Wanna try a more risky fund in Roth IRA

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detroitdiablo
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Wanna try a more risky fund in Roth IRA

Post by detroitdiablo » Thu Feb 22, 2018 10:55 pm

Looking to drop $5500 for the first time into a Roth IRA. I want to try something a little more risky since I already have the traditional 3 fund 457b that I stick my money in. I have it narrowed down to three choices:
1) Vanguard Explorer VEXPX ER 0.44
2) Vanguard International Explorer VINEX ER 0.38
3) Vanguard health care VGHCX ER 0.37

I want to drop the whole 5500 in one and see how it goes. Thoughts or suggestions? Any other fund I should look into to take a flyer on? Thanks
Last edited by detroitdiablo on Thu Feb 22, 2018 11:28 pm, edited 1 time in total.

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fortfun
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Re: Wanna try a more risky fund in Roth IRA

Post by fortfun » Thu Feb 22, 2018 10:59 pm

detroitdiablo wrote:
Thu Feb 22, 2018 10:55 pm
Looking to drop $5500 for the first time into a Roth IRA. I want to try something a little more risky since I already have the traditional 3 fund 457b that I stick my money in. I have it narrowed down to three choices:
1) Vanguard Explorer VEXPX
2) Vanguard International Explorer VINEX
3) Vanguard health care VGHCX

I want to drop the whole 5500 in one and see how it goes. Thoughts or suggestions? Any other fund I should look into to take a flyer on? Thanks
What are the ERs on each?

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detroitdiablo
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Re: Wanna try a more risky fund in Roth IRA

Post by detroitdiablo » Thu Feb 22, 2018 11:28 pm

Added the ER's to original post.

jacoavlu
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Re: Wanna try a more risky fund in Roth IRA

Post by jacoavlu » Thu Feb 22, 2018 11:33 pm

if you have total market equities already covered, how about some small cap and or emerging market tilt in the Roth?

Malinois000
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Re: Wanna try a more risky fund in Roth IRA

Post by Malinois000 » Thu Feb 22, 2018 11:35 pm

AARK - investing in disruptive technologies.

Dominic
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Re: Wanna try a more risky fund in Roth IRA

Post by Dominic » Thu Feb 22, 2018 11:51 pm

jacoavlu wrote:
Thu Feb 22, 2018 11:33 pm
if you have total market equities already covered, how about some small cap and or emerging market tilt in the Roth?
This.

If you're going to tilt, tilt to a small-cap value index and/or an emerging market index. These segments have higher expected returns, but you can invest in them cheaply and passively. If the premiums persist, you come out on top. If they don't persist, you're even with the market in the long run. I'm really not a fan of Vanguard's active offerings, save for the pseudo-index bond funds (I think the Treasury funds are listed as active, for example) and Wellington/Wellesley. (The Quantitative Equity Group's funds are interesting as well.) I don't like the Explorer funds, and I think health care is really risky since it's concentrated into one sector.

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Re: Wanna try a more risky fund in Roth IRA

Post by RRAAYY3 » Thu Feb 22, 2018 11:56 pm

Total International or Emerging Market

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detroitdiablo
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Re: Wanna try a more risky fund in Roth IRA

Post by detroitdiablo » Fri Feb 23, 2018 12:03 am

Dominic wrote:
Thu Feb 22, 2018 11:51 pm
jacoavlu wrote:
Thu Feb 22, 2018 11:33 pm
if you have total market equities already covered, how about some small cap and or emerging market tilt in the Roth?
This.

If you're going to tilt, tilt to a small-cap value index and/or an emerging market index. These segments have higher expected returns, but you can invest in them cheaply and passively. If the premiums persist, you come out on top. If they don't persist, you're even with the market in the long run. I'm really not a fan of Vanguard's active offerings, save for the pseudo-index bond funds (I think the Treasury funds are listed as active, for example) and Wellington/Wellesley. (The Quantitative Equity Group's funds are interesting as well.) I don't like the Explorer funds, and I think health care is really risky since it's concentrated into one sector.
Why don't you like the explorer funds? The small cap explorer and international explorer (small/mid funds) are looking for diamonds in the rough. The health Care is bumpy and kill it one year and tank the next. What emerging market fund would you suggest?

Dominic
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Re: Wanna try a more risky fund in Roth IRA

Post by Dominic » Fri Feb 23, 2018 12:10 am

detroitdiablo wrote:
Fri Feb 23, 2018 12:03 am
Dominic wrote:
Thu Feb 22, 2018 11:51 pm
jacoavlu wrote:
Thu Feb 22, 2018 11:33 pm
if you have total market equities already covered, how about some small cap and or emerging market tilt in the Roth?
This.

If you're going to tilt, tilt to a small-cap value index and/or an emerging market index. These segments have higher expected returns, but you can invest in them cheaply and passively. If the premiums persist, you come out on top. If they don't persist, you're even with the market in the long run. I'm really not a fan of Vanguard's active offerings, save for the pseudo-index bond funds (I think the Treasury funds are listed as active, for example) and Wellington/Wellesley. (The Quantitative Equity Group's funds are interesting as well.) I don't like the Explorer funds, and I think health care is really risky since it's concentrated into one sector.
Why don't you like the explorer funds? The small cap explorer and international explorer (small/mid funds) are looking for diamonds in the rough. The health Care is bumpy and kill it one year and tank the next. What emerging market fund would you suggest?
The Explorer funds aim for small growth companies, which as an asset class have performed poorly historically. The Explorer funds really don't seem to perform any better than the small growth index, and they're pretty expensive for Vanguard funds (Wellington's expense ratio is almost 20 basis points lower, for instance).

The healthcare fund has done insanely well for a very long time, but again, it's a lot of risk concentrated in one corner of the stock market. If there's significant reform in the healthcare industry (be it a string of new inventions or some kind of unforeseen sociopolitical changes), you're vulnerable to losing a lot of money. Maybe it will continue its outperformance, but I'd like to think that any future growth in healthcare is already priced in by the market.

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detroitdiablo
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Re: Wanna try a more risky fund in Roth IRA

Post by detroitdiablo » Fri Feb 23, 2018 12:24 am

Dominic
What outside the box fund would you suggest? It's only 5500 bucks so I'm not trusting my life savings with it and would like something to keep me intrigued. Something high risk high reward and if I did lose it all wouldn't cry about it.

jacoavlu
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Re: Wanna try a more risky fund in Roth IRA

Post by jacoavlu » Fri Feb 23, 2018 12:37 am

^^^ how about bitcoin? :greedy

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Re: Wanna try a more risky fund in Roth IRA

Post by gostars » Fri Feb 23, 2018 1:51 am

VSS, Vanguard FTSE All-World ex-US Small-Cap ETF, .13% ER
Holding 3591 small companies in just about every country outside the US that has a functioning economy and publicly-traded companies.

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nisiprius
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Re: Wanna try a more risky fund in Roth IRA

Post by nisiprius » Fri Feb 23, 2018 8:09 am

The last thing in the world I would do is ask someone else for suggestions on what kind of risky thing to do. To begin with, you are taking the meta-risk of asking someone who might be connected with or sells something risky. In the forum, that probably not true for most of postings, and you have limiting your risk by asking for a choice from a list, but still. Ask an advisor this question and you're positively inviting them to throw all consideration of your interests to the winds, and plug whatever is best for them.

Playing your own hunch is one thing. (I don't happen think it's a good idea; I've outgrown doing that). But if you are going to do something, it really should be your own hunch, you should really have a high level of conviction. If you follow anybody else's suggestion and it does poorly you are going to feel even worse about it than if you had chosen it for yourself.

To quote the words of a character in The Prodigious Hickey, by Owen Johnson,
just remember this, if you forget the rest: if you want to put ducks in Tabby's bed or nail down his desk, do it because you want to do it, not because some other fellow wants you to do it.
All that said, I think you have some homework to do. You have mentioned three actively managed funds. I don't go in for actively managed funds, but if you do, then what that means is that you have personal conviction that the fund manager has something special, and can see things in stocks or groups of stocks or trends that you, and the average professional fund manager, cannot see. (It has to be above-average skill, because average skill gets you average performance which you can get from an index fund, at lower cost). So the question I would ask you is: what are the names of the managers of these three funds, what do you know about them, and why do you think they are better than the average fund manager?

Finally, with regard to your three choices: you want to take more risk, meaning you really believe you could lose as well as win. (Often people seem to be thinking only of the "winning" aspect and don't really seem to be quite serious about the "risk" part. Risk only gives you the potential of winning. If there weren't a real possibility that you, yourself, might lose, it wouldn't be "risk.") The first thing you need to decide is whether you want

1) to play it fairly safe and choose a fund that only has a little more risk than the obvious most similar index fund, a fund that might give you a small edge on the index and then again, of course, might underperform the index; a fund that has been broadly similar in past behavior to Total Stock or Total International, or...

2) a fund that is seriously giving you more risk, by obviously having behaved in a different way from Total Stock or Total International. "Different" means you should notice places where, in the past, your candidate fund was doing worse than the comparisons. If only see an unbroken stretch of outperformance, then you aren't looking at a long enough period of time; the periods of outperformance are (almost????) always there.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Toons
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Re: Wanna try a more risky fund in Roth IRA

Post by Toons » Fri Feb 23, 2018 8:24 am

Risk usually diminishes with Time.
Pick One that suits.
Hold for minimum 10 years.
Peek once a year .
Enjoy the ride.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Watty
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Re: Wanna try a more risky fund in Roth IRA

Post by Watty » Fri Feb 23, 2018 8:44 am

For a truly risky investment you might want to buy it in a taxable account so that you can deduct the capital loss if it does not work out.

If it does do well then the long term capital gains tax rates are not too bad, or even zero if your income is low enough.

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ruralavalon
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Re: Wanna try a more risky fund in Roth IRA

Post by ruralavalon » Fri Feb 23, 2018 12:19 pm

detroitdiablo wrote:
Thu Feb 22, 2018 10:55 pm
Looking to drop $5500 for the first time into a Roth IRA. I want to try something a little more risky since I already have the traditional 3 fund 457b that I stick my money in. I have it narrowed down to three choices:
1) Vanguard Explorer VEXPX ER 0.44
2) Vanguard International Explorer VINEX ER 0.38
3) Vanguard health care VGHCX ER 0.37

I want to drop the whole 5500 in one and see how it goes. Thoughts or suggestions? Any other fund I should look into to take a flyer on? Thanks
Adding risk doesn't guarantee extra return, it only guarantees extra risk.

If you really want to add risk then consider one of these:
1) Vanguard Small-cap Value Index Fund, VISVX;
2) Vanguard Emerging Markets Index Fund, VEIEX;
3) Vanguard Real Estate Index Fund, VGSIX; or
4) Vanguard Precious Metals and Mining Fund, VPMGX.

On Morningstar look at the "growth of $10k" graph for any fund you consider for the "maximum" time frame, and notice the down times as well as the up times.

I favor putting risky sector funds in a tax-advantaged account (like a Roth IRA) so that you can take advantage of rebalancing opportunities presented by their very high volatility, without creating unnecessary income tax liability.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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grabiner
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Re: Wanna try a more risky fund in Roth IRA

Post by grabiner » Fri Feb 23, 2018 9:37 pm

detroitdiablo wrote:
Thu Feb 22, 2018 10:55 pm
Looking to drop $5500 for the first time into a Roth IRA. I want to try something a little more risky since I already have the traditional 3 fund 457b that I stick my money in.
What matters is the risk of your whole portfolio, not any one part of it. If you want to take more risk, you can sell a bond fund somewhere to buy a stock fund.

If you want to take another type of risk, it should be a non-diversifiable risk, so that you at least get an expected reward. Small-cap stocks are riskier, for the potential of higher returns; so are value stocks. Many Bogleheads (including me) overweight them as a way to take more risk.'

But you need to be confident that you are taking the right level of risk. I wouldn't suggest doing this unless you have already been through a bear market with a risky portfolio, and since you are making your first Roth IRA investment, I assume you haven't.
Wiki David Grabiner

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