Want a $1 Million Investment Portfolio? This ETF Could Get You There.
Building a portfolio worth $1 million isn’t easy, but it’s achievable. It just takes consistent investing over the course of decades, the discipline to see the process through, and a little good fortune along the way.
Picking the right investment goes a long way, too.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
With years to invest, you can be more aggressive in your approach. It’ll likely come with some above-average volatility, but the added return potential can often make up for it. The key is to ride out that volatility. If you can’t do that, there’s a good chance you’ll do more harm than good.
If you can, I suggest looking at the Vanguard Growth ETF (NYSEMKT: VUG) for your portfolio. Over its history, it has demonstrated a clear ability to produce strong returns.
Why VUG’s fundamental selection criteria make it a winner
The definition of “growth” can vary widely. Any particular ETF’s performance can be significantly impacted if the selection criteria are too vague or don’t look at the right metrics.
The Vanguard Growth ETF uses a smart combination of backward- and forward-looking metrics:
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Expected long-term growth in earnings per share (EPS)
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Expected short-term growth in EPS
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Three-year historical growth in EPS
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Three-year historical growth in sales per share
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Current investment-to-assets ratio
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Return on assets
A lot of funds will look at just earnings and/or revenue growth. Worse, they’ll look only at historical rates instead of understanding where the business is going.
The Vanguard Growth ETF looks at these measures in both directions to help ensure that growth trends are sustainable. Using return on assets (ROA) as a measure helps indicate that positive results are being delivered. The investment-to-assets ratio shows how much capital is being put into future growth.
It’s this last piece that helps us understand why the artificial intelligence (AI) names are such a big part of this ETF. They’re certainly seeing earnings growth, but they’re also building the business to accelerate existing growth.
These factors taken in aggregate do a good job of properly identifying and sizing the best stocks.
Why a growth ETF works for your portfolio
Many investors are using growth and tech ETFs interchangeably. It’s understandable because both look pretty similar right now. In the Vanguard Growth ETF, tech accounts for 70% of the overall portfolio.
