Vanguard ETF's Tech-Heavy Portfolio Could Pay Off Big for Young Investors

The S&P 500 is an index of 500 stocks from 11 different sectors of the U.S. economy, delivering a compound annual return of about 10% since its establishment in 1957.

Youthful investors with time on their side may be willing to endure volatility for higher returns. The Vanguard Morningstar Mega Cap Growth ETF (MGK) exclusively holds 56 of the U.S.'s most valuable growth stocks, outperforming the S&P 500 every year since its launch in 2007.

The Vanguard ETF has a whopping 73% of its assets parked in technology stocks, with Nvidia, Apple, and Microsoft being its top three holdings. These tech giants have seen significant increases in value due to soaring demand for their products and services.

A $10,000 investment in the Vanguard ETF at age 25 could yield over $1.7 million by retirement age, compared to around $627,000 if invested in the S&P 500. However, this strategy may be vulnerable to significant downside if the technology sector hits a speed bump.

The Vanguard ETF rebalances once per quarter, replacing companies that no longer meet its criteria with more suitable candidates. This reduces the risk of one or two plunging stocks affecting its returns, making it likely to continue beating the S&P 500 over the long term.