Do you want $1 million in retirement? 2 ETFs to Buy Now and Hold for Decades

The $1 million mark has long been a milestone for financial success. It may not get you as far as it did decades ago, but it’s still a significant achievement that deserves every celebration it gets. Fortunately, hitting seven figures doesn’t have to be a pipe dream; it can be done using only exchange-traded funds (ETFs).

ETFs allow you to invest in hundreds and sometimes thousands of companies with a single investment, greatly simplifying the investment process. For those aiming to hit the $1 million mark, the following two ETFs can help pave the way: The Vanguard S&P 500 ETF (VOO 0.94%) and the Vanguard Growth ETF (VUG 0.99%).

Both ETFs have a history of strong returns and growth prospects that can continue the momentum for decades to come.

1. Vanguard S&P 500 ETF

This ETF mirrors S&P 500the stock market’s most watched index (and probably the most important). The S&P 500 tracks the performance of the 500 largest US companies on the market, providing insight into the health of the US economy in general. They may not be directly correlated, but a strong or weak performance of the S&P 500 generally reflects overall economic strength or weakness.

With this ETF, you gain exposure to all major sectors of the US economy:

• Communication services: 8.9% of the ETF
• Discretionary consumer: 10%
• Basic consumer products: 5.8%
• Energy: 3.7%
• financial: 13%
• Health: 11.9%
• industrially: 8.4%
• Information technology: 31.4%
• Materials: 2.2%
• immobility: 2.3%
• Utilities: 2.4%

Having an ETF that essentially represents the US economy has proven to be an excellent long-term investment. Since the S&P 500 became a thing, it has averaged annual returns of about 10% over the long term. Since this ETF’s inception in September 2010, it has averaged a total annual return of nearly 14.5%.

Below is how long it would take to reach $1 million by investing $500 monthly and averaging different annual returns.

Chart by author. Years rounded to the nearest whole year.

Past returns are no guarantee of future performance, and there’s no way to predict how the ETF will behave in the future, but this shows how little monthly investing could pay off over the long term with consistency.

2. Vanguard Growth ETF

Like the Vanguard S&P 500 ETF, this ETF focuses on large-cap stocks. The difference is that it only contains companies with strong growth potential, as opposed to those focused on value or dividends.

Large-cap growth stocks can offer investors the best of both worlds. Their size offers a bit more stability than smaller companies with fewer resources, and their focus on growth gives investors a chance to earn market returns (or at least, that’s the intention).

It has proven to be a profitable two-for-one benefit, with this ETF outperforming the market over the past decade, averaging more than 15% total returns.

VUG Total Return Level data by YCharts.

This ETF is driven by some of the world’s most promising companies. Below are his top 10 holdings and how much of the ETF they make up (as of July 31):

• Apple: 12.89%
• Microsoft: 12.39%
• Nvidia: 10.90%
• Amazon: 4.87%
• Meta platforms: 4.15%
• The alphabet (grade A): 4.02%
• The alphabet (grade C): 3.30%
• Eli Lilly: 2.75%
• adze: 2.52%
• Visa: 1.63%

The top three holdings account for over 36% of the ETF, which is far from diversified by most standards. However, its top stocks have been some of the most rewarding growth stocks in the market and the catalyst for its market returns. With the emergence of new technologies (artificial intelligence, cloud computing, etc.), advances in healthcare, electric vehicles and digital payments, these companies should continue on this path.

This ETF should not be the foundation of your portfolio, but it can be a great addition. If you invest in both this ETF and an S&P 500 ETF, it’s important to be aware of overlapping companies. You don’t want to become too it relies on too few companies to get you to the million dollar mark.