Investing in the stock market is a fantastic way to build wealth, and exchange-traded funds (ETFs) can offer a simple way to make a lot of money with little effort.
An ETF is a basket of securities bundled together into a single investment. Some ETFs track large market indexes, such as the S&P 500, while others follow particular industries or other niche sectors of the market.
Not all ETFs will be right for every portfolio, and where you choose to buy will depend on your investing goals and risk tolerance. But there are three Vanguard ETFs that could help you earn a lot of money over time, potentially turning just $100 per month into $325,000 or more.
1. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF (VOO 0.15%) tracks the S&P 500 index itself, meaning it includes the same stocks as the index and aims to mirror its performance. The S&P 500 contains stocks from 500 of the largest and strongest companies in the U.S., so by investing in just one share of this ETF, you'll instantly own a stake in all of those stocks.
S&P 500 ETFs are one of the safer types of funds, as the index itself has a decades-long track record of recovering from even the worst crashes, recessions, and bear markets. Also, because this ETF only contains stocks from large companies, it carries less risk than many other funds.
Over the last 10 years, the Vanguard S&P 500 ETF has earned an average rate of return of 12.37% per year. That may be a bit higher than you might see going forward, though, as the market itself has earned an average return of around 10% per year, historically.
2. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF (VTI 0.14%) is similar to the S&P 500 ETF, except it includes far more stocks and is much broader. While VOO only contains stocks from 500 large companies, VTI contains 3,717 stocks from corporations of all sizes -- from micro-cap stocks to large-cap stocks and everything in between.
If you're looking for maximum diversification, a total stock market ETF can be a wise choice. This fund aims to track the performance of the market as a whole, and greater diversification within your portfolio generally results in less risk.
Since its inception in 2001, this ETF has earned an average rate of return of 8.39% per year. Again, though, the stock market itself has historically earned an average rate of return of around 10% per year, so it's possible this ETF could earn slightly higher returns over the coming decades.
3. Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (VUG 0.09%) contains 199 stocks with the potential for above-average growth.
This ETF offers the least diversification of the three funds listed here, especially considering more than half of the fund is made up of stocks in the tech sector. However, growth ETFs are designed to beat the market, so if you're looking to earn higher-than-average returns over time, this investment could be a good fit.
Over the last 10 years, this ETF has earned an average rate of return of 14.57% per year. Since its inception in 2004, though, it's averaged returns of 10.90% per year.
Growth ETFs, in general, tend to be more volatile than S&P 500 ETFs and total stock market ETFs, but they also have the potential for higher returns. Before you invest, be sure that increased volatility is a risk you're willing to take.
Turning $100 per month into $325,000 or more
Exactly how much you earn with any of these ETFs will depend on how the market fares, so it's impossible to say for certain what types of returns you'll see. However, it can still be helpful to see approximately how much you could earn based on the funds' historic performances.
Let's say that you could earn a 9% average annual return with the Vanguard Total Stock Market ETF, a 10% average annual return with the Vanguard S&P 500 ETF, and an 11% average annual return with the Vanguard Growth ETF. If you're investing $100 per month, here's approximately how that would add up over time:
| Number of Years | Total Portfolio Value: 9% Avg. Annual Return | Total Portfolio Value: 10% Avg. Annual Return | Total Portfolio Value: 11% Avg. Annual Return |
|---|---|---|---|
| 20 | $61,000 | $69,000 | $77,000 |
| 25 | $102,000 | $118,000 | $137,000 |
| 30 | $164,000 | $197,000 | $239,000 |
| 35 | $259,000 | $325,000 | $410,000 |
Data source: Author's calculations via investor.gov.
To reach $325,000 in total savings, you'd need to invest consistently for around 35 years while earning 10% average annual returns. But even if you earn slightly lower-than-average returns, you could still earn hundreds of thousands of dollars over time.
Where you choose to invest will depend primarily on your goals and risk tolerance. An S&P 500 ETF or total stock market ETF may be your best bet if limiting risk is your main priority, while a growth ETF can help maximize your returns over time. By investing consistently and giving your money as much time as possible to grow, you could earn more than you might think.
