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Often, investors find themselves at a turning point: Should they keep playing it safe with low-risk ETFs or risk it all and chase huge returns with aggressive high-risk ETFs?
These high-risk investments are usually designed to take advantage of arising industries, speculative trends or leveraged practices that promise higher returns than conventional ETFs.
Some investors think that allocating a small share to these high-risk ETFs can increase the overall performance of their portfolio without jeopardizing their entire nest egg.
Conversely, low-risk ETFs, like the Vanguard S&P 500 or VOO, are a must-have acquisition for many investors. These funds offer broad stock exposure, lower fees and more controlled growth. VOO, for instance, tracks the S&P 500 index, making it a go-to choice for those investors who prefer the “set it and forget about it” strategy.
This brings us to one investor’s predicament, recently shared on Reddit, an online discussion forum with plenty of investing communities. The poster, a saver in his early 30s, has built a portfolio of almost $150K in VOO.
“Right now, I’m in my early 30s and am 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’s considering allocating a portion of his wealth to high-risk, high-reward ETFs.
“Any suggestions for aggressive, high-risk/high-reward ETFs that make sense to supplement VOO with? I'd be looking to do no more than 5-10% of my portfolio into something with a little more upside like this. Alternatively, would it be better to just stay the course and keep throwing extra money into VOO?” he asks.
Because he isn’t sure which of these two options is a good strategy, he asked Reddit’s r/ETFs community for advice. Let’s see what Reddit’s investors recommended to the young poster.
Low Risk or High Risk? The Advice Given By Redditors
Diversify With Small-Cap and International ETFs
Many Redditors have suggested the investor diversify beyond VOO by allocating a portion of his 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 in, can offer high growth over time.
“VIOV or AVUV (small-cap value – considered a compensated risk – I have 15% here myself),” a commenter suggests.
Some Redditors recommended certain funds like VXUS or VWO for U.S. international and emerging markets exposure.
“Small allocation to VXUS as well for international diversification,” a comment reads.
“You already have U.S. large caps covered. So what you’re looking for is either mid/small caps to cover the rest of the U.S. market and/or international,” another comment suggests.
Stick With VOO and Complement it With High-Risk Bets
Many Redditors in the thread mentioned that the VOO core is as solid as possible but can be supplemented with a couple of high-risk, high-reward ETFs.
“QQQM or VUG or SCHG (large-cap growth – considered an uncompensated risk because it further concentrates rather than diversifies away from high growth holdings in VOO – but I have 15% here myself),” says a commenter.
Another Reddit member suggested a small allocation to a Bitcoin-related ETF.
“Grab FBTC for 5% or another bitcoin ETF. Roll with it for a few decades,” he said.
A commenter who seems risk-tolerant shared his allocation, implying 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 ain't changing,” the Redditor wrote.
