Key Points
The Vanguard IT ETF is outperforming the S&P 500 this year, and it has for many years.
It invests in whatever the biggest tech trends are at the moment.
Gains have accelerated recently.
Artificial intelligence (AI) has been driving double-digit market gains for four years, and one of the best ways to play the trend is to buy the Vanguard's Information Technology ETF (NYSEMKT: VGT). It's beating the S&P 500 this year by more than double, 25% to 12%, and it's beaten the market by a wide margin over many years. Here's what a $10,000 investment might be worth in 25 years.
The tech-driven ETF powerhouse
The information technology ETF is Vanguard's highest-gaining ETF over the past 10 years, with an exceptional annualized gain of 23.9%. If you had invested $10,000 10 years ago, you'd have $85,910 today. That's more than double what you'd have if you'd invested in the standard Vanguard S&P 500 ETF. Since inception in 2004, though, the ETF's gains have been more modest at 14.6%.
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The ETF has 318 components today and is anchored by the world's biggest companies, Nvidia, Apple, and Microsoft.
Stocks don't maintain the same growth they have delivered in the past, because as they get bigger, they slow down. However, ETFs work differently because they track indexes. Stocks get swapped out as necessary to maintain standards and growth levels, which means the index can continue to gain at similar levels.
For this exercise, let's assume that the ETF can continue to gain at an annualized rate of 15% over the next 25 years. That would turn a $10,000 investment into $329,190.
It's important to keep in mind that this is just an estimate, and the results over such a long period could vary.
Jennifer Saibil has positions in Apple, Vanguard Information Technology ETF, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.