It Doesn't Really Matter Which ARK ETF You Buy

seekingalpha2021-01-19

Summary New investors to ARK often spend unnecessary time trying to pick the right balance of ARK's five main ETFs. There is no "right" balance as all of ARK ETFs have fairly high holdings overlap ...

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hendrik
2021-02-18
hendrik
Nice insight
shannielim
2021-02-07
shannielim
?
IvanOon
2021-01-20
IvanOon
Dollar cost average into Arks
- 股市小民:
  ARKK可以買嗎？

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ARK also selects top holdings from each sector and combines them to create their flagship and largest fund, the ARK Innovation ETF (ARKK), meaning 100% of ARKK's holdings can be found in at least one of the sector-specific ETFs.\nOften, new ARK investors can be a bit overwhelmed with researching the specific strategies and holdings of each fund and have a difficult time deciding on the right weighting of ARK ETFs in their portfolio. With a small exception, due to ARK's tendency to recycle holdings amongst their ETFs, this decision doesn't actually matter too much. It's more important if you truly believe in the viability and long term success of ARK's management that you just get in on any of their ETFs.\nARK Has A History Of Recycling Companies\nWhile it's fairly obvious that ARKK is a repeat of the sector-specific funds, what's less well known is that even the sector-specific funds overlap significantly with each other. Below is an overlap analysis amongst the funds, with each row showing the weight of row header holdings overlapped with each column header holdings.\n\nIt's unsurprising that ARK ETFs have so much overlap as giving investors more options for inflows creates more profit for both ARK and its distributor Resolute (for a more detailed explanation please read myarticle on the ARK-Resolute relationship). Recycling companies within these ETFs reduces the amount of research work required to maintain the different ETFs.\nIn my opinion, there isn't anything wrong or sketchy with this practice. All of ARK's holdings and daily trades are made publicly available and the same company can legitimately be a part of technological innovation in multiple sectors. However, it is still important to call this recycling insight to new investors.\nARKK Gives You The Best Balance\nARKK as the main flagship ARK ETF has a healthy weight towards all four sectors with the lowest exposure to ARKQ at 25% of assets and the most to ARKW at 66%.\nBuying the other sector specific funds would not give you significant additional company exposure. For example, buying ARKW would result in 66% of its holdings already in your ARKK ETF. Only a third of companies would be new.\nIt is worthwhile to call out that more advanced investors may purchase sector specific ARK ETFs to get more weight towards a certain sector as holdings that overlap amongst the different ETFs will have different weights in a given ETF (for example, Pacific Biosciences (PACB) is the top holding of ARKG with 7% weight but only 1% in ARKK). However, for newest investors or investors just wanting to invest quickly with ARK, getting into ARKK is the easiest and most diversified.\nIt is also worthwhile to note that purchasing ARKG gives an investor the most diversification from the other sector specific ETFs. It only has 9% overlap with a non-ARKK ETF as genomic companies tend to have less overlap with AI, Robotics, and Fintech. Personally, I hold both ARKK for the broad reach and ARKG as I am most bullish on the genomics sectors and also it has the lowest redundancy in holdings with the sector specific ETFs. Please feel free to readmy commentaryon ARKG for more details.\nThe Performance Is Correlated\nA significant proportion of ARK investors invest because they believe in the management team led by Cathie Wood, who manages all of the ARK ETFs. That combined with the significant overlap in holdings results in very high correlated price performance. The following table displays the daily return correlation matrix amongst the ARK ETFs and also includes SPY to measure the correlation with the broader market. Values near 0 indicate no correlation and values near 1 indicate strong positive correlation.\nSource: Daily return correlation from portfolio-visualizer.com for Jan 2019 to Jan 2021\nThe daily return correlation data backs up the overlap analysis results, with ARK ETFs having a very strong daily return correlation with each other relative to SPY. As expected, ARKG also happens to have the lowest correlations and drags down the averages due to its lack of holdings overlap.\nVisualizing the price performance over the past year also indicates a similar level of correlation. Had you selected any of the ARK ETFs your bumpy but upwards ride would have been basically the same. Landing in 2021 would have you crushing SPY no matter which ETF you chose.\nData by YCharts\nConclusion\nIf you are still confident in riding the ARK ship even after it's monstrous and potentially bubble-like run in 2020, choosing one, some, or all of ARK's ETFs will likely give you similar end return and risks, whether good or bad. If you're wary of ARK being unable to sustain their performance after all the recent inflows, stay out of all of them. It is unlikely for a specific ETF to rise while the others fall significantly. There is perhaps a small exception with ARKG but even ARKG is still fairly strongly correlated with the remaining ARK ETFs.\nIf you do not have a specific sector you believe will stand out in the next few years but still want to invest in ARK and technological innovation, it's better to just get in quickly on any of the ETFs and not stress too much about picking the right combination of ARK ETFs.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":384301900,"gmtCreate":1613611465500,"gmtModify":1704882679578,"author":{"id":"3576161037296229","authorId":"3576161037296229","name":"hendrik","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3576161037296229","authorIdStr":"3576161037296229"},"htmlText":"Nice insight","listText":"Nice insight","text":"Nice insight","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/384301900","repostId":1172157078,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":389320006,"gmtCreate":1612693101505,"gmtModify":1704873538168,"author":{"id":"3573810704294140","authorId":"3573810704294140","name":"shannielim","avatar":"https://static.tigerbbs.com/afa4b4d2de4428a77f2ed8bd21a4ef44","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3573810704294140","authorIdStr":"3573810704294140"},"htmlText":"?","listText":"?","text":"?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389320006","repostId":1172157078,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":337150732,"gmtCreate":1611098322526,"gmtModify":1704857982973,"author":{"id":"3569354683318638","authorId":"3569354683318638","name":"IvanOon","avatar":"https://static.tigerbbs.com/7e332af04c99b1ae0ca2131246646a93","vip":1,"crmLevel":5,"crmLevelSwitch":1,"idStr":"3569354683318638","authorIdStr":"3569354683318638"},"htmlText":"Dollar cost average into Arks","listText":"Dollar cost average into Arks","text":"Dollar cost average into Arks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/337150732","repostId":1172157078,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":3614796,"gmtCreate":1613753320595,"gmtModify":1680777602702,"authorId":3452127935919207,"author":{"id":3452127935919207,"idStr":"3452127935919207","authorId":3452127935919207,"name":"股市小民","avatar":"https://static.tigerbbs.com/f51d690edb61fc7c4aa73cba69139ae6","vip":1,"crmLevel":6,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":337150732,"type":1,"supId":0,"prevId":0,"content":"<p>  ARKK可以買嗎？</p><p><br></p>","text":"<p>  ARKK可以買嗎？</p><p><br></p>","html":"<p>  ARKK可以買嗎？</p><p><br></p>"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":38,"commentSize":3,"repostSize":0,"favoriteSize":22,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1172157078"}