If I Could Only Buy and Hold a Single Stock, This Would Be It

When one hears about stocks that turned a $5,000 investment into millions, it can make investors think of betting it all on one stock. Some stories of such gains are real. However, there is no way of reliably predicting such an outcome before the fact, and trying to bet everything on one name can often lead an investor to ruin.

Instead of trying to "bet it all," investors may have a safe way to buy one stock and still come out ahead. While this stock will probably not turn a small investment into millions, it has a long track record of outsized returns in a growth industry and can deliver such results at a substantially lower risk.

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The one stock

Again, investors should never put everything into one name, but if one is to do such a thing, they should turn to an exchange-traded fund (ETF) as a workaround. The only ways an ETF could go to zero are through fraud or if every stock in the fund were to become worthless, both of which are highly improbable scenarios.

Knowing that, the ETF I think investors should consider is the VanEck Semiconductor ETF (NASDAQ: SMH).

As the name implies, it invests in 26 top semiconductor stocks. Not surprisingly, its top holding is Nvidia, which makes up over 18% of the fund. The other top holdings are Taiwan Semiconductor, Broadcom, AMD, and Micron.

Collectively, these five stocks are almost 49% of the VanEck fund's holdings. Admittedly, this is a higher level of exposure than some investment experts would recommend. Still, it is a safer move than placing 100% of one's capital in a single stock.

Investing in the VanEck Semiconductor ETF

As previously mentioned, the VanEck fund holds significantly fewer stocks than the S&P 500 or the Nasdaq-100. Nonetheless, its returns over the last 10 years have averaged 31% per year, and 27% per year since the fund's launch in 2011. Investors should also note this is an average, meaning it includes years like 2022, when the ETF fell in value.

This is critical, since its performance is well above the 15% average yearly returns of the SPDR S&P 500 ETF Trust and the 20% average annual gains of the Invesco QQQ Trust over the last 10 years.

These return levels also highlight one critical point when analyzing the average returns earned by fund managers. According to research conducted by S&P Dow Jones Indices, just 12% of fund managers outperform the S&P 500.

Such results indicate the odds are heavily against investors hoping for market-beating returns, assuming they want to invest the time to find the right stocks. Knowing that, most investors will likely earn higher returns with less effort by simply purchasing the VanEck ETF.

Plus, it costs investors very little to outsource these duties to VanEck. Its semiconductor ETF charges its shareholders an expense ratio of 0.35%. This means that for every $10,000 a shareholder has in the fund, they pay VanEck $35 in management fees, a level that is economical, given the returns it has produced over time.

Consider the VanEck Semiconductor ETF

Although investors can technically invest their entire portfolio in a single stock, this is typically not recommended. However, if one must invest this way, an excellent choice is to place one's capital in the VanEck Semiconductor ETF.

For one, the VanEck ETF ties investors to 26 companies, rather than just one. Moreover, its performance has far surpassed that of both the S&P 500 and the Nasdaq, benchmarks that most professional fund managers have struggled to outperform.

Additionally, its 14 years of existence include downturns such as the one in 2022, showing it can prosper during industry and market downturns.

Ultimately, since it can deliver huge returns at a low cost while reducing investor risk, the VanEck ETF is a comparatively safe way to handle a move as inadvisable as buying only one stock.

Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.