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Investors often find themselves at a crossroads: should they continue to play it safe with low-risk ETFs or risk it all and chase huge returns with aggressive high-risk ETFs?
these high risk investments are typically designed to take advantage of emerging industries, speculative trends, or leverage practices that promise higher returns than conventional ETFs.
Some investors think that allocating a small portion to these high-risk ETFs can boost the overall performance of their portfolio without compromising the overall investor.
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Conversely, low-risk ETFs, such as the Vanguard S&P 500 or VOO, are a must-have for many investors. These funds offer broad exposure to stocks, lower fees and more controlled growth. VOO, for example, follows S&P 500 indexmaking it the choice for those investors who prefer a set-it-and-forget-it strategy.
This brings us to one investor’s plight, recently shared on Reddit, an online discussion forum with a multitude of investor communities. Poster, a saver in his early 30s, built a portfolio of nearly $150,000 in VOO.
“I’m currently in my early 30s and 100% VOO and laid back, with roughly $150k at the moment. This is spread across retirement accounts and brokerage accounts,” he says.
However, now that his portfolio has grown so much, he is considering allocating some of his wealth to high-risk, high-reward ETFs.
“Do you have any suggestions for aggressive high-risk/high-reward ETFs that make sense to complement VOO? I wouldn’t want to invest more than 5-10% of my portfolio in something with a bit more upside like this. Alternatively, would it be better to just stay the course and keep throwing extra money into VOO?” he asks.
Not sure which of these two options is a good strategy, he asked Reddit’s r/ETF community for advice. Let’s see what Reddit investors recommended to the young poster.
Many Redditors have suggested that investors diversify beyond VOOs by allocating a portion of their portfolio to small-cap funds and international ETFs.
Several commentators mentioned funds like AVUV or VIOV because they target smaller, undervalued companies that, if invested in, can offer high growth over time.
“VIOV or AVUV (small cap value – considered risk compensated – I have 15% here personally),” suggests a commenter.
Some Redditors recommend specific funds like VXUS or VWO for international exposure to the US and emerging markets.
“A small allocation to VXUS also for international diversification,” the comment reads.
“You already have the US large caps covered. So what you’re looking for is a mid/small cap to cover the rest of the US and/or international markets,” another comment suggested.
Stick to VOO and complement it with high risk bets
Many Redditors in the thread mentioned that the VOO core is as tight as possible, but that it can be supplemented with a few high-risk, high-reward ETFs.
“QQQM or VUG or SCHG (large-cap growth – considered an uncompensated risk as it further concentrates rather than diversifying away from high-growth holdings in VOOs – but I have 15% here personally),” says the commentator.
Another Reddit member suggested a small allocation to an ETF linked to Bitcoin.
“Grab FBTC for 5% or some other bitcoin ETF. Play with it for a few decades,” he said.
An apparently risk-tolerant commenter shared his allocation, implying that investing in high-risk, high-reward ETFs is a good strategy.
“I’m 42 years old and my only positions are IVV and VGT/IYW. My risk tolerance is 11/10 and I won’t change,” the Redditor wrote.
