3 Reasons the Vanguard S&P 500 Growth ETF Is a Long-Term Buy for 2030 and Beyond

The market has been shaky in recent weeks, and it can be an intimidating time to invest. The S&P 500 (^GSPC -4.26%) is down by around 9.13% since mid-February, as of this writing, with the Nasdaq Composite (^IXIC -5.40%) tumbling by close to 14% in that time.

While it can be tempting to hold off on buying for now, market slumps are one of the best opportunities to generate wealth. With stock prices dropping, now is your chance to load up on quality investments for a fraction of the cost.

Investing in ETFs can help further limit your risk, and there are a few reasons why the Vanguard S&P 500 Growth ETF (VOOG -4.78%) could supercharge your earnings over the next five years and beyond.

1. It’s relatively safe compared to other growth funds

The Vanguard S&P 500 Growth ETF is a little different from many other growth funds in that it only contains stocks from the S&P 500 index. The S&P 500 contains stocks from 500 large companies in the U.S., many of which are industry-leading juggernauts and household names.

Of the 500 companies in the S&P 500, this ETF includes 209 stocks with the most growth potential. Only the strongest organizations can make it into the S&P 500, making this ETF somewhat safer than many other funds that are more focused on smaller up-and-coming companies.

2. It has more potential for growth than an S&P 500 ETF

One of the biggest advantages of investing in an S&P 500 ETF is its flawless track record. The index has survived every single downturn in its history so far, and it’s extremely likely to continue thriving over the long term.

However, because S&P 500 ETFs are designed to follow the market, they can’t beat the market. In other words, this type of ETF can only earn average returns. That’s not necessarily a bad thing, but a growth fund — like the Vanguard S&P 500 Growth ETF — has more potential for higher-than-average earnings.

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Over the last 10 years, the Vanguard S&P 500 Growth ETF has earned an average rate of return of 14.63% per year. The Vanguard S&P 500 ETF, on the other hand, has earned an average return of just 12.93% per year in that time.

That may not sound like a major difference on the surface. But if you were to invest, say, $200 per month in each of those ETFs at those rates, it would add up to around $482,000 and $369,000, respectively, over 25 years. That’s a difference of around $113,000 with just slightly higher average returns.

3. It offers plenty of diversification

Unlike many other growth ETFs, the Vanguard S&P 500 Growth ETF offers significant diversification. It contains 209 stocks across 11 industries, with around 38% of the fund dedicated to stocks in the tech sector.

For comparison, Invesco QQQ, another popular growth ETF, allocates around 60% of the fund toward tech stocks. The Vanguard Growth ETF and the Schwab U.S. Large-Cap Growth ETF also dedicate around 58% and 49%, respectively, of their funds to the technology sector.

The tech sector tends to be hit hardest during periods of market volatility, so investing in a fund with less of a dependence on tech stocks can help reduce your risk.

Investing for the long haul

Nobody knows where the market will be in the next year or two, but over decades, it’s incredibly likely that stocks will experience positive total returns. By investing while prices are lower and holding onto your investment for at least five to 10 years, you’re far more likely to generate long-term wealth.

The Vanguard S&P 500 Growth ETF, specifically, has a strong chance of surviving market downturns. Companies within the S&P 500 are among the strongest and healthiest in the world, and this ETF can help you earn above-average returns while still limiting risk.

Regardless of what the future holds for the market, a long-term outlook is key right now. By investing in a strong ETF and holding it for at least five years, you can not only survive a market downturn, but thrive over time.