Investing in exchange-traded funds (ETFs) can be a smart alternative to buying individual stocks, as they often require less effort while offering greater diversification.
Growth ETFs, specifically, aim to outperform the market over time. Each fund contains a variety of growth stocks, sometimes from one particular industry and other times from multiple market sectors. This approach could help you earn above-average returns without hand-picking every stock in your portfolio.
Where you choose to invest matters, though. All ETFs offer their own advantages and disadvantages, and these three funds could help you turn just $100 per month into hundreds of thousands of dollars over time.
The Vanguard Information Technology ETF (NYSEMKT: VGT) is a tech-centered ETF covering all corners of the technology industry. It contains 316 stocks, with the top 10 holdings including household names like Apple, Microsoft, Nvidia, and Salesforce.
If you're looking to invest in the tech sector without spending countless hours researching the ins and outs of individual stocks, this ETF could be an appealing option. You'll instantly own a stake in hundreds of tech stocks, which can create some diversification and help limit your risk.
Just keep in mind that any industry-specific ETF will carry more risk than a fund containing stocks from multiple market sectors. Tech, in particular, tends to be more volatile than many other industries, so expect more severe fluctuations in the short term with this investment.
That said, this ETF has a strong history of earning above-average returns. Over the last 10 years, it's earned an average return of 20.75% per year. At that rate, investing $100 per month could add up to roughly $639,000 after just 25 years.
As with any investment, it's wise to keep a long-term outlook. The short-term can be turbulent, especially with a tech ETF, but staying invested for at least a decade or two can help reduce the impact of that volatility.
Invesco QQQ Trust (NASDAQ: QQQ) is similar to the Vanguard Information Technology ETF in that it's heavily focused on stocks in the tech sector. However, it's not solely dedicated to tech stocks, with only around 60% of the fund allocated to companies in the technology industry.
This ETF contains stocks in nine sectors in addition to tech, including consumer discretionary, healthcare, industrials, and more. This added diversification makes QQQ slightly less risky than the Vanguard fund, as your money is spread across a wider variety of stocks.