Long-term investing is the key to building wealth in the stock market. The best investments are the ones that grow consistently over time, and by holding them for as long as possible, you can generate wealth that lasts a lifetime.
Growth ETFs can be a fantastic addition to your portfolio and are designed to earn higher-than-average returns. Because each ETF contains hundreds of stocks, they still provide ample diversification and reduce your risk.
Not all growth ETFs are created equal, however, and it can be challenging to choose the right ones. These three funds make fantastic long-term investments and can potentially make you a lot of money over time.
1. iShares Russell 1000 Growth ETF (IWF)
The iShares Russell 1000 Growth ETF (NYSEMKT: IWF) includes 498 stocks from a wide variety of industries. All of the stocks within the fund are expected to experience above-average growth. Some of the largest are heavy hitters like Amazon, Apple, and Microsoft.
This ETF was established in 2000, giving it a long track record. While past performance doesn't predict future returns, a fund that's been around for decades is more likely to continue growing over time.
Since its inception, this fund has earned an average rate of return of around 7% per year. In other words, despite all the ups and downs, its annual returns averaged out to around 7% over time.
By holding this fund for the long term, you could potentially make a lot of money. If you were to invest, say, $300 per month while earning a 7% average annual return, you'd have close to $500,000 saved after 35 years.
2. Invesco QQQ Trust (QQQ)
Invesco QQQ Trust (NASDAQ: QQQ) is an ETF that tracks the Nasdaq 100 Index and includes just over 100 stocks from the largest non-financial companies around the world. Around half of the fund is made up of companies from the technology sector, but it includes stocks from a variety of other industries, as well.
With fewer stocks, this ETF does provide less diversification than some other funds. And because the bulk of the stocks are from a single industry, it also poses more risk. However, technology companies are known for their explosive growth, and this fund includes big names like Apple, Microsoft, Amazon, and Alphabet — companies that are likely to see long-term growth.
Established in 1999, this fund also has a long history, making it a smart option for long-term investors. Since it was launched, it's earned an average rate of return of more than 9% per year.
If you were to invest $300 per month in this fund while earning a 9% average annual return, you'd end up with roughly $777,000 after 35 years.
3. Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (NYSEMKT: VUG) tracks the CRSP US Large Cap Growth Index and includes 287 stocks that have the potential for rapid growth. This fund is also heavily weighted toward the tech industry but includes stocks from nearly a dozen different sectors.
This ETF is the youngest on the list, launched in 2004. However, it also boasts the highest returns, earning an average rate of return of more than 11% per year since its inception.
Part of the reason it's earned higher returns may be because, unlike the other two ETFs on the list, this fund wasn't around during the dot-com bubble burst of the early 2000s. So while this fund has achieved higher earnings, that doesn't necessarily mean it's a better investment than other ETFs — timing also played a part in its performance.
That said, if you were to earn 11% average returns over time, you could stand to make a lot of money. If you were investing $300 per month while earning 11% average annual returns, you'd have around $1.23 million after 35 years.
Growth ETFs can be a smart addition to any portfolio and can give your savings a boost. Staying invested for the long haul is key, and the longer you hold these investments, the more money you can potentially make.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Katie Brockman owns shares of Vanguard Growth ETF. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, and Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.