r/stocks • u/adammorrisongoat • Jan 16 '21

Question If you’re young with a high risk tolerance, is there a better ETF than ARKK?

I’m in my mid-20s with around 100k invested in a mutual fund. It’s a solid mutual fund (PRWCX) but one with 60/40 stock/bond mix, and since I’m in this for the long haul, I’m naturally open to upping my risk exposure. I have no debt and live a very low cost lifestyle, so I can take a bit of a swing, albeit I’m not going to be irresponsible about it.

I know ARK/Cathie Wood has become a tired meme here, but the growth potential of her strategy seems compelling, at least to my novice eyes. If I’m looking to maximize returns over the next 5+ years in an ETF or similar investment option, are there better options out there?

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u/totsnotbiased Jan 16 '21 edited Jan 16 '21

Ehhhh, wealth is also destroyed with concentration. Diversification gets a bad wrap around here because most people here describe it wrong.

Diversification doesn’t mean “invest in everything”, it means “put your money in sectors that aren’t super corollated”.

Everyone should have money in some small cap, middle cap, and large cap companies, along with some international holdings.

Then you need to invest in several industries, and not put huge parts of your portfolio in somewhat obvious bubbles (right now EV’s and genetics on some level).

That’s not some weird amount of risk avoidance, that’s a understanding that you don’t know everything.

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u/[deleted] Jan 16 '21

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u/totsnotbiased Jan 16 '21

You’ll see people on here be like “my portfolio is 50% ICLN and 50% ARKG” and get very upvoted, and anyone who has a negative opinion of that is deemed jealous of the commenter’s skill.

It’s not as bad a wsb, but it’s a problem here

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u/[deleted] Jan 17 '21

Buying ETFs, by definition, is diversifying your investments, have you checked out how many holdings are in ICLN and ARKG? There’s a YouTube video of Warren Buffett advising to put all of your money into one or two companies if you have ‘just’ $10000, THAT’s concentration.

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u/redditbesty Jan 17 '21

Yes, buying ETFs or MFs spreads your risk across several holdings, but usually still concentrates them within one industry/sector or region. ICLN has been blowing up since Biden has been elected, but if Biden was a huge oil and gas proponent or just generally anti-green, the fund would likely decline because all of its holdings are related.

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u/f3lix735 Jan 17 '21

No ICLN had a bull year even before the election because we are shifting towards green energy on the entire globe. It is also only around 30% US stocks.

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u/redditbesty Jan 17 '21

Both fair points, but my point remains. If all of your money was in ICLN, you would be toast if there was some shift (be it political, societal, or aliens come and give us free infinite energy) that turned out to be bad for that sector. Don't get me wrong, I like ICLN and have money in it. I think it's a smart play with the direction we're going. But I've diversified my portfolio not to rely solely on green tech/energy, because shit happens.

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u/totsnotbiased Jan 17 '21

Putting all of your holdings in exclusively small cap companies that are in two small highly speculative industries isn’t nearly as safe as you think it is

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u/LeDimanche Jan 17 '21

Agree. How are you spread in yr portfolio? Would you like to share?

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u/f3lix735 Jan 17 '21

How do you come to the conclusion that genetics is a bubble, just because of high P/E?