ARKK vs ARKW – Which Is Better?

ARK Invest has some of the top performing ETFs in 2020. All 5 of the active ARK ETFs are up 100% or more since the beginning of 2020. In this article, we will be doing a comprehensive comparison of ARKK vs ARKW.

The main difference between ARKK vs ARKW is, ARKK invests across different innovation sectors, such as genomic revolution, industrial innovation, fintech innovation and the next generation of internet innovation. ARKW is more focused on next generation of internet innovation such as big data, IoT and E-commerce.

Who is ARK Invest?

ARK is a global asset manager specializing in thematic investing in disruptive innovation. The firm is rooted in over 40 years of experience in investing in technologies that aim to deliver outsized growth as industries transform.

ark-invest.com

An Overview: ARKK vs ARKW

ARKK
(INNOVATION ETF)
ARKW
(NEXT GENERATION INTERNET ETF)
ObjectiveThematic multi-cap exposure
to innovation across sectors
Thematic multi-cap exposure to
innovative internet technologies
Fund TypeActive ETFActive ETF
Fund AUM$17.68 B$5.27 B
Expense Ratio0.75%0.76%
As of 31/12/2020
Source: ark-funds.com

The ETFs have the following similarities:

  • Both are actively managed funds
  • Similar expense ratio at 0.75% vs 0.76%

What is the difference between ARKK and ARKW?

ARKK includes companies that are related to these 4 innovation sectors:

  • DNA technologies (‘‘Genomic Revolution”)
  • industrial innovation in energy, automation and manufacturing (‘‘Industrial Innovation’’)
  • the increased use of shared technology, infrastructure and services (‘‘Next Generation Internet’)
  • technologies that make financial services more efficient (‘‘Fintech Innovation’’)

You can think of ARKK as a more diversified ETF as in invests in companies across different innovation sectors.

On the other hand, ARKW invests in companies that are related to innovative internet technologies such as:

  • Cloud Computing
  • Big Data
  • Digital Media
  • E-commerce
  • Blockchain technologies
  • Internet of Things (IoT)

You can also see that ARKK has a bigger AUM of $17.68 billion compare to $5.27 billion in ARKW.

Top 10 holdings

ARKKARKW
TESLA INC
(9.14%)
TESLA INC
(9.37%)
ROKU INC
(7.6%)
ROKU INC
(5.2%)
CRISPR THERAPEUTICS AG
(4.84%)
TELADOC HEALTH INC
(3.9%)
SQUARE INC – A
(4.67%)
SQUARE INC – A
(3.85%)
TELADOC HEALTH INC
(4.61%)
TENCENT HOLDINGS LTD-UNS ADR
(3.47%)
INVITAE CORP
(4.18%)
GRAYSCALE BITCOIN TRUST BTC
(3.33%)
ZILLOW GROUP INC – C
(3.01%)
SPOTIFY TECHNOLOGY SA
(3.13%)
BAIDU INC – SPON ADR
(2.94%)
NETFLIX INC
(2.7%)
SPOTIFY TECHNOLOGY SA
(2.72%)
PURE STORAGE INC – CLASS A
(2.32%)
PROTO LABS INC
(2.54%)
FASTLY INC – CLASS A(
2.24%)
46.25% of total net asset39.51% of total net asset
View updated full list of ARKK holdingsView updated full list of ARKW holdings
as of 20/01/2021
Source: ark-funds.com

From the above table, we can see that the top 10 makes up 46.25% of ARKK and 39.51% ARKW. This might seem like a rather extreme % for just the top 10 holdings. But it is important to remember that these ETFs are narrowly focused on disruptive innovation companies, unlike a broader global index fund.

We can also see that there are overlaps in the companies that each ETF buys into.

If we look further into the full list of holdings for each ETFs, you can see that there are actually 28 overlapping counters between these 2 ETFs. If you are buying ARKK, you are also buying part of ARKW.

Performance of ARKK vs ARKW

ARKK vs ARKW Performance

Using the portfolio visualizer, I ran a back test on these 2 ETFs starting from inception date with an initial investment of $10,000. And this is what you will end up with in Nov 2020 if you have invested $10,000 at the end of 2014.

ARKK: $59,796
ARKW: $78,282

From the graph above, we can see that ARKW outperforms ARKK by an additional $18,486 (30%).

If you compare both of these performances against the S&P 500 index, the S&P 500 index pales in comparison.

Both ARKK and ARKW has a annualized returns of 39.37% and 43.24% respectively compared to the 11.47% that S&P 500 has in the last 5 years

Source from ARKK factsheet
Source from ARKW factsheet

ARKK vs ARKW: Which is better?

Based on historical performance, ARKW is a clear winner here. This year’s 2020 pandemic just propelled all the internet related stocks to the next level. Hence the impressive run as seen on ARKW.

On the other hand, if you want a more diversified ETF, then ARKK is the one to choose. At least it is diversified across the different innovation sectors.

If you have been following Catherine Wood who is the CEO and Chief Investment Officer (basically the woman behind all the ARK ETFs) of ARK Invest, then you would know how bullish she is on Genomic stocks. She has even touted them as the next “FANG” stocks.

I am no expert on genomic technology, but what I understood is with these technologies, we have the ability to add, remove or alter genes. A simple example is, the ability to remove or correct cancer causing genes or insert new genes that could theoretically cure cancer. That sounds like the medical breakthrough that is much needed.

If you agree with her, then ARKK might be the better one here, as there is still a potential up side to go.

Both these ETFs are narrowly focused in the innovation industry, so they are considered really high risk. Personally, I would invest a max. 20% of my portfolio on these.

And always remember that Past Performance is No Guarantee of Future Results.