Key Points
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By investing monthly, you can make up for not having a large lump sum to invest right away.
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Over time, as your balance becomes larger, the gains you generate from compounding become much more significant.
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The Vanguard Growth Index Fund ETF invests in top growth stocks, which can help you potentially outperform the market.
- 10 stocks we like better than Vanguard Growth ETF ›
Investing in the stock market can seem intimidating if you don’t have a lot of money saved up. But you can make up for that by making regular, periodic investments. If you’re able to save and invest $400 per month, then you can still put yourself on track to grow your portfolio to more than $1.5 million in the future.
Below, I’ll show you how that kind of growth is possible, without having to take on any significant risks.
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How investing $400 per month can turn into $1.5 million
If you invest money into the stock market each month, that can be an effective way to build up your retirement savings, even if you’re starting with $0. The S&P 500 index, which includes the top stocks on U.S. markets, has averaged a return of 10% per year for decades.
The table below shows how your portfolio might grow over the long term, assuming you invest $400 each month in the stock market, and you average a 10% gain each year.
| Year | Portfolio Balance (assuming 10% annual growth) |
|---|---|
| 5 | $31,233 |
| 10 | $82,621 |
| 15 | $167,170 |
| 20 | $306,279 |
| 25 | $535,156 |
| 30 | $911,730 |
| 35 | $1,531,311 |
Table and calculations by author.
Through the power of compounding, the larger your balance gets, the more significant the growth becomes. That’s why the big payoff comes with building up a big balance. But as you can see from the table, you can generate that through monthly investments, rather than having to start with a big lump sum today.
A growth-oriented fund can be a great way to stack the odds in your favor
The S&P 500 has risen by 10% per year, but that’s on average. And there’s no guarantee that it will average that in the future. However, you can increase the odds of generating a strong return by investing in an exchange-traded fund (ETF) that focuses on growth, such as the Vanguard Growth Index Fund ETF (NYSEMKT: VUG).
This Vanguard fund has a low expense ratio of 0.03%, and it invests in the country’s top growth stocks. With 151 holdings, it gives you some terrific exposure to many top companies, including Nvidia, Tesla, and Eli Lilly, along with other big names. By targeting growth stocks, which typically outperform value and dividend stocks, you can increase the chances that you’ll attain a strong return in the future, perhaps even outperform the S&P 500.
By investing regularly in a well-balanced ETF such as the Vanguard Growth Index Fund, you can put yourself on track to generating some fantastic returns in the future, and potentially ending up with a portfolio that’s worth well over $1.5 million. While it will take time and require continuous monthly investments, the effort could be well worth it in the long run.
Should you buy stock in Vanguard Growth ETF right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Tesla, and Vanguard Growth ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
