Investing in an exchange-traded fund (ETF) is one of the most effortless ways to build long-term wealth. ETFs are passive investments that require little effort on your part, and they perform best when left alone for many years.
Some ETFs are riskier than others, however, so choosing the right investment is key. For investors seeking a low-maintenance fund that could build a million-dollar portfolio with a few hundred dollars per month, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) could be a smart choice right now.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
A safe yet powerful investment
The Vanguard Total Stock Market ETF aims to capture a snapshot of the overall market, holding nearly 3,500 stocks across all industries. It also includes stocks of all sizes, from up-and-coming small-cap stocks to industry-leading megacap companies.
It’s tough to find an investment more rounded than the Vanguard Total Stock Market ETF, and that diversification can help limit risk. If a few stocks or even an entire industry gets hit hard during a market downturn, it’s less likely to sink your entire portfolio when you’re investing in thousands of stocks at once.
This ETF also has a long track record of success. Launched in 2001, it’s earned an average return of close to 10% per year. It’s outperformed that figure more recently, earning an average annual return of more than 15% over the past decade and 23% over the last three years.
For simplicity’s sake, let’s assume you’ll be earning a 10% average annual return on your investment. If you’re investing $300 per month, here’s approximately how it might add up over time:
Data source: Author’s calculations via investor.gov.
Perhaps the biggest advantage of this fund is its consistency. While past performance doesn’t predict future earnings, a total stock market ETF is very likely to deliver positive long-term returns. The trade-off for that stability, though, is that it will take most investors decades to generate hundreds of thousands of dollars with this fund.
While the Vanguard Total Stock Market ETF may not be the highest-earning investment out there, it does offer plenty of long-term potential. By investing regularly and staying in the market for decades, you could earn more than you might think.
