Want $1 Million in Retirement? Look at 3 Simple Index Funds to Buy and Hold for Decades.

Are you looking to become a millionaire before you retire? It's certainly possible, even earning a merely average income. The key is being disciplined enough to save some money along the way, and being smart enough to maximize that money's growth.

The irony? When it comes to maximizing your returns, less is more, and simpler is better. Plenty of investors have undermined their own returns by too many overly aggressive stock picks and too much activity. Buying and holding more basic investments often bears more fruit in the long run.

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With that as the backdrop, here's a closer look at three super-simple but high-potential exchange-traded index funds that would work well in almost anyone's portfolio. In no particular order...

Vanguard Dividend Appreciation ETF

Just as the name suggests, the Vanguard Dividend Appreciation ETF's (NYSEMKT: VIG) chief goal is holding stocks that pay reliably rising dividends. It's built to mirror the performance of the S&P U.S. Dividend Growers Index, which consists of stocks of U.S. companies that have raised their dividend payments every year for at least the past 10 years.

There's a twist, however. See, Standard & Poor's deliberately excludes the 25% highest-yielding tickers from this index. Although this ultimately lowers this ETF's current yield to a relatively low 1.7%, this rule weeds out many of the potentially problematic tickers that sport higher dividend yields due to subpar performances (which often precede dividend cuts).

But you don't need -- or even want -- income right now? That's ok. You can reinvest these dividends in more shares of the fund paying them. You should, in fact, since the market's best dividend payers also usually end up being its best-performing stocks in terms of capital appreciation. Data from mutual fund company Hartford indicates that between 1973 and 2023, S&P 500 constituents that consistently raised their dividends experienced an average annualized net gain of just over 10%, versus an average yearly gain of about 5% for stocks of companies that didn't raise their dividends or pay any dividends at all.

Connects the dots. The same qualities that allow for consistent dividend growth also seem to facilitate company growth and rising stock prices. Indeed, it's very possible you could end up achieving growth-like returns from names that aren't considered growth stocks.

iShares Core S&P Mid-Cap ETF

Anyone reading this is almost certainly familiar with the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), which reflects the S&P 500 index (SNPINDEX: ^GSPC) itself. It's an ideal way to invest in "the market," since the S&P 500's large caps collectively account for about 80% of the stock market's total value.

By its very large-cap nature, however, the S&P 500 excludes an entire high-potential sliver of the stock market...the other 20%.

Enter the iShares Core S&P Mid-Cap ETF (NYSEMKT: IJH), which replicates the performance of the S&P 400 Mid Cap Index. These are companies with market capitalizations in the ballpark of $2 billion to $10 billion.

This is a sweet spot for most organizations. They're past their small-cap start-up phase where survival isn't guaranteed. Yet, they're also not yet large caps. They're somewhere in between, perhaps en route to becoming the next powerhouse of their industry. Lennox International and GoDaddy, for instance, are just a couple of former S&P 400 names that recently graduated to the S&P 500.

And whether or not these mid caps ever grow their way out of the index, they still boast an incredible performance track record. Since the beginning of this century, the S&P 400 has outperformed the S&P 500 by a ratio of nearly two to one.

^MID data by YCharts

Obviously past performance is no guarantee of future results. Past performance is what it is for a reason, though, and the reason here is likely to be replicated. That's the continued rise of scrappy, up-and-coming companies that have the wherewithal to disrupt their respective industries with a better solution or a new idea.

Invesco QQQ Trust

Last but not least, add the Invesco QQQ Trust (NASDAQ: QQQ) to your list of index ETFs that could help make you a millionaire by the time you retire.

At first blush it feels like a risky prospect. While it's obviously not an individual stock, it's only performed so well of late because it's overweighted with the hottest of the market's hot tech stocks like Apple, Nvidia, Microsoft, Amazon, and Meta. Indeed, its top 10 holdings alone account for over half of the underlying Nasdaq-100 index's total value. That's not exactly balanced, or the sort of allocation most investors might choose for themselves with individual stocks.

There's a strategic reason, nonetheless, you might want to make a point of owning a stake in this relatively unbalanced index fund: the fact that technology stocks are apt to remain the most fruitful -- even if the most volatile -- investment prospects for the near and distant future. That's just the nature of technology itself. By holding the Invesco QQQ Trust, you hold almost all of the market's best-growing tech names, yet any necessary buying, selling, and swapping-out of these names is automatically handled by Invesco for you. And let's face it. It's tempting but tricky to try to time any entries and exits of most technology stocks.

The kicker: A lot of investors don't realize it, but the QQQ's underlying Nasdaq-100 index also excludes financial (banks, brokers, asset managers, etc.) stocks. That doesn't mean you should avoid financials altogether in your portfolio. But it does mean the Invesco QQQ Trust's net performance won't be held back by a group of stocks that tend to generate merely modest returns, but are highly cyclical as well. It's a much more focused growth fund that still successfully spreads its risk around.

Should you invest $1,000 in Vanguard Dividend Appreciation ETF right now?

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends GoDaddy and 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.