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The right investments can greatly enhance your portfolio, and exchange-traded funds (ETFs) can be a great option for many people.
An ETF is a basket of securities combined into a single investment. When he invests in just one ETF, he will actually be investing in hundreds or even thousands of stocks at once. This makes it much easier to build a well-diversified portfolio, limiting your risk with minimal effort.
There are countless ETFs to choose from, and the best one for your portfolio will depend on your preferences and risk tolerance. However, there is one ETF that I have owned for years and will continue to stock up on through 2024, and it could help you make a lot of money in the long run.
How the right ETF can help you build wealth
When choosing ETFs for your portfolio, it’s important to consider your goals and preferences. If you’re looking for an investment that can limit your risk and requires little effort to maintain, one option is: Vanguard Total Stock Market ETF (VTI 0.15%).
This fund is a broad market ETF that aims to replicate the performance of the overall stock market. It provides exposure to different sectors of the market with a single investment and includes his massive 3,761 stocks across 11 industries.
It also includes large-cap, mid-cap, small-cap, and micro-cap stocks for further diversification.Ann S&P500 ETFs, on the other hand, only include large-cap stocks. That’s not necessarily a bad thing, but small-cap stocks often have more room to grow. At the same time, this ETF is less risky than, say, a growth ETF that contains only stocks and is expected to deliver above-average returns.
Even if you don’t have much to invest in, you can easily create a balanced portfolio by putting your money into this one ETF. By comparison, if you invest in individual stocks, you’ll need to buy shares in at least 25 to 30 different companies to properly diversify.
This ETF also boasts one of the lowest expense ratios at just 0.03% annually. In other words, for every $10,000 in assets you own, you pay just $3 a year in fees to manage your investments. This is much lower than many other similar ETFs (which often have expense ratios of 1% or more) and could save you thousands of dollars in fees over the long term.
How much money will I make with this investment?
The Vanguard Total Stock Market ETF is a great investment for first-time buyers and experienced investors looking to further diversify their portfolio.
Since its inception in 2001, this ETF has returned an average of just over 8% per year. While this is slightly below the market’s historical average of 10% per year, it still has the potential to generate significant returns over the long term.
For example, let’s say you invest $300 per month and earn an average return of 8% per year. Depending on the number of years you need to invest, here’s the approximate amount you can accumulate over time:
| years | Total portfolio amount |
|---|---|
| 20 | $165,000 |
| twenty five | $263,000 |
| 30 | $408,000 |
| 35 | $620,000 |
| 40 | $933,000 |
Data source: Author calculations via investor.gov.
With enough time and consistency, you can make hundreds of thousands of dollars or more. And if you can afford to increase your monthly investments over time, you could potentially build a portfolio worth well over $1 million.
There is no single investment that is best for everyone as it depends on personal preference. The Vanguard Total Stock Market ETF is a smart choice for those who want to limit risk while easily building a diversified portfolio, and it could help you earn more than you think in the long run. .
Katie Brockman has a position in Vanguard Index Fund Vanguard Total Stock Market ETF. The Motley Fool owns positions in and recommends Vanguard Index Fund and Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.
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