Is This Vanguard ETF a Millionaire Maker?

Date:

From investing beginners to market veterans, no investor can go wrong with the classic Vanguard S&P 500 ETF (NYSEMKT: VOO). It gives your portfolio an instant shot of broad diversification, its annual fees are vanishingly low, and it comes with a decent 1.3% dividend-like annual yield. You won’t beat the market, since the fund actively matches the S&P 500 (SNPINDEX: ^GSPC) index, which defines “the market” for most investors. But it’s an easy way to benefit from the stock market’s long-term gains with low risks and even lower fees.

But you can still do better.

Are You Missing The Morning Scoop? Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

As long as the tech sector is the main engine behind the broader market’s gains, the Vanguard Information Technology ETF (NYSEMKT: VGT) feels like a secret weapon.

First of all, a simple S&P 500 ETF can be a millionaire-maker. It just needs some combination of a large original investment, a long time in the market, and/or disciplined additional investments along the way.

However, a faster-growing fund can change the equation and get the job done sooner. Let’s take a very simple example of a quite large initial investment of $75,000, left untouched for a couple of decades. Any dividends are reinvested in more shares of the same ETF. The Vanguard S&P 500 tracker would have grown to $523,000 over the last 13 years, but the tech-heavy Information Technology ETF crossed the million-dollar mark in the same period:

VGT Total Return Level data by YCharts

The S&P 500 did better than usual in this sample time span with an average total return of 14.7% per year. The technology fund soared ahead with am average return of 20.2%.

You know what they say about past performance and future results. Wall Street’s history book is not a perfect guide to what’s coming up ahead. And it’s also true that the Vanguard Information Technology fund isn’t guaranteed to beat the market every year. It’s easy enough to find periods where this ETF merely matched the S&P 500, and it will lag behind from time to time:

VGT Total Return Level Chart
VGT Total Return Level data by YCharts

So this fund isn’t a magic market-beating trick. It runs ahead when the tech sector is doing well, and that has generally been the case in recent years. In particular, you’ll find the Information Technology fund outperforming its broader-based sibling over the last two years, thanks to the artificial intelligence (AI) market boom that started in November 2022. The tech-focused fund is up by 81% since then, while the S&P 500 gained 53%.

Share post:

Popular

More like this
Related

Former Wimbledon champion banned for doping

Two-time grand slam doubles winner Max Purcell has been...

Hansi Flick’s hopeful words failed to calm Barcelona dressing room after Atletico loss

Flick expressed his satisfaction with their overall effort, highlighting...

Middle East live updates: Israel to act against Houthis in Yemen, Netanyahu says

Rebel forces in Syria are building a transitional government...

Sources: Florentino Perez and Ancelotti discussed Real Madrid forward’s future after Sevilla win

According to Defensa Central, The pair spoke highly of...