Is This Vanguard ETF a Millionaire Maker?
There are many possible ways to become a millionaire. One of the best is simply investing in stocks — for the long term.
However, you don’t want to choose just any stock or buy a stock when it’s overvalued. That can leave many of us scratching our heads as to what we should do.
Enter the Vanguard S&P 500 ETF (NYSEMKT: VOO) — a simple S&P 500 index fund that can make you a millionaire.
Here’s some information on what this ETF is and what it might do for you.
First, the Vanguard S&P 500 ETF is an exchange-traded fund (ETF) — a fund that trades like a stock. It’s also an index fund, aiming to deliver the same performance (less its puny fees) as the S&P 500 index of 500 of America’s biggest companies. Its “expense ratio,” or annual fee, is just 0.03% — costing you $3 per year for every $10,000 you have in the fund.
How has this ETF performed in the past? Check out the table below — but remember that past results don’t guarantee future results. (Also, any low-fee S&P 500 index fund, such as those from Fidelity, Schwab, or other good financial companies, will have similar results.)
|
Period |
Average Annual Gain |
|---|---|
|
Past 3 years |
11.02% |
|
Past 5 years |
16.26% |
|
Past 10 years |
14.04% |
|
Past 15 years |
13.95%* |
Source: Morningstar.com, as of October 21, 2024. Chart by author.
*Since the Vanguard ETF hasn’t been around for 15 years — its inception date was Sept.7, 2010 — this figure is from the SPDR S&P 500 ETF (NYSEMKT: SPY).
Here are the Vanguard S&P 500 ETF’s top holdings, as of the end of September — and they will be the same for just about any other S&P 500 index fund, as well:
|
Stock |
Percent of ETF |
|---|---|
|
Apple |
7.25% |
|
Microsoft |
6.55% |
|
Nvidia |
6.11% |
|
Amazon.com |
3.56% |
|
Meta Platforms |
2.56% |
|
Alphabet Class A |
1.99% |
|
Berkshire Hathaway Class B |
1.73% |
|
Alphabet Class C |
1.64% |
|
Broadcom |
1.64% |
|
Tesla |
1.49% |
Source: Vanguard.com. As of September 30, 2024. Chart by author.
If you’re an admirer of the “Magnificent Seven” stocks, due to their impressive performances over many years, you may be happy to know that all seven — Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Facebook parent Meta Platforms, and Tesla — are in the Vanguard S&P 500 ETF. If you buy shares of the index fund, you’ll have positions in all seven — plus 493 other big companies.
How, exactly, might the Vanguard S&P 500 ETF grow your wealth to $1 million (or beyond)? Let’s crunch some numbers. And despite those delightful average annual returns in the table above that range from about 11% to 16%, let’s be more conservative.
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