ETFs

One Vanguard ETF to Buy in 2025 and Hold Forever

Published January 5, 2025

Choosing the right investment can significantly enhance your portfolio, and exchange-traded funds (ETFs) offer a simple way to grow your savings with minimal effort.

ETFs consist of a collection of securities combined into a single investment. Each ETF can include many stocks, allowing you to invest in one share and gain ownership in all the companies within that fund.

While ETFs require less time and effort than purchasing individual stocks, they can still lead you to accumulate substantial wealth. Every investor has different goals and strategies, but one ETF from Vanguard stands out as a great investment for me in 2025 and beyond.

A Technology Giant with Great Potential

If you're interested in tapping into the tech sector without spending hours analyzing individual companies, a tech-focused ETF is a smart choice. The ETF I'm investing in is the Vanguard Information Technology ETF (VGT).

This fund includes 316 stocks from various areas of the technology sector, mixing well-established giants with smaller firms to help manage risk and reward.

Leading companies such as Apple, Nvidia, and Microsoft dominate the top holdings, making up nearly 45% of the total fund. The other 55% consists of the remaining 313 stocks.

While large-cap stocks like Apple, Nvidia, and Microsoft can provide stability through market fluctuations, smaller companies may present greater growth potential. If one of the lesser-known stocks in this ETF performs exceptionally well, it could lead to impressive returns.

A Proven Track Record of Strong Returns

One major benefit of investing in a sector-specific ETF compared to a broader market ETF is the possibility of achieving above-average returns. Generally, tech stocks tend to have higher average returns than stocks from other sectors. When you invest in a fund filled with such stocks, the cumulative returns can be considerable.

However, the technology sector is often more volatile than others. While the highs can be outstanding, the lows may be steeper.

Your personal risk tolerance will determine whether this is a worthwhile risk. If you're after a stable investment with low short-term volatility, a tech ETF might not suit you. Conversely, if you're open to higher risk for the potential of greater returns, this fund could enhance your portfolio.

Estimating Potential Earnings from This Investment

It’s important to note that the stock market offers no guarantees, and prior performance is not an indicator of future results. Just because this ETF has outperformed previously does not assure it will continue to do so.

That said, if it can sustain slightly greater-than-average returns, you stand to gain significantly. Since its establishment in 2004, the Vanguard Information Technology ETF has generated an average annual return of 13.70%. Over the last decade, it has performed even better, with an average return of 20.75% per year—well above the typical market average of around 10%.

For example, if you were to invest $200 each month into this ETF, based on average annual returns of 11%, 14%, or 20%, here's a projection of how much you could potentially accumulate over various time frames:

Number of Years Total Portfolio Value: 11% Average Annual Return Total Portfolio Value: 14% Average Annual Return Total Portfolio Value: 20% Average Annual Return
20 $154,000 $218,000 $448,000
25 $275,000 $436,000 $1,133,000
30 $478,000 $856,000 $2,837,000

Even if this ETF doesn’t maintain its 20% average annual return, you could still amass significant wealth through regular, long-term investments.

A tech-focused ETF may not fit into every investment strategy, which is why it’s important to maintain a diversified portfolio to reduce risk. With time and consistent investing, the Vanguard Information Technology ETF has the potential to greatly enhance your savings.

investment, ETF, technology