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Often, investors find themselves in a dilemma: Should they continue to play it safe with low-risk ETFs, or risk it all and chase high returns with high-risk ETFs?
These High risk Investments are often designed to take advantage of industries, speculative trends, or trends that promise higher returns than traditional ETFs.
Some investors think that allocating a small portion of these high-risk ETFs will boost their portfolio’s overall performance without risking their entire nest egg.
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Conversely, low-risk ETFs like the Vanguard S&P 500 or VOO are a must-buy for many investors. These funds offer broad stock exposure, lower fees and more controlled growth. VOO, for example, follows S&P 500 IndexThis makes it an option for investors who prefer a “set it and forget it” strategy.
This brings us to an investor problem that was recently shared on Reddit, an online discussion forum with many investor communities. A frugal poster in his early 30s, he built a nearly $150K portfolio in VOO.
“Now, I’m in my early 30s and I’m 100% VOO and chill, with roughly $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 top up VOO? I’d like to put no more than 5-10% of my portfolio into something a little more upside like this. Alternatively, would it be better to just stay the course and dump more money into VOO?” he asks.
Not sure which of these two options is the best strategy, he asked the Reddit R/ETF community for advice. Let’s take a look at what Reddit investors gave the young poster.
Many Redditors suggest that investors diversify beyond VOO by allocating a portion of their portfolio to small-cap value funds and global ETFs.
A few commenters mentioned funds like AVUV or VIOV because they target undervalued companies that have the potential to deliver significant growth over time if invested in.
“VIOV or AVUV (low-cap value – considered as compensation risk – I myself have 15% here)” suggests a commenter.
Some Redditors recommend investing in funds like VXUS or VWO for exposure to US global and emerging markets.
One comment says, “Minimum classification for VXUS and international diversity.”
“You already have America’s biggest covers. So what they need is mid/small cap to cover the rest of the US market and/or international,” suggests another comment.
Stick with VOO and complement it with high risk bets
Several Redditors in the thread mentioned that the VOO core is as strong as possible but could be complemented by higher-risk, higher-reward ETFs.
“QQQM or VUG or SCHG (large-cap growth – it is considered an uncompensated risk because it is more concentrated than the high-growth holdings in VOO – but I myself have 15%),” he said.
Another Reddit member suggested a modest allocation to a Bitcoin-linked ETF.
“Hold FBTC at 5% or another Bitcoin ETF. They rolled with it for a few decades,” he said.
A seemingly risk-tolerant commentator shares the dividend, suggesting that investing in high-risk, high-reward ETFs is a good strategy.
“I’m 42 and basically my only positions are IVV and VGT/IYW. My risk tolerance is 11/10 and I’m not changing,” the Redditor wrote.
