Exchange-traded funds, or ETFs, can be a fantastic investment for both novice and experienced investors.
An ETF is a collection of stocks grouped together into a single investment. Some ETFs track the stock market as a whole and include stocks from a wide variety of industries. Other ETFs are more specific and only contain stocks from a particular industry.
By choosing the right ETFs and investing consistently, you could potentially make a lot of money. Here are four ETFs that could help you get rich in the stock market.
1. SPDR S&P 500 ETF (SPY)
The S&P 500 is a stock market index that includes hundreds of the largest publicly traded U.S. companies. The SPDR S&P 500 ETF (NYSEMKT:SPY) tracks the S&P 500, meaning it includes all the same companies and mirrors its performance.
This ETF was established in 1993, holding the record as the oldest ETF in the United States. With a track record like that, it’s hard to go wrong with this fund.
Since its inception, it’s earned an average rate of return of 10% per year. If you were to invest, say, $1,000 right now without making any additional contributions, you’d double your money in just over seven years. If you invested $1,000 right now and then continued investing, say, $100 per month, you’d have around $13,000 in that same timeframe.
2. Invesco QQQ ETF (QQQ)
The Invesco QQQ ETF (NASDAQ:QQQ) tracks the Nasdaq-100 Index, and it includes just over 100 of the largest non-financial stocks listed on the Nasdaq. Close to half of the fund is composed of stocks in the information technology sector, which is known for its explosive growth. This could help your money grow faster.
It was established in 1999, and since then it has earned an average rate of return of around 9% per year. By investing $1,000 right now, you’d double your money in around eight years. If you continue investing an additional $100 per month, you’d end up with approximately $15,000 after eight years.
3. Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF (NYSEMKT:VGT) contains 341 stocks from the information technology sector. This fund is slightly higher risk than others on the list because it includes stocks from only one industry, so it’s less diversified.
However, it’s also experienced higher returns. Since the fund’s inception in 2004, it has earned an average rate of return of around 13% per year.
If you invested $1,000 right now, it would take around six years to double your money. But by investing $100 per month in addition to your initial investment, you’d have around $12,000 saved after just six years.
4. Schwab U.S. Small-Cap ETF (SCHA)
The Schwab U.S. Small-Cap ETF (NYSEMKT:SCHA) includes more than 1,800 stocks from a wide variety of industries, including healthcare, information technology, financials, and industrials.
Small-cap stocks tend to be on the riskier side of the spectrum, because they’re often more volatile than their larger counterparts. That said, small-cap stocks also have more opportunity for growth, so they can sometimes see higher-than-average returns.
This ETF was established in 2009, so it’s the youngest fund on the list. Since then, though, it has experienced average returns of nearly 15% per year.
By investing $1,000 now, you’d double your money within just five years. And if you continued investing an extra $100 per month, you’d have more than $10,000 total in that same time period.
Deciding where to invest your money
Which ETFs you choose will depend on your tolerance for risk. Risk-averse investors should opt for broad-market index ETFs such as S&P 500 ETFs. Those who are willing to take on more risk in exchange for higher potential rewards may opt for small-cap ETFs or funds that contain stocks from only a particular industry.
No matter where you choose to invest, be sure you’re in it for the long haul. It can take years to build a robust portfolio, but consistency is key. Keeping your money in the stock market for the long term can help you earn as much as possible.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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