1 Growth-Focused Vanguard ETF That Can Turn $36,000 Into Over $1 Million

Growing your portfolio to $1 million or more doesn't have to be complicated or involve taking on a lot of risk. If you're able to save up a large lump sum and invest it in the stock market, a simple buy-and-hold strategy can be sufficient to generate massive returns in the years ahead. The big payoff from long-term investing is compounding; your balance can grow much larger the longer you remain invested in the stock market.

If you have $36,000 that you can invest today and have 35 investing years to go, I'll show you how it's possible to grow the size of an investment to more than $1 million. As long as you have the time and money, you can deploy a low-risk strategy that can generate terrific returns in the long run.

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Why a buy-and-forget strategy is so effective

If you just invest money into the stock market and allow it to grow, your portfolio will rise steadily over the years. While there may be some bad years along the way, by remaining invested in quality stocks, you're likely to come out with strong gains in the end.

Consider that the S&P 500 (SNPINDEX: ^GSPC), which is a collection of the top stocks on the U.S. markets, has, on average, generated annual returns of around 10% per year. It's been doing far better than that in recent years, but that has been its long-run average. And if you were to average a 10% return for 25 years, an investment today would grow to just under 11 times its value over that time frame.

This is a great example of how letting an investment sit and accumulate gains can help set you up for significant gains in the long run.

Make the most of your investment by going with a growth-focused fund

Investing in the S&P 500 is safe, and you can accomplish that by buying exchange-traded funds (ETFs) that track the index, known as S&P 500 index funds. But in order to achieve the best returns possible, you may want to consider an ETF that focuses more on growth. Growth stocks have the potential to generate even better returns in the long run, as they often captivate investors with strong revenue and profit numbers, and thus can make for more popular investments to hang on to due to their upside.

The Vanguard Growth ETF (NYSEMKT: VUG) is a top Vanguard fund that focuses on these types of stocks, and may be a better option than just going with the S&P 500. The ETF holds a position in 165 stocks, with the majority being in the tech sector (62% of its holdings). Its low expense ratio of 0.04% means your fees will be minimal, ensuring that you'll hold on to the vast majority of your gains. Over the past decade, while the S&P 500 has risen by 240%, the VUG ETF's returns have totaled 370%.

How a $36,000 investment can grow to $1 million

The big challenge when forecasting what your investment will be worth years from now is projecting what the future annual returns will be. When you're looking at decades, virtually all economic variables are on the table, as anything and everything can change over such a long window. That's why I prefer to stick to the average S&P 500 return of 10% when estimating growth.

While the VUG ETF has outperformed the index over the past 10 years, that doesn't mean that's guaranteed to continue. Plus, given how hot the stock market has been in recent years, a slowdown may be inevitable in the near term, which could result in a lower long-term average from here on out.

The table shows what a $36,000 investment would be worth over the years, assuming a 10% growth rate.

Table and calculations by author.

As you can see, it's possible to get to $1 million through a simple buy-and-hold strategy. If you can save up $36,000 and invest that into a top growth fund such as VUG, that can maximize the odds that you generate the best returns possible in the market.

It might take 35 years, but it might also end up taking less than that if growth stocks do particularly well and the fund averages a return better than 10%. But the big takeaway is that it'll take time. It won't be quick, but it doesn't have to be complicated -- just investing the money and forgetting about it can be an effective strategy.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool has a disclosure policy.