Cathie Wood’s Ark Innovation ETF (ARKK) stock price has continued to rise this year as America’s technology companies rallied. It continued to underperform the broader market as it rose by just 9.13%, while the Invesco QQQ (QQQ) fund rose by almost 24%.
ARKK ETF has had some big winners
The Ark Innovation Fund has had some big winners this year as the tech industry bounced back.
Tesla, its biggest holding, started the year badly but has bounced back in the past few months, bringing its year-to-date gains to about 40%. This rally happened as investors cheered Tesla’s robotaxi plans and its strategy to launch a more affordable vehicle. It also accelerated after Donald Trump’s election victory.
Coinbase stock has also doubled this year, helped by the strong performance of the crypto industry. This jump has brought ARKK’s holdings to over $656 million.
The other big mover in the ARKK ETF was Palantir Technologies whose stock jumped by over 320% this year. Palantir, like NVIDIA, has benefited from its investments in the artificial intelligence industry and the fact that commercial revenue is about to flip that from the government.
Robinhood stock price has also jumped this year, helped by the strong performance of the stock and crypto markets. This growth has pushed the number of its active accounts and its revenue higher. Robinhood has also introduced 24-hour trading and purchased BitStamp to increase its presence in the crypto industry.
Shopify is another top performing company in the ARKK ETF. The company offers a software platform that enables anyone to build and launch an e-commerce platform within a few hours. Shopify has benefited by signing new big customers and the resilient consumer spending.
The other top performers in the ARKK ETF are companies like Amazon, DraftKings, and The Trade Desk.
On the other hand, some ARKK ETF companies have underperformed the market this year. The most notable ones are firms like Crispr Therapeutics, which has dropped by 15%, Roku, down by 24%, and Pager Duty.
Read more: ARKK: Why would anyone invest in this Cathie Wood ETF?
No good reason to invest in the Ark Innovation Fund
The past performance of the Ark Innovation Fund is evidence that there is no good reason to invest in it. For one, the fund has an expense ratio of 0.75%, higher than most funds. For example, the Invesco QQQ ETF has a ratio of 0.25%, while the giant Vanguard IT index Fund ETF (VGT) has a 0.03% ratio.
Ideally, if a fund has a higher expense ratio, you would expect it to do better than the cheaper ones. In its case, the ARKK ETF has a long track record of underperformance. Its total return in the past five years stood at just 16%, while the VGT and QQQ have soared by over 150% in the same period. The same has happened this year as it jumped by 9.13% as the rest jumped by over 20%.
Historically, data shows that many passive funds do better than active ones. For example, the QQQ fund has continued to lag behind the JEPQ fund that boosts yields using the covered call strategy.
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