Everyone wants to be financially comfortable, but building a strong financial future can be tough. It’s not enough to simply save to create long-term wealth — you’ll need to invest.
Finding the right investments can be challenging, though, because not all stocks are created equal. Choose the wrong stocks or funds, and it could wreak havoc on your finances.
These four Vanguard ETFs make fantastic long-term investments. If you invest consistently and stay invested for as long as you can, these funds can help you create a strong financial future and set you up for life.
1. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF (NYSEMKT: VTI) is a fund that contains 3,755 stocks from small, midsize, and large companies across a wide variety of industries. Its goal is to replicate the performance of the stock market as a whole, which makes it a relatively safe investment. The stock market itself does experience short-term volatility, but it’s earned positive returns over the long run.
This ETF was established in 2001, and since then, it has earned an average annual return of around 8% per year. Keep in mind that this doesn’t necessarily mean you’ll earn 8% returns each and every year. There will be some years you’ll experience off-the-charts returns, while in other years, you’ll see losses. Over time, though, those returns may average out to around 8% per year.
So how far will this ETF get you? Let’s say you began investing $300 per month while earning an 8% average annual return. After 30 years, you’d have roughly $408,000 accumulated.
This is just an estimate, of course, and there are never any guarantees when it comes to the stock market. But the more consistently you invest and the longer you continue investing, the more money you can potentially make.
2. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF (NYSEMKT: VOO) aims to mirror the S&P 500 itself. It includes just over 500 stocks from some of the largest and strongest companies in the United States.
The biggest difference between the S&P 500 ETF and the Total Stock Market ETF is that the S&P 500 ETF only includes large-cap stocks. The Total Stock Market ETF contains large-cap, mid-cap, and small-cap holdings. Large-cap stocks tend to experience less growth than their smaller counterparts, but they’re also less volatile.
Since this fund’s inception in 2010, it’s earned an average annual return of around 15% per year. However, this is mostly a result of the incredible bull market we’ve experienced since the tail end of the Great Recession, so it’s unrealistic to assume this fund will continue earning 15% average returns over the next few decades.
The S&P 500 itself has earned average returns of around 10% per year since its inception. Again, this doesn’t mean you’ll earn 10% returns year after year, but rather as an average over time. If you were to invest $300 per month while earning a 10% average annual return, you’d have around $592,000 invested after 30 years.
3. Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (NYSEMKT: VUG) includes 276 stocks that have the potential to experience rapid growth. This means you’re more likely to experience higher-than-average returns, but that comes with higher levels of risk, too.
High-growth companies tend to be more volatile than well-established companies. The good news, though, is that some of the largest stocks in this fund are tech giants like Apple, Microsoft, and Amazon. While these companies have experienced exponential growth, they’re also relatively stable stocks.
This fund was established in 2004, and since then, it has earned an average return of around 11% per year. If you were to invest $300 per month while earning an 11% average annual return, you’d have around $716,000 after 30 years.
4. Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF (NYSEMKT: VGT) is a fund that focuses only on the tech sector. It includes 333 stocks that are all in the information technology industry.
Because all the stocks in this ETF are in the same industry, this fund doesn’t provide as much diversification as the others on the list. For that reason, it’s wise to invest in at least one other broad-market fund — like an S&P 500 ETF or Total Stock Market ETF — in addition to this ETF to avoid putting all your eggs in one basket.
The advantage of investing in this fund is that tech stocks are known for their growth, so this ETF is more likely to experience higher returns. In fact, since its inception in 2004, this fund has earned an average return of around 13% per year. If you invested $300 per month while earning an average return of 13% per year, you’d have approximately $1.056 million after 30 years.
Investing in the stock market is an excellent way to build wealth over time. With the right ETFs and enough patience, you can earn more than you may think.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman owns shares of Vanguard Total Stock Market ETF. The Motley Fool owns shares of and recommends Amazon, Apple, Microsoft, Vanguard Growth ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon, long March 2023 $120.0 calls on Apple, short January 2022 $1940.0 calls on Amazon, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.