The stock market has been volatile the past few months, but if there’s one silver lining right now, it’s that many higher-priced investments are on sale.
Investing during periods of turbulence can make it easier to snag stocks at a discount, but it can also set you up for significant gains when the market rebounds. One of the easiest ways to maximize your long-term wealth, then, is to buy during the market’s rough patches.
Not all investments will be able to survive bouts of economic instability, though. While there’s no single investment that will fit every portfolio, there’s one Vanguard ETF that can both supercharge your earnings while helping protect against volatility: the Vanguard Mega Cap Growth ETF (MGK -0.68%).
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A powerhouse performer that can limit risk
An ETF, or exchange-traded fund, is a basket of securities grouped together into a single investment. When you invest in one share of an ETF, you’ll instantly own a stake in every stock within the fund.
The Vanguard Mega Cap Growth ETF contains 69 megacap stocks, which are generally defined as companies with a market capitalization of more than $200 billion. These juggernaut companies are the largest in the world, and most are industry leaders with decades of experience surviving market volatility.
For that reason, this ETF can be less risky than other growth funds that focus more on smaller, up-and-coming stocks. The fund’s three largest holdings include Apple, Microsoft, and Nvidia, with those companies alone making up close to 37% of the entire fund.
Despite its relative safety, the Vanguard Mega Cap Growth ETF can also be a powerful wealth builder. Over the past 10 years, it’s earned an average rate of return of 15.26% per year, as of this writing. For comparison, the Vanguard S&P 500 ETF has earned an average return of just 12.27% per year in that time, and the market as a whole has historically earned a 10% average annual return.
Say you were to invest $200 per month, earning future average returns of either 15%, 12%, or 10% per year. Here’s approximately how that could add up over time:
| Number of Years | Total Portfolio Value: 10% Avg. Annual Return | Total Portfolio Value: 12% Avg. Annual Return | Total Portfolio Value: 15% Avg. Annual Return |
|---|---|---|---|
| 20 | $137,000 | $173,000 | $246,000 |
| 25 | $236,000 | $320,000 | $511,000 |
| 30 | $395,000 | $579,000 | $1,043,000 |
| 35 | $650,000 | $1,036,000 | $2,115,000 |
Data source: Author’s calculations via investor.gov.
Even if this ETF doesn’t manage to beat the market going forward like it has over the past decade, you could still accumulate hundreds of thousands of dollars or more.
A word of caution
Before you invest anywhere, a word of warning: There’s a chance the market could get worse before it gets better. Analysts at J.P. Morgan estimate a 60% chance of a recession by the end of the year, and stocks could potentially sink into a bear market.
If you choose to invest right now, be sure you’re willing to keep your money in the market for the next five years or so. If you buy now and have to sell after prices have dropped, you could lock in significant losses. But by holding your investment until the market recovers, you should recoup any lost value.
Because the Vanguard Mega Cap Growth ETF only contains stocks from extremely large corporations, there’s a better chance this fund will be able to recover from a recession or bear market. But you’ll need to stay in the market through all the ups and downs to reap those rewards.
Investing during the market’s volatile periods can be a smart way to build long-term wealth, and the Vanguard Mega Cap Growth ETF can help limit your risk. By investing consistently and staying in the market for the long haul, you can not only survive a downturn, but thrive.
