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Investors often find themselves at a turning point: 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 generally designed to take advantage of emerging industries, speculative trends or leveraged practices that promise higher returns than conventional ETFs.
Some investors think that allocating a small portion to these high-risk ETFs can increase the overall performance of their portfolio without jeopardizing their entire nest egg.
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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 stock exposure, lower fees and more controlled growth. VOO, for example, traces the S&P 500 IndexMaking a choice for those investors who prefer the “set it and forget about it” strategy.
This brings us to an investor situation, recently shared on Reddit, an online discussion forum with many investment communities. The poster, a lifesaver in his early 30s, has built a portfolio of nearly $150K in VOO.
“Now, I’m in my early 30s and I’m 100% VOO and chill, with about $150K at this point. That’s 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.
“Any suggestions for aggressive, high-risk/high-reward ETFs that make sense to supplement VOO? I’d try to put no more than 5-10% of my portfolio in something with a bit more upside like this. In Alternatively, would it be better to stay the course and keep throwing extra money at VOO?
Because he’s 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 recommend to the young poster.
Many Redditors have suggested that investors diversify beyond VOO by allocating a portion of their portfolio to small-cap value funds and international ETFs.
A few commenters mentioned funds like AVUV or VIOV because they target smaller, undervalued companies that, if invested, can offer high growth over time.
“VIOV or AVUV (small-cap value – considered a compensated risk – I have 15% right there),” suggests one commenter.
Some Redditors recommend certain funds like VXUS or VWO for exposure to US international and emerging markets.
“Small allocation to VXUS even for international diversification,” one comment read.
“You already cover the US large caps. Therefore, what you are looking for is either mid / small caps to cover the rest of the US and / or international market,” suggests another comment.
Stick With VOO and Complement it with High Risk Bets
Several Redditors in the thread said that the VOO core is as solid as possible, but it can be supplemented with a couple of high risk and reward ETFs.
“QQQM or VUG or SCHG (large capitalization growth – considered a risk without compensation because more concentration instead of diversifying out of the height of growth in VOO – but I have 15% here myself),” says a comment.
Another Reddit member suggested a small allocation to an ETF linked to Bitcoin.
“Take FBTC for 5% or another bitcoin ETF. Roll with it for a few decades,” he said.
A seemingly 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 basically my only positions are IVV and VGT/IYW. My risk tolerance is 11/10 and I haven’t changed,” wrote the Redditor.
