If you want to grow your portfolio to more than $1 million, you can do it even without having a lot of money to invest today. Steadily increasing your investment over time can allow you to save and invest at the same time. Not only are you effectively increasing your savings, but you’re also putting the money to work right away, rather than having it in your bank account and potentially earning only a minimal return.
The challenge can be finding the right investments to keep accumulating money into each month, to ensure that they are fairly safe and have the potential to generate significant long-term returns.
There are a couple of solid Vanguard exchange-traded funds (ETFs) that can be great investments around which you can build your portfolio. Both the Vanguard Total Stock Market ETF (NYSEMKT: VTI) and the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) They are solid options that can turn investments of $300 per month into more than $1 million after a period of 34 years.
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The Vanguard Total Stock Market Index Fund is a simple and obvious choice for investors. As the name suggests, it gives you a position in virtually the entire stock market. While you don’t own all the stocks, you can certainly feel that way: your portfolio includes more than 3,500 stocks. His largest position is in the technology giant. NVIDIAwhich represents more than 7% of its total holdings. But, in general, it is a fairly diversified investment.
With this ETF, you’ll get a wide range of stocks that span many different sectors. Technology accounts for just under 40% of holdings, followed by consumer discretionary stocks at 14%, industrials at 12% and financials at 10%; that is the only other sector with double digits.
The good thing about the ETF is that its expense ratio is only 0.03%, which means the fees are minimal. Over the last decade, the fund has performed similarly to the S&P 500(SNPINDEX: ^GSPC)which has averaged returns of around 10% annually for decades.
Assuming the fund can continue to perform similarly to the S&P 500, that may be enough to turn a $300 monthly investment in this ETF into at least $1 million after a 34-year period.
Another Vanguard fund that you may want to consider investing money in each year is the Vanguard S&P 500 Growth ETF. Its expense ratio is slightly higher at 0.07%, but still quite low overall.
The nice thing about this ETF is that it focuses on growth stocks within the S&P 500. The index is already made up of the leading companies in the US markets, and this ETF forms a smaller subset of that group. That gives you the security of knowing you have a position in the S&P 500, but with a greater focus on growth. Instead of 500 stocks, the fund gives you exposure to 217 stocks (as of October 31).
That focus on growth has paid off for investors. Over the past 10 years, this ETF has generated returns of around 315% versus 210% for the Total Stock Market ETF and 224% for the S&P 500 overall.
There is a bit more risk with this fund, as tech stocks make up about 44% of its overall position and Nvidia makes up more than 15% of the entire portfolio. For risk-averse investors, that may be an unsustainable situation. But if your focus is on the long term, that may not be a big concern, as having less diversification is often the trade-off when pursuing more of a growth strategy and focusing on the best of the best.
This ETF has the potential to generate higher returns than the Total Stock Market ETF due to its focus on growth, but investors should consider the additional risk that comes with this fund.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends the Nvidia and Vanguard Total Stock Market ETFs. The Motley Fool has a disclosure policy.
The Top 2 Vanguard ETFs That Can Turn $300 Each Month into Over $1 Million was originally published by The Motley Fool
