Stock Market Rallies: Opportunities in Tech ETFs for Investors
The stock market has had a tumultuous year, yet those who remained engaged have seen substantial returns. As of now, the S&P 500 (SNPINDEX: ^GSPC) has surged nearly 20% since hitting its low point in early April. While future months remain uncertain, historical trends suggest that the market could perform well in the long term. Investing today could position you for meaningful gains.
Where to Invest $1,000 Right Now
While potential gains are enticing, the choice of where to invest is crucial. For those seeking a less hands-on approach, a growth ETF could transform an investment of just $100 per month into a substantial portfolio. Understanding the mechanics of such an investment is essential.
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A Tech ETF with a Strong Track Record
An ETF (Exchange-Traded Fund) is essentially a collection of securities wrapped into one fund. While some ETFs mirror the overall market performance, others focus on specific industries or company sizes. The main appeal of an ETF lies in its simplicity; the selection of stocks is handled for you, allowing for easier long-term investing.
If you’re targeting above-average returns, the Vanguard Information Technology ETF (NYSEMKT: VGT) is worth considering. Although tech stocks can be volatile, this ETF presents several advantages:
- Diverse Tech Exposure: Comprising 307 stocks from various tech sectors—from software to semiconductors—this ETF allows for a diversified investment within the technology industry, reducing overall risk.
- Inclusion of Mega-Cap Stocks: With a median market cap of $905 billion, it includes major players like Apple, Microsoft, and Nvidia, which tend to withstand market fluctuations better than smaller companies.
- Proven Resilience: Since its inception in 2004, the fund has navigated various economic downturns, demonstrating its ability to endure tough market conditions.
This ETF has not only weathered recessions but prospered during them.
^SPX data by YCharts
Over the past decade, the Vanguard Information Technology ETF has delivered an average annual return of 18.90%. Since its launch, it has achieved an average of 12.82%, exceeding the historical market average of 10%.
Building a $500,000 Portfolio
Your potential earnings with this ETF depend on market performance over the next few years. Even if returns fall below historic averages, you could still accumulate significant wealth.
If you invest $100 monthly and achieve average returns of 19%, 13%, or 10%, the portfolio’s future value could look like this:
| Number of Years | Total Portfolio Value: 10% Avg. Annual Return | Total Portfolio Value: 13% Avg. Annual Return | Total Portfolio Value: 19% Avg. Annual Return |
|---|---|---|---|
| 20 | $69,000 | $97,000 | $199,000 |
| 25 | $118,000 | $187,000 | $482,000 |
| 30 | $197,000 | $352,000 | $1,160,000 |
| 35 | $325,000 | $656,000 | $2,777,000 |
Data source: Author’s calculations via investor.gov.
To amass $500,000, you would need around 25 years of investing while earning a 19% average annual return. Achieving a 13% average would still accumulate more than half a million dollars with a few additional years of investing.
In a best-case scenario, consistent returns could yield close to $3 million over 35 years.
It’s important to note that tech ETFs can experience heightened volatility, particularly in the short term. While the Vanguard Information Technology ETF boasts a proven history, market fluctuations can impact future performance. Nonetheless, for long-term investors, this ETF may provide a solid opportunity for wealth accumulation.
Should You Invest $1,000 in Vanguard Information Technology ETF Now?
Before acquiring shares in the Vanguard Information Technology ETF, consider this:
The analyst team from The Motley Fool Stock Advisor has identified what they believe to be the 10 best stocks for current investment, and Vanguard Information Technology ETF is not among them. The stocks on this list could yield significant gains in upcoming years.
Historical context demonstrates the potential of selected recommendations. For instance, had you invested $1,000 in Netflix when it was recommended on December 17, 2004, your investment would be worth $642,582 today. Similarly, investing in Nvidia from April 15, 2005, would yield $829,879 today.
Notably, Stock Advisor boasts a total average return of 975%, which significantly surpasses the S&P 500’s 172%.
Katie Brockman has positions in Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. They also suggest long and short options on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
