributions could add up over time:
|
Number of years |
Total portfolio value: 15% average. Annual Return |
|---|---|
|
10 |
$49,000 |
|
15 |
$114,000 |
|
20 |
$246,000 |
|
25 |
$511,000 |
|
30 |
$1,043,000 |
Data source: Author’s calculations via Investor.gov.
If this ETF continues to outperform, as it has in recent years, it could be a lucrative long-term investment. However, given the volatility of tech stocks, be prepared for short-term turbulence if you decide to invest.
As part of a well-diversified portfolio, the Vanguard Information Technology ETF can help build life-changing wealth. While there are no guarantees in the stock market, this fund offers a solid track record for those seeking exposure to the fast-growing technology sector.