Investing in index funds can be a simple and effective way to grow your retirement savings over the long term. Three index funds that could help you reach a $1 million nest egg are the Vanguard Dividend Appreciation ETF, iShares Core S&P Mid-Cap ETF, and Invesco QQQ Trust. The Vanguard Dividend Appreciation ETF focuses on stocks that have consistently raised their dividends for at least 10 years.
These companies tend to experience steady growth and rising stock prices. Reinvesting the dividends can further boost returns. The iShares Core S&P Mid-Cap ETF tracks the S&P 400 Mid Cap Index, which includes companies with market caps between $2 billion and $10 billion.
These mid-sized companies are past the risky start-up phase but still have room for significant growth. Historically, the S&P 400 has outperformed the S&P 500. The Invesco QQQ Trust mirrors the Nasdaq-100 index, which is heavily weighted towards technology stocks.
While tech stocks can be volatile, they also offer some of the best growth potential. The QQQ’s top 10 holdings make up over half of the index’s value, providing exposure to the market’s leading tech names. Building a diversified portfolio with a mix of ETFs can provide stability and the potential for market-beating returns.
etf options for retirement growth
One approach is to combine a broad market index fund like the SPDR S&P 500 ETF Trust (SPY) with more targeted funds like the Invesco QQQ Trust (QQQ) for tech exposure, the Vanguard Small-Cap ETF (VB) for small-cap stocks, and the iShares 20+ Year Treasury Bond ETF (TLT) for a hedge against market downturns. During past economic downturns, a diversified ETF portfolio has often outperformed the S&P 500 alone.
While the S&P 500 may eventually catch up, holding a mix of ETFs can provide better returns and allow for more precise management of your investments. When building an ETF portfolio, consider your risk tolerance and market conditions. For example, you might allocate more to undervalued funds like the Treasury bond ETF and less to high-flying tech stocks.
However, there’s no one-size-fits-all approach. For investors with a higher risk tolerance and a decade until retirement, investing in individual high-growth stocks could potentially generate even greater returns. Three stocks that might deliver substantial gains over the next 10 years are MicroStrategy, Archer Aviation, and Lumen Technologies.
MicroStrategy has become known for its large Bitcoin holdings, which could pay off if the cryptocurrency soars in value as predicted by the company’s founder. Archer Aviation is a leader in the emerging market for electric vertical take-off and landing (eVTOL) aircraft, with plans to scale production and launch air taxi services. Lumen Technologies, formerly CenturyLink, has recently secured major AI infrastructure deals that could transform it into a key player in the AI market.
While investing in individual stocks carries more risk than index funds, the potential for outsized returns makes them worth considering as part of a long-term retirement strategy. As with any investment, it’s important to do your research and understand the risks involved.