3 Unstoppable Growth ETFs That Could Turn $2,000 Into $132,000 With Practically Zero Effort

Source The Motley Fool

Investing in growth exchange-traded funds (ETFs) can be a fantastic way to build wealth, and it takes less of your time and effort than buying individual stocks.

While there's nothing wrong with opting for individual stocks, to do it well, you'll need to heavily research each company you're interested in buying. A properly diversified portfolio should contain at least 25 to 30 stocks, and not everyone has the time or interest to build a personally customized set of investments.

An ETF's portfolio can contain dozens, hundreds, or even thousands of stocks, but these funds trade like stocks themselves, giving investors the ability to get diversified exposure with a single investment. Growth ETFs, specifically, are designed to beat the market over time, and these three funds could supercharge your long-term earnings with practically zero effort.

1. Vanguard Growth ETF

The Vanguard Growth ETF (NYSEMKT: VUG) contains shares of 182 companies with a median market cap of $1.4 trillion. Around 58% of the fund is allocated to stocks in the tech sector; its largest holdings include industry leaders like Apple, Nvidia, and Microsoft.

This particular ETF can be a smart choice for those looking to balance risk and reward. Growth ETFs -- especially those that are heavily weighted toward the tech sector -- are generally riskier than many other types of funds.

While this fund is no exception, its top 10 holdings make up more than 57% of the entire ETF's value. Because they are juggernaut companies that are more likely to survive periods of volatility, that can decrease the risk that the ETF will underperform. The other 172 stocks, by contrast, are from smaller companies that have greater chances of experiencing explosive growth.

Over the past 10 years, this ETF has earned an average annual return of 15.17% per year -- substantially higher than the market's historic average of around 10% per year. If you were to invest $2,000 in it right now and never make any additional contributions, if the ETF continued to produce a 15% annualized return, in 30 years, your position would grow to more than $132,000.

2. Schwab U.S. Large-Cap Growth ETF

The Schwab U.S. Large-Cap Growth ETF (NYSEMKT: SCHG) is similar to the Vanguard Growth ETF in many ways, but it's slightly broader and more diverse. It contains 230 stocks, with only around 49% of its value allocated to the tech sector.

Greater diversification can help reduce your risk, especially when your stocks are more evenly spread across multiple industries. The tech sector, for example, tends to be hit harder than other sectors during periods of economic volatility, and though this ETF still leans heavily on that industry, it's not as tech-focused as some other growth ETFs.

Despite being slightly more diversified, this ETF still packs a punch. Its average annualized return over the last 10 years was 16.10% per year, which is slightly higher than the Vanguard fund. If it maintains that growth rate, investing $2,000 right now (with no additional contributions) and holding on for 30 years would leave you with a position worth around $172,000.

3. Vanguard Information Technology ETF

The Vanguard Information Technology ETF (NYSEMKT: VGT) is a bit different from the other two funds in that it's entirely dedicated to the tech sector. It contains 314 stocks from various areas of the information technology industry, from semiconductors to systems software to technology hardware and more.

Many of the largest stocks in the fund overlap with the top positions in the other two funds. Its three largest holdings are Apple, Nvidia, and Microsoft, but they comprise a larger percentage of the portfolio compared to the other ETFs on this list. In fact, those three stocks alone make up close to 45% of the entire fund.

Because this ETF is less diversified than the other two, it's also the riskiest of the three. If you choose to buy shares of this fund, it would be wise to also invest in at least one other ETF that's more diversified, as investing only in the tech sector puts your portfolio at greater risk of steep declines during market downturns.

Greater risk can sometimes come with greater reward, however. This ETF's 10-year average annualized return is a whopping 20.37%. If it's able to maintain that level of returns, a single $2,000 investment could grow into around $475,000 after 30 years.

Which ETF is right for you?

Which funds and stocks you choose 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, an industry-specific ETF like the Vanguard Information Technology ETF could be a good fit for your portfolio.

On the other hand, if you'd prefer to limit your risk, recognizing that you're also accepting a less ambitious potential upside, investing in a growth ETF that's broader and more diversified could be a safer move. Funds like the Vanguard Growth ETF and Schwab U.S. Large-Cap Growth ETF hold positions in large companies from many industries, providing more diversification while still offering above-average returns.

Don’t miss this second chance at a potentially lucrative opportunity

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  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $358,460!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,946!*
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*Stock Advisor returns as of November 25, 2024

Katie Brockman has positions in Vanguard Index Funds-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: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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