Stocks that Boast the Potential to Grant Your Grandchildren Regal Fortunes
For young investors seeking high growth potential over the coming decades, several Exchange-Traded Funds (ETFs) stand out due to their focus on growth-oriented large-cap stocks, technology, and momentum. These ETFs have historically delivered strong returns suitable for long-term investment horizons.
Key ETFs to Consider
Here are some of the key ETFs that could be beneficial for young investors:
- Invesco QQQ Trust (QQQ): This ETF focuses on the Nasdaq-100, offering exposure to 100 of the largest non-financial Nasdaq stocks. It is rebalanced regularly to maintain exposure to top growth companies, making it a popular choice for those focusing on tech growth. The expense ratio is approximately 0.20%.
- iShares Russell Top 200 Growth ETF (IWY): This ETF concentrates on large-cap U.S. growth stocks, with a strong 5- and 10-year track record. It is particularly strong in high-quality tech stocks. The expense ratio is also around 0.20%.
- Invesco S&P 500 Momentum ETF (SPMO): This ETF tracks high-momentum S&P 500 stocks, offering exposure to growth and volatility opportunities in the broader S&P 500. It has a low expense ratio of 0.13%.
- Invesco S&P 500 High Beta ETF (SPHB): This ETF focuses on S&P 500 stocks with high price sensitivity. It offers more volatility but higher growth potential. The expense ratio is 0.25%.
- Vanguard Mega Cap Growth ETF (MGK): This ETF tracks mega-cap growth companies, including tech giants. It has a low expense ratio of approximately 0.07%.
Additional ETFs for Balance and Dividend Growth
For portfolio stability over decades, consider adding an ETF that focuses on financially healthy companies with consistent dividend growth and sound balance sheets, such as the T. Rowe Price Dividend Growth ETF (TDVG), or one that offers exposure to safe dividend stocks, like the Schwab U.S. Dividend Equity ETF (SCHD).
Summary for a Young Investor
The Invesco QQQ Trust (QQQ) and iShares Russell Top 200 Growth ETF (IWY) provide strong exposure to high-growth technology and innovation stocks, which may deliver significant growth over the long term. ETFs like Invesco S&P 500 Momentum (SPMO) and High Beta (SPHB) complement these by capturing growth and volatility opportunities in the broader S&P 500.
Including a dividend growth ETF such as T. Rowe Price Dividend Growth (TDVG) or Schwab U.S. Dividend Equity (SCHD) can add stability and income potential, creating a balanced growth-oriented portfolio fit for a long investment horizon.
Expense ratios for these ETFs are generally low, which is important for keeping long-term investment costs minimal.
Choosing among these depends on your risk tolerance and interest in growth versus income balance, but these ETFs are widely regarded as top candidates for growth-minded young investors over the next decades.
Consider Broad-Market Index Funds
Consider broad-market index funds that aim to deliver the performance of the total U.S. stock market or the total world stock market. These funds offer diversification and long-term growth potential.
The Importance of Compounding
The amount invested every year matters a lot, and it's important to invest more each year as one is able. Compounding requires time, meaningful investments, and a good growth rate for optimal results.
For example, a $12,000 annual investment growing at 8% for 50 years could result in $7,436,061. On the other hand, a $6,000 annual investment growing at the same rate could result in $3,718,030.
The Power of Starting Early
Investing early can help young people become multimillionaires due to the long-term growth of their money. The principle of compounding means that the earlier you start, the more time your money has to grow.
Market Downturns and Growth Stocks
When market downturns happen, growth stocks such as those in ETFs like the Technology Select Sector SPDR ETF (XLK) may drop sharply in value, but often recover eventually. Therefore, it's important to buy and hold broad funds like the ones mentioned, as holding for decades is more likely to be safe and effective.
Recommended Reading
- Investopedia: How to Invest in ETFs
- Investopedia: What is Compound Interest?
- Vanguard: The Power of Starting Early
- Warren Buffett on Index Funds
- To achieve your personal-finance goals, consider investing in the Invesco QQQ Trust (QQQ), a popular choice for those focusing on tech growth, as it focuses on the Nasdaq-100 and historically delivers strong returns.
- By adding the T. Rowe Price Dividend Growth ETF (TDVG) to your portfolio, you can benefit from a fund that focuses on financially healthy companies with consistent dividend growth, which helps create stability and income potential over decades.
- The Vanguard Mega Cap Growth ETF (MGK) tracks mega-cap growth companies, including tech giants, making it an ideal choice for young investors seeking high growth potential in the long-term. This ETF offers a low expense ratio for keeping long-term investment costs minimal.
