NVIDIA has been known as a high-yield stock in recent years. The chipmaker is a major player in the artificial intelligence market, and its chips are the go-to choice for many tech companies developing chatbots and other next-generation products. But NVIDIA isn’t a cheap investment, either. The company’s market capitalization is around $3 trillion. Earning a high yield on a stock that’s already one of the world’s most valuable companies isn’t easy, especially with expectations so high for the company at the moment.
If you want to make big profits and turn your $25,000 into $1 million or more, there are better and safer ways to do it, but you have to be patient. Exchange-traded funds (ETFs) allow you to make big profits over several years while keeping your risk much lower. You won’t be overly dependent on one stock, as you would be if you only bought Nvidia stock.
The ideal ETF for growth investors is the Invesco QQQ Trust (QQQ 2.53%)Here’s why you should buy it without hesitation.
Invesco funds offer investors broad diversification across a range of growth stocks
If you want to invest in the world’s top growth stocks, you’d turn to the Nasdaq exchange, where many of the top tech stocks trade. But Invesco’s fund narrows the list even further, focusing only on the exchange’s top 100 non-financial stocks. That means you avoid some of the Nasdaq’s riskier stocks. Instead, you get exposure to some of the best growth stocks in the world.
Nvidia is one of the ETF’s major holdings, but it only accounts for 8% of the total. The ETF also contains shares of Costco Wholesale, Alphabet, Amazon, and many other big names. Although it is heavily biased towards tech stocks (making up half of the fund), other sectors of the market are represented in the fund, including healthcare, industrials, and consumer discretionary stocks. Collectively, these stocks can generate strong, consistent returns over the years.
How ETFs can grow your portfolio to $1 million
For a $25,000 investment to grow to $1 million or more, it would need to grow 40 times its original value. To accumulate those kinds of returns, you need to focus on the long term, like 25 to 30 years, so you don’t need to set your expectations too high or focus on risky small caps with seemingly big upside potential.
For an investment to grow 40 times its original value, it would require an average compound annual growth rate (CAGR) of about 15.9% over 25 years. But if you could keep the investment for 30 years, the required CAGR drops to 13.1%.
Historically, the Invesco ETF has been a worthwhile investment to hold. Including dividends, it has a total return of 417% over the past decade, which equates to a CAGR of 17.9%. Of course, this doesn’t mean it will generate such returns in the coming decades, but it does show the strength of the growth stocks you hold in your portfolio and their ability to generate huge returns. Even with lower growth rates, if you are patient and hold on to it for the long term, this fund could make you a millionaire with a $25,000 investment.
Invesco QQQ Trust is a great option for any investor
Whether you’re looking to track growth stocks or simply want a diversified portfolio, the QQQ Fund is a great investment to add to your holdings. With a fairly low expense ratio of 0.2% and exposure to top growth stocks, it’s a no-think investment that’s suitable for almost all types of investors. It also makes a great default investment to put your money in, especially if you don’t want to track individual stocks.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, serves on The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, serves on The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet, Amazon, Costco Wholesale, and Nvidia. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
