Higher risk ETF

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PurpleArc
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Higher risk ETF

Post by PurpleArc » Mon Jun 24, 2019 10:04 am

Thinking of adding some risk to the portfolio, which would you suggest?

Currently have VOO, VTI, VNQ, IWF.

livesoft
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Re: Higher risk ETF

Post by livesoft » Mon Jun 24, 2019 10:07 am

DGS, VSS, VXUS, IJS, and maybe a Russian, Iranian, or Turkish country-specific ETF.

Your VOO, VTF, and IWF are all pretty much the same thing and really don't help with diversification, do they? Maybe you have all 3 because of previous tax-loss harvesting?
Last edited by livesoft on Mon Jun 24, 2019 10:08 am, edited 2 times in total.
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ohai
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Re: Higher risk ETF

Post by ohai » Mon Jun 24, 2019 10:07 am

How about ETF with 2x or 3x leverage?

Anyway, if you believe capital asset pricing model and mean variance optimization, the most efficient portfolio is the full market, whose leverage you just scale if you want to change your risk exposure.

MotoTrojan
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Re: Higher risk ETF

Post by MotoTrojan » Mon Jun 24, 2019 10:16 am

ohai wrote:
Mon Jun 24, 2019 10:07 am
How about ETF with 2x or 3x leverage?

Anyway, if you believe capital asset pricing model and mean variance optimization, the most efficient portfolio is the full market, whose leverage you just scale if you want to change your risk exposure.
Daily rebalanced leveraged ETFs can work well in a balanced portfolio (see hedgefundie thread) but alone they only really outperform in a bull market due to massive drawdowns (97% during GFC).

Day9
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Re: Higher risk ETF

Post by Day9 » Mon Jun 24, 2019 10:58 am

How about reducing your bond & cash allocation and increasing your stock allocation? Are you already 100% stock?
I'm just a fan of the person I got my user name from

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whodidntante
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Re: Higher risk ETF

Post by whodidntante » Mon Jun 24, 2019 11:02 am

I assure you that VTI is incredibly risky. It just doesn't seem that way in a bull market.

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Dialectical Investor
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Re: Higher risk ETF

Post by Dialectical Investor » Mon Jun 24, 2019 11:06 am

One of your funds had a maximum drawdown of nearly 70% and did not reach its previous value for more than 5 years. Not risky enough?

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jeffyscott
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Re: Higher risk ETF

Post by jeffyscott » Mon Jun 24, 2019 11:38 am

whodidntante wrote:
Mon Jun 24, 2019 11:02 am
I assure you that VTI is incredibly risky. It just doesn't seem that way in a bull market.
Same goes for VOO, VNQ, and IWF, of course.
Time is your friend; impulse is your enemy. - John C. Bogle

schooner
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Re: Higher risk ETF

Post by schooner » Mon Jun 24, 2019 12:10 pm

PurpleArc wrote:
Mon Jun 24, 2019 10:04 am
Thinking of adding some risk to the portfolio, which would you suggest?

Currently have VOO, VTI, VNQ, IWF.
I’d take a step back and reflect on Warren Buffett’s great quote:

“Be fearful when others are greedy and greedy when others are fearful”

ohai
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Re: Higher risk ETF

Post by ohai » Mon Jun 24, 2019 12:17 pm

MotoTrojan wrote:
Mon Jun 24, 2019 10:16 am
ohai wrote:
Mon Jun 24, 2019 10:07 am
How about ETF with 2x or 3x leverage?

Anyway, if you believe capital asset pricing model and mean variance optimization, the most efficient portfolio is the full market, whose leverage you just scale if you want to change your risk exposure.
Daily rebalanced leveraged ETFs can work well in a balanced portfolio (see hedgefundie thread) but alone they only really outperform in a bull market due to massive drawdowns (97% during GFC).
If you do not like the particular leverage scheme used by some ETF, you can always self construct a method using futures or other methods. The failure of one implementation does not disprove the principle. And in any case, OP did not state that he was exceeding 100% leverage anyway. So the choice is most likely with respect to how much of his current net worth he should carry as market beta.

MotoTrojan
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Re: Higher risk ETF

Post by MotoTrojan » Mon Jun 24, 2019 12:29 pm

ohai wrote:
Mon Jun 24, 2019 12:17 pm
MotoTrojan wrote:
Mon Jun 24, 2019 10:16 am
ohai wrote:
Mon Jun 24, 2019 10:07 am
How about ETF with 2x or 3x leverage?

Anyway, if you believe capital asset pricing model and mean variance optimization, the most efficient portfolio is the full market, whose leverage you just scale if you want to change your risk exposure.
Daily rebalanced leveraged ETFs can work well in a balanced portfolio (see hedgefundie thread) but alone they only really outperform in a bull market due to massive drawdowns (97% during GFC).
If you do not like the particular leverage scheme used by some ETF, you can always self construct a method using futures or other methods. The failure of one implementation does not disprove the principle. And in any case, OP did not state that he was exceeding 100% leverage anyway. So the choice is most likely with respect to how much of his current net worth he should carry as market beta.
You mentioned 2x and 3x leveraged funds. I commented on 2x and 3x leveraged funds. Of course there are other ways to achieve direct, non-rebalancing, leverage.

Agree with above sentiment though that if you aren't already 100/0, that is the most efficient knob to increase risk for most people (I could see an argument for something like small-value and long duration treasuries being more efficient with the same expected return).

asif408
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Re: Higher risk ETF

Post by asif408 » Mon Jun 24, 2019 1:03 pm

I like gold miners (GDX), any Russian, Turkish, or Brazilian ETFs (ERUS, TUR, EWZ or EWZS). They are still 50%+ below their all time highs in 2007 and have at some point fallen 60-80% between 2011 and today. With all the talk about the length of the US bull market, most of the rest of the world has been in various stages of bear markets for the last decade, and these countries and sectors have been the worst of the bunch.

None of the funds you currently own have had anything approaching a whiff of the poor performance these ETFs have had since 2009. So I think these would add good risk that could potentially be well rewarded, considering how long and deep their underperformance has been.

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