Best High Risk/Growth Options for Taxable Account

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csm14
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Joined: Thu Jan 07, 2016 8:21 pm

Best High Risk/Growth Options for Taxable Account

Post by csm14 »

Hi All,

I have a small amount of $ in my portfolio allocated in a taxable account for riskier investments.
All my retirement portfolio is in a Vanguard 3 fund portfolio.

What do you recommend as a way to get exposure to higher risk/higher potential return companies in a taxable account?
I use Fidelity for this account.

I've considered investing in companies like Salesforce, Tencent, Baidu, etc. but I'm not sure if there's a fund out there that will give me exposure to a broader basket of high risk stocks?
BreakfastToze
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Joined: Wed Dec 13, 2017 12:48 am

Re: Best High Risk/Growth Options for Taxable Account

Post by BreakfastToze »

Why do you want to put a potentially high-yield asset in a taxable account? It would be more efficient to use the tax-advantaged retirement account(s) for that.

You should consider the taxable account as part of your overall portfolio. Rather than investing in individual stocks, split an existing fund in your portfolio and move the higher-risk part into the taxable account. For example:
  • Total international equity = 80% developed markets + 20% emerging markets. Emerging markets are generally higher-risk than developed ones.
  • Total US equity = ~72% large-cap + 28% mid-small cap stocks. Smaller market cap stocks are assumed to have higher yields over the long run.
This way you can selectively allocate higher-risk stocks while maintaining your overall asset allocation.
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Noobvestor
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Re: Best High Risk/Growth Options for Taxable Account

Post by Noobvestor »

No need to separate things into buckets. Just fill in the portfolio in a tax-efficient way - probably using Total Stock or Total International. Individual stocks give you more risk, but not more expected return.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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grabiner
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Re: Best High Risk/Growth Options for Taxable Account

Post by grabiner »

Your taxable account is for things you want to hold forever, because it will be more costly if you sell.

Therefore, if you want to take more risk, it still makes sense to use an index fund of higher-risk stocks. My own taxable account contains Vanguard Emerging Markets Index and Vanguard FTSE All-World Ex-US Small-Cap. These are among my riskiest holdings. I don't hold them in taxable specifically because of their risk, but because I want to take those risks, and I can take them tax-efficiently; I also hold the less risky Developed Markets Index and Total Stock Market Index for their tax-efficiency. (Conversely, I use my Roth IRA for REIT Index and Global Real Estate, which are also very risky, because those funds generate high tax bills even when they are not sold.)
Wiki David Grabiner
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