ARKK ETF Review
Investment Personal Finance

Best investment for the future? ARKK ETF first look

Over the past couple of months, I’ve been doing my research and looking into new opportunities to invest in. This has ranged from REITS to alternative assets such as Cryptocurrencies.

While on Reddit, I learnt of this new ETF called ARKK by Ark Invest. After doing some research, I can say that I’m a believer and have decided to invest into it!

When we talk about ETFs, most people will think of the S&P ETFs. Or they might think of a broad-based global ETF like VT.

In this article, I’m going to talk about the ARKK ETF by Ark Invest and why I think it is an incredible investment for the future.

Introduction to Ark Invest

Ark Invest is an American funds manager which aims to invest in disruptive innovative companies which will change the world. Its CEO/CIO is Cathie Wood.

Cathie Wood has investment experience of over 40 years. After watching several interview clips about her, I am really impressed with her thinking.

The reason for setting up Ark Invest was to fill in the gap for innovative investing. Currently, most fund managers that invests in innovative companies look into the private markets to discover the “next Apple”.

“ARK invests across sectors, geographies, and market caps, seeking to identify companies missed by traditional sector-based strategies.”

ark-funds.com

However, Cathie Wood believes that there are also many hidden gems in the lower cap public market. This is also the ethos of Ark Invest as you can see in a majority of their holdings.

According to Cathie, there are several categories where she believes will drive the next innovation boom in the world. These are Autonomous Tech, Genomes, Fintech and 3D printing.

This is very evident in the ETFs offered by the company.
ARKK – Ark Innovation
ARKF – Ark Fintech
ARKW – Ark Next Gen Internet
ARKG – Ark Genomics
ARKQ – Ark Autonomous Tech

We are going to specifically talk about ARKK — the mother of all ARK ETFs. That’s the one I have the most interest in and the one I’m currently invested in.

ARKK

Investment categories for ARKK

ARKK is basically an aggregation of all the other ETFs. It takes the best companies out from the other ETFs and invests in them. In terms of diversification, this will definitely be the best out of the rest.

Basic Information

Expense Ratio0.75%
Fund TypeActive
Number of holdings35-55
Net AssetsUS$4.8 Billion

The first thing that stands out about this fund is that is an active fund. This means that there is a fund manager actively buying and selling the companies it holds.

This makes it very different from other types of passive ETFs which tracks indices. As a result, the expense ratio of the fund is also particularly high: 0.75%.

As a comparison, the expense ratio of a traditional S&P 500 ETF like SPY is usually only 0.03%. That’s more than 20 times more!

You can also see that the number of holdings of the fund is much lower and is not capped at the particular number. This very limited number means that every single company in its company is carefully scrutinised and selected.

Holdings

CompanyTickerWeight
TESLA INCTSLA9.76%
INVITAE CORPNVTA7.47%
SQUARE INC – ASQ6.11%
CRISPR THERAPEUTICS AGCRSP5.10%
ROKU INCROKU4.93%
PROTO LABS INCPRLB4.31%
2U INCTWOU3.77%
ILLUMINA INCILMN3.42%
ZILLOW GROUP INC – CZ3.09%
LENDINGTREE INCTREE UW3.05%
Source: ark-funds.com, As of 09/10/2020

We can see that Tesla is ARKK’s biggest holdings. I’m not surprised by this as Cathie Wood is Tesla’s biggest bull. This is clearly evident in many interviews of her across Youtube.

I personally own individual stocks of Tesla and Square. Therefore, by purchasing into ARKK, I’m actually increasing my exposure to these companies. This is a feature that I welcome a lot as I am personally a believer of these companies as well.

You can also see that the companies are very diversified across the different sectors researched by Ark.

Performance over the years

In the past year, ARKK has performed incredibly well. It went from $44.35 at the start of the year to $85.73 as of the time of writing.

This can likely be attributed to the Covid tech boom. ARKK has also benefited greatly by Tesla’s meteoric price rise during this same period of time.

Outside of this year, ARKK has also outperformed the S&P 500 index consistently.

ARKK3 MonthsYTD1 Year3 Years5 YearsSince Inception
Market Price62.00%42.42%49.12%37.23%29.09%26.73%
Source: ark-funds.com/arkk, As of 06/30/2020

This performance chart is really incredible. The market price has increased by 26.73% annually since 2014. That significantly beats out S&P500’s average of 9-11%.

How do I buy ARKK?

You can purchase ARKK from any broker that gives you access to the US market.

I personally use Firstrade to buy ARKK every 2 weeks as the platform offers commission-free trading. As an alternative, I’d recommend either Tiger Brokers or Interactive Brokers.

Kristal.AI, a Robo-Advisor platform also offers ARKK as one of its investment options. Even though I’ve signed up with them, I did not continue using them as I was already using Firstrade for all of my US trades.

Conclusion

ARKK is really a very interesting alternative to the S&P 500. As someone who is really into tech and innovation, this ETF aligns greatly with my personal values.

As an ETF, it also allows me some form of diversification. Sure, this ETF is definitely riskier than the traditional S&P 500 ETF. However, it also offers tremendously more growth potential.

I’m allocating a small proportion of my monthly investible money into this ETF.

I hope that this introduction to ARKK gives you 1 more option in your investment journey! If you’re interested to find out more about Ark Invest, I’d highly recommend you subscribe to their podcast.

In the podcast, they explore into topics regarding innovation and how they envision the future to be like. It can really help give new perspectives into your investment journey.

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