Investing in growth exchange traded funds (ETFs) is a great way to build wealth, and it takes less time and effort than buying individual stocks.
There's nothing wrong with picking individual stocks, but to do it successfully you need to thoroughly research each company you're interested in buying. A well-diversified portfolio should include at least 25 to 30 stocks, but not everyone has the time or interest to build a personally customized set of investments.
Although an ETF's portfolio may contain tens, hundreds, or even thousands of stocks, these funds trade like stocks themselves, giving investors diversified exposure. Masu. With just one investment. Growth ETFs in particular are designed to beat the market over the long term, and with these three funds, you can significantly increase your long-term returns with virtually no effort.
1. Vanguard Growth ETF
of Vanguard Growth ETF (VUG 0.84%) contains stocks from 182 companies with a median market capitalization of $1.4 trillion. Approximately 58% of the funds are allocated to stocks in the tech sector. The company's largest holdings include industry leaders such as: apple, Nvidiaand microsoft.
This particular ETF is a smart choice for those looking to balance risk and reward. Growth ETFs, particularly those focused on the tech sector, generally carry higher risk than many other types of funds.
This fund is no exception, with its top 10 holdings accounting for more than 57% of the ETF's overall value. They can reduce the risk of ETFs underperforming because they are large companies that are more likely to survive periods of volatility. In contrast, the remaining 172 stocks are small-cap stocks with a high potential for explosive growth.
Over the past 10 years, this ETF has earned an average annual return of 15.17%. This is significantly higher than the market's historical average of about 10% per year. If you invest $2,000 now and make no additional contributions, your position will grow to more than $132,000 in 30 years if the ETF continues to generate a 15% annual return.
2. Schwab U.S. Large Cap Growth ETF
of Schwab U.S. Large Cap Growth ETF (SCHG 0.83%) is similar to the Vanguard Growth ETF in many ways, but it is broader and more diverse. It includes 230 stocks, but only about 49% of its value is allocated to the tech sector.
More diversification can reduce risk, especially if stocks are evenly distributed across multiple industries. For example, the tech sector tends to be hit harder than other sectors during periods of economic instability, and while this ETF remains heavily dependent on that industry, it is less focused on tech than other growth ETFs. Not.
Despite being a bit more diversified, this ETF still packs a punch. The average annual return over the past 10 years has been 16.10% per year, slightly higher than the Vanguard Fund. If you can maintain this growth rate, if you invest $2,000 now (with no additional contributions) and hold it for 30 years, you'll be left with a position worth about $172,000.
3. Vanguard Information Technology ETF
of Vanguard Information Technology ETF (VGT 0.89%) It is a little different from the other two funds in that it is completely focused on the technology sector. It includes 314 stocks from various sectors of the information technology industry, from semiconductors to systems software, technology hardware, and more.
Many of the largest stocks in the fund overlap with the top stocks in the other two funds. Its three largest holdings, Apple, Nvidia, and Microsoft, make up a larger portion of the portfolio compared to other ETFs on this list. In fact, these three stocks alone account for nearly 45% of the entire fund.
This ETF has lower variance than the other two, making it the riskiest of the three ETFs. If you buy shares in this fund, it's wise to also invest in at least one other more diversified ETF, as investing solely in the tech sector increases the risk of your portfolio plummeting during market downturns.
However, sometimes the greater the risk, the greater the reward. The average annual return for this ETF over 10 years is a whopping 20.37%. If you can maintain this level of return, your one-time $2,000 investment could grow to about $475,000 in 30 years.
Which ETF is right for you?
The choice of which funds and stocks to invest in should reflect your risk tolerance and goals. If you're willing to take on more risk for the chance to earn higher returns, industry-specific ETFs like the Vanguard Information Technology ETF may be a good fit for your portfolio.
On the other hand, if you are willing to accept less ambitious upside potential and want to limit your risk, investing in a more broadly diversified growth ETF may be a safer choice. . Funds like the Vanguard Growth ETF and the Schwab U.S. Large Cap Growth ETF hold positions in large companies across many industries, providing greater diversification while providing above-average returns.
Katie Brockman has positions in Vanguard Index Fund – Vanguard Growth ETF and Vanguard World Fund – Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
