You can become a multimillionaire by investing in the stock market, but you need to choose the right investments. Not all stocks are created equal, and some are better options than others.
Investing in exchange traded funds (ETFs) is a smart way to diversify your investments because you are investing in tens or hundreds of stocks at the same time. There are, however, different types of ETFs, including broad market funds and niche funds.
Broad market funds, such as S&P 500 ETFs contain stocks from a wide range of industries. They tend to have a lower risk, but they also have lower returns on average. Niche ETFs only contain stocks from a particular industry. They have the potential to earn returns above average, but they also carry more risk.
Investing in technology-focused ETFs can help you earn higher returns, but still limit your risk. ETFs generally have lower risk than investing in individual stocks, and the technology sector is known for its explosive growth. If you are eager to invest in technology stocks, there are some technical ETFs that can help you make a lot of money.
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1. Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF (NYSEMKT: VGT) contains 341 shares of the US technology sector, with some of its largest shares appeal, Microsoft, en NVIDIA.
The fund was established in 2004 and therefore has a relatively long record. Since its inception, it has earned an average rate of return of about 13% per annum. If you aim to raise at least $ 2 million, you need to invest just over $ 550 a month for 30 years while earning a 13% annual return.
Of course, there are 30 years to wait. But ETFs are low-maintenance investments, so you just need to invest consistently and leave your money alone for as long as possible. With enough patience, you can save a considerable amount of money with little or no effort.
2. Invesco S&P 500 ETF (RYT) for Equal Weight Technology
The Invesco S&P 500 Equal Weight Technology ETF (NYSEMKT: RYT) It contains 76 shares in the S&P 500 sector in information technology. Although this fund owns less and does not offer as much diversification, the S&P 500 contains some of the strongest companies in the US – which can limit your risk.
Since the fund was established in 2006, it has earned an average rate of return of approximately 14% per annum. To earn at least $ 2 million in total savings, you need to save about $ 450 a month for 30 years while earning an annual return of 14%.
3. SPDR S&P Software & Services ETF (XSW)
The SPDR S&P Software and Services ETF (NEWS: XSW) contains 186 shares and follows the software and services segment of the S&P Total Market Index – which includes sub-industries such as application software, data processing and IT consulting.
This ETF is younger than the other two on the list since it was founded in 2011. However, it has also achieved higher returns, with an average rate of return of around 22% per annum since its inception. At this rate, you need to save about $ 100 a month for 30 years to raise $ 2 million.
Remember, however, that there are no guarantees that this fund will be so high in the long run that this fund does not have an extensive record. All niche ETFs are riskier than broad market funds, and your investments may experience higher levels of volatility.
Building a balanced portfolio
If you prefer to invest in any technical ETF, it is important to make sure that the rest of your portfolio is well diversified. In other words, do not invest all your money in one ETF – especially not a niche ETF.
Once you have a solid core portfolio, you can boost your investments to put money behind a technical ETF. With enough time and patience, these funds can help you become a multimillionaire.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.