Is a global ETF all I need to become a stock market millionaire?

Exchange-traded funds are very popular among private investors looking to grow their wealth. Today I’m asking if I can achieve my financial goals with a single goal that includes the global stock market.

What is a global ETF?

Just as it sounds, this kind of ETF It invests in a large basket of stocks from around the world. Some providers will only include companies from developed countries. Others will be from developing economies.

Regardless, this is all done passively. There is no (expensive) human fund manager making decisions in the background.

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There are a few reasons why I think a one-stop global fund like this might be a perfect fit for me.

First, it provides instant access to a large number of listed companies. Theoretically this diversification completely eliminates the risk of write-offs that come with individual stocks.

Second, the passive approach keeps fees lower than most actively managed funds. This could save me thousands of dollars over many years.

Of course, no fund (or stock) rises in a straight line. Future returns will also not need to match past returns. But numerous studies show that stocks have consistently outperformed every other asset class for decades. And this this time period This is what we’re most interested in here at Fool UK.

But there are problems…

By its very nature, no ETF can beat what it tracks. This may mean that it will take me longer to become a millionaire than if I ran a more concentrated portfolio.

Let’s use the US chip manufacturer Nvidia (LSE:NASDAQ) as an example.

Over the past five years, the tech giant’s value has increased by almost 2,700%, making some shrewd (and very risk-tolerant) investors rich. It goes without saying that this kind of performance would absolutely upset a global ETF, even though the global ETF has some exposure to this company.

But looking back is a wonderful thing. In a parallel world, I could have backed a different growth stock exposed to the AI ​​revolution and lost all my money.

Moreover, the weight of expectation towards Nvidia is increasing. Yes, businesses are snapping up graphics processing units (GPUs) like lightning. But this is now reflected in the frothy valuation. What happens when those customers have everything they need for now or a competitor tries to steal their lunch? Even the outcome of the upcoming US election could cause some volatility.

Another thing to note is that approximately 60% of a global ETF will be invested in the US. This is to be expected; the world’s largest economy. But if Uncle Sam starts to struggle, it could affect my returns.

One and done?

I know which of these two approaches works for me, considering my own circumstances. And the simple answer is; both of them!

The majority of my wealth is now invested in global ETFs. Over time, I hope this will allow me to retire as a millionaire. But we’re talking decades here. Patience is absolutely necessary.

But I still have a cheerful group of individual company stocks that I hope will outperform. This may or may not get me to my goal faster.

But the point is, I will enjoy the process (and dividends) as much as the result.