Since reaching a high of $156.58 on February 12, 2021, ARK Innovation ETF (NYSEARCA:ARKK) has dropped 39.6%, closing at $94.59 on December 31, 2021. For all of 2021, the ETF was down 24.02%. The ETF, which focuses on new and disruptive technologies, is primarily comprised of stocks that performed well during Covid lockdowns.
The global shutdown, when work/study/stay at home decrees dictated a change in the lifestyle of workers and students, gave rise to a demand for products such as PCs, video conferencing, and even exercise equipment when gyms shut down. As lockdowns eased, these stocks dropped as well. In the near-term, in effect, ARKK could do with another global lockdown.
There are alternatives to ARKK. One is Vanguard Information Technology ETF (NYSEARCA:VGT). For all of 2021, the ETF was up 29.5%.
Comparing these ETFs over a 3-year period, VGT grew 175% while ARKK, with significant volatility, grew 154%, as show in Chart 1.
Chart 1
To mitigate the volatility, an investor would need to rely on the active management of ARK Invest, versus more of a buy and wait strategy of the passive management of Vanguard. But with the strong pullback of ARKK since the peak in early 2021, how good ARK Invest is at mitigating the volatility needs to be evaluated along with its strategy. These issues are analyzed below.
Comparing ARKK and VGT
A competitive analysis of these two ETFs is shown in Table 1. One of the key differentiators is Assets Under Management ("AUM"), which represents the total of all investor dollars invested in all share classes of the fund. Investors generally consider higher investment inflows and higher AUM comparisons as a positive indicator of quality and management experience. That would make the VGT ETF a strong choice with an AUM of $56.60 billion compared to just $16.80 billion for ARKK.
ARKK also has an expense ratio of 0.75%, which is 80 basis points higher than the FactSet segment average of 0.67%. VGT’s expense ratio is just 0.10%.
*Source: Table created by author with information from the fund websites.
Profile of VGT
The Vanguard Information Technology ETF VGT was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology segment of the equity market.
Table 2 is the current (12/3/21) top 10 holdings for VGT, showing 1-year stock performance and Quant Ranking based on industry. Currently Apple (AAPL) is the largest holding at 20.06%, while NVIDIA (NVDA) has the top 1-year stock performance, growing 125.06% in 2021. The probable block of NVIDIA's acquisition of ARM is responsible for a pullback of the stock.
*Source: Table created with information from fund website and Seeking Alpha.
Profile of ARKK
Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of:
DNA Technologies and the “Genomic Revolution”
Automation, Robotics, and Energy Storage
Artificial Intelligence and the “Next Generation Internet”
Fintech Innovation
Table 3 is the current (12/3/21) top 10 holdings for ARKK, showing 1-year stock performance and Quant Ranking based on industry. Only Tesla (TSLA) had positive stock performance in 2021 and has a Quant Ranking of 4 out of 26 in the Automobile Manufacturers industry.
*Source: Table created with information from fund website and Seeking Alpha.
Investor Takeaway
Cathie Wood, CEO and CIO of ARK Invest, made a name for herself after a banner 2020 in which the ARK Innovation ETF returned nearly 150%. She put out a thread of tweets in late October, 2021 highlighting her concerns around how businesses and consumers seem to have overreacted to supply chain bottlenecks.
“Now we believe that three sources of deflation will overcome the supply chain-induced inflation that is wreaking havoc on the global economy. Two sources are secular, or long term, and one is cyclical. Technologically enabled innovation is deflationary and the most potent source.”
“As a result, once the holiday season passes and companies face excess supplies, prices should unwind. Some commodity prices - lumber and iron ore - already have dropped 50%. China’s crackdowns are one of the reasons. The oil price is an outlier and psychologically important.”
At the end of December 2021 she reiterated her analysis of the economy and philosophy on ARK Invest:
“In our view, fears of inflation will give way to confusion and fears of recession during the next three to six months. If so, the rapid growth rates of truly innovative companies, many of their equities maligned this year, should be rewarded handsomely.”
ARK Invest releases a list of its trades at the end of each trading day, which are published at 24/7 Wall St. (247wallst.com). Cathie Wood, the CEO and CIO of ARK Investment Management, is a minority and nonvoting shareholder of 24/7 Wall St.
Chart 2 shows ARKK’s stock price in the past year, closing at $94.59 and down 23.92% for 2021. Chart 2 also shows a peak on November 4, 2021 followed by a nearly continuous drop in stock price to the end of 2021.
Chart 2
The importance of this November 4 peak is important. Table 4 also shows the purchase price of the stocks bought on November 4, and the closing price on 12/31/21. The percentage change for the 2-month period ranges from -11.7% for Intellia Therapeutics (NTLA) and -52.1% for Robinhood Markets (HOOD).
*Source: Table created by author with data from 24/7 Wall Street.
Table 4 shows that Cathie Wood doesn’t believe her own thesis of inflation to deflation to innovative stock rise, because on 11/4/21 inflation was strong and supply chain disruptions threatened to disrupt Christmas. Yet she made the purchases and stocks continued to plummet for the next two months!
Finally, ARK defines ‘‘disruptive innovation’’ as the introduction of a technologically enabled product or service that potentially changes the way the world works. But it doesn’t mean that these disruptive companies are and will be market leaders in the near or mid-term.
For example, Apple’s (AAPL) iPhone was a market disruptor when first introduced in 2007, yet its market share never reached more than 25%.
Another example is Block (SQ) (formerly Square), which ARKK has 3.46% of its holdings in the company. There is a market full of alternatives to Square out there for an investor to choose from, including Intuit (INTU) and PayPal (PYPL). There are many point-of-sale companies that allow one to harness the power of smart devices to convert them into fully functional points of sale. And there are also Square competitors that don’t require you to have access to a smart device for their product.
For the long-term investor, ARKK may be a good choice after stock prices of its holdings increase because they have already exhibited pullbacks and these pullbacks may not have ceased yet. But that means timing the market on the buy, and because of possible volatility, on the sell.
For the long-term investor that has a strategy of buy and hold, the low volatility and strong historic stock performance for VGT may be the better choice.
This free article presents my analysis of this semiconductor sector. A more detailed analysis is available on my Marketplace newsletter site Semiconductor Deep Dive. You can learn more about it here and start a risk free 2 week trial now.
Investors generally consider higher investment inflows and higher AUM comparisons as a positive indicator of quality and management experience. That would make the VGT ETF a strong choice with an AUM of $56.60 billion compared to just $16.80 billion for ARKK.
Vanguard Information Technology ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VGT is a great option for investors seeking exposure to the Technology ETFs segment of the market.
ETFs can be great building blocks for long-term investors. They can provide broad exposure to market sectors, geographies, and industries and help investors quickly diversify their portfolios while reducing their overall risk profile. The best long-term ETFs provide this exposure for a relatively low expense ratio.
ARKK - Volatility Comparison. The current volatility for Berkshire Hathaway Inc.(BRK-B) is 3.02%, while ARK Innovation ETF (ARKK) has a volatility of 8.93%. This indicates that BRK-B experiences smaller price fluctuations and is considered to be less risky than ARKK based on this measure.
Based on 3,237 Wall Street analysts offering 12 month price targets to VGT holdings in the last 3 months. The average price target is $429.00 with a high forecast of $523.87 and a low forecast of $323.45. The average price target represents a 12.79% change from the last price of $380.37.
Based on 389 Wall Street analysts offering 12 month price targets to ARKK holdings in the last 3 months. The average price target is $49.40 with a high forecast of $69.99 and a low forecast of $32.55. The average price target represents a 40.27% change from the last price of $35.22.
QQQ - Performance Comparison. The year-to-date returns for both investments are quite close, with VGT having a 20.58% return and QQQ slightly higher at 21.18%. Over the past 10 years, VGT has outperformed QQQ with an annualized return of 19.52%, while QQQ has yielded a comparatively lower 17.39% annualized return.
Bottom Line. Leveraged ETFs decay due to the compounding effect of daily returns, volatility of the market and the cost of leverage. The volatility drag of leveraged ETFs means that losses in the ETF can be magnified over time and they are not suitable for long-term investments.
Through his holding company Berkshire Hathaway, Warren Buffett only owns one type of ETF: the S&P 500 ETF -- specifically, the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).
Financials. Buffett's favorite America Express has exposure to ETFMG Prime Mobile Payments ETFMG Prime Mobile Payments Fund IPAY while Bank of America is heavy on the likes of iShares U.S. Financial Services ETF IYG.
Through his holding company Berkshire Hathaway, Warren Buffett invests in only two ETFs: the Vanguard S&P 500 ETF (VOO -0.07%) and the SPDR S&P 500 ETF Trust (SPY -0.10%). An S&P 500 ETF is an investment that aims to track the S&P 500 index itself, which means it includes all the same stocks as the index.
Based on our forecasts, a long-term increase is expected, the "VGT" fund price prognosis for 2028-04-19 is 611.509 USD. With a 5-year investment, the revenue is expected to be around +59.11%. Your current $100 investment may be up to $159.11 in 2028. Get It Now!
The Vanguard S&P 500 ETF is one of the largest and most popular ETFs (third in assets under management, or AUM). The ETF's low-cost and large-size combination makes it a great choice if you're looking to invest in the broader market.
YTD, Wood's flagship ARK Innovation ETF (ARKK) is actually performing quite well. The fund has gained 29.78 percent in the early weeks of 2023, while the S&P 500 has risen just 6.54 percent. On a slightly longer time horizon, however, the fund has still turned in poor performance for its investors.
For ARK Innovation ETF Stock (ARKK) price forecast for 2030, a forecast is offered for each month of 2030 with average ARKK price forecast of $47.55, a high forecast of $48.43, and a low forecast of $31.14. The average ARKK price prediction of 2030 represents a +33.05% increase from the last price of $35.74.
Will the stock market hit $3000 in 2025? Based on our updated research, we now estimate that it could approach $3,000 in 2025. To arrive at this forecast, ARK used a Monte Carlo model with 34 inputs, the high and low forecasts incorporating 40,000 possible simulations.
The QQQ ETF offers investors big rewards during bull markets, the potential for long-term growth, ready liquidity, and low fees. QQQ usually declines more in bear markets, has high sector risk, often appears overvalued, and holds no small-cap stocks.
Back tests show that TQQQ can be held longer term (1-Year) and beats QQQ but holding for too long (5 Years) can significantly worsen performance. Holding TQQQ for too long almost guarantees that you will encounter a protracted bear market that wipes out nearly your entire portfolio.
SPY has 503 holdings across 24 sectors. By contrast, QQQ has just 106 holdings across 7 sectors. Furthermore, SPY's largest sector allocation comes in at “just” 25.93% in Technology. Healthcare, Financials, Consumer Discretionary, and Utilities all make up the top five.
If you hold ETF shares for one year or less, then gain is short-term capital gain. If you hold ETF shares for more than one year, then gain is long-term capital gain.
10-Year Average Annualized Return. We believe the SPDR SSGA Multi-Asset Real Return ETF might be the best inflation ETF. This actively managed fund holds shares of other ETFs that track market sectors expected to outperform the inflation rate.
The key benefits of ETFs, such as simplicity, diversification, low expenses and tax efficiency, can make ETFs a sound investment for retirees. Short-term income generation and long-term growth are other potential benefits for retired investors.
Eric Balchunas, an ETF analyst at Bloomberg Intelligence, notes that during the past five years, 1,050 ETFs have launched. During the same period, more than 900 ETFs have folded. Their average lifespan is just 3.4 years.
A trader can hold the majority of these ETFs including TQQQ, FAS, TNA, SPXL, ERX, SOXL, TECL, USLV, EDC, and YINN for 150-250 days before suffering a 5% underperformance although a few, like NUGT, JNUG, UGAZ, UWT, and LABU are more volatile and suffer a 5% underperformance in less than 130 days and, in the case of JNUG ...
The top reasons for closing or liquidating an ETF include a lack of investor interest and a limited amount of assets. An investor may not choose an ETF because it is too narrowly-focused, too complex, or has a poor return on investment.
According to the fund's website: Subversive Unusual Whales Democratic ETF (Ticker: NANC) will invest in equity securities purchased or sold by Democratic members of Congress and their spouses.
Investors looking to build a portfolio around Tesla might be interested in the Consumer Discretionary Select Sector SPDR Fund (XLY 0.26%), the Ark Innovation ETF (ARKK 0.62%), or the First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN -0.24%).
To build up retirement savings, Buffett swears by one simple tip. “Consistently buy an S&P 500 low-cost index fund,” he told CNBC in 2017. “I think it's the thing that makes the most sense practically all of the time.”
What Is the 90/10 Rule in Investing? The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital towards low-cost stock-based index funds and the remainder 10% to short-term government bonds.
What Strategy Does Warren Buffett Use? Warren Buffett's investing strategy is value investing. Value investing involves selecting stocks whose share price is trading below its intrinsic value or book value.
Vanguard Information Technology ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VGT is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market.
Vanguard's Technology ETF VGT has underperformed in 2022 as many large firms face layoffs amid falling sales and rising input costs. Inflation is particularly troublesome for technology companies due to their dependence on imports and the impact of interest rates on growth stock valuations.
Vanguard Information Technology (VGT): Historical Returns. In the last 15 Years, the Vanguard Information Technology (VGT) ETF obtained a 15.07% compound annual return, with a 19.77% standard deviation. In 2022, the ETF granted a 0.64% dividend yield.
VGT has a dividend yield of 0.79% and paid $3.00 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 24, 2023.
In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 9.80% compound annual return, with a 14.96% standard deviation. In 2022, the ETF granted a 1.37% dividend yield. ... Correlations as of Apr 30, 2023.
U.S. Treasury securities are considered to be about the safest investments on earth. That's because they are backed by the full faith and credit of the U.S. government. Government bonds offer fixed terms and fixed interest rates.
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