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Cathie Wood‘s ARK Innovation ETF (NYSE:ARKK) was once the darling of the market, boasting bold bets on disruptive technologies and promising massive returns.
Yet, over the past five years, it’s been more like a rollercoaster with no brakes—compared to the smooth ride offered by the Invesco QQQ Trust (NASDAQ:QQQ).
So, what went wrong? Let’s dig into why ARKK has stagnated while the QQQ soared.
ARKK made a name for itself by investing in what it called “disruptive innovation.” The fund’s top holdings include Tesla Inc (NASDAQ:TSLA), Roku Inc (NASDAQ:ROKU), Coinbase Global Inc (NASDAQ:COIN), Roblox Corp (NYSE:RBLX), and Block Inc (NYSE:SQ)—companies that promised to revolutionize their industries.
But here’s the catch: disruptive doesn’t always mean profitable, at least not in the short term. While these companies had their moments in the sun, their volatility and speculative nature have led to massive swings in ARKK’s performance.
Meanwhile, QQQ has played it safe and smart. Its top holdings—Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT), Nvidia Corp (NASDAQ:NVDA), Broadcom Inc (NASDAQ:AVGO), and Amazon.com Inc (NASDAQ:AMZN)—are giants in their fields.
These companies have not only weathered market storms but have also thrived, especially in the recent AI-driven tech boom. QQQ’s exposure to these steady, cash-generating behemoths has allowed it to deliver consistent returns.
The data speaks for itself. Over the past year, ARKK has managed a mere 10% return, while QQQ has posted a 32.2%. Year-to-date, ARKK is down 10.2%, while QQQ is up 19.5%. Over the past five years, ARKK has managed a mere 3.9% return, whereas the QQQ is up 164%.
ARKK’s 5-year beta of 1.84, compared to QQQ’s 1.19, further underscores its higher risk and volatility.
But the real kicker? ARKK's expense ratio is 0.75%, significantly higher than QQQ's 0.20%. Investors are paying more for a fund that’s been underperforming—a tough pill to swallow.
ARKK’s big swings in stock picks have also cost it. Tesla, its top holding, was a major win, but the fund's predictions for stocks like Roku, Zoom Video Communications Inc (NASDAQ:ZM) and Teladoc Health Inc (NYSE:TDOC) have been overly ambitious, to say the least.
The predictions include $605 for Roku by 2026 (currently less than 10% of that) and $1,500 for Zoom (now around $60).
While ARKK pursued potential high returns by betting on future growth, QQQ focused on established performers. As a result, QQQ investors have experienced steadier returns with less volatility. ARKK, on the other hand, has faced significant challenges, and unless its high-risk, high-reward strategy begins to pay off soon, achieving those predicted returns may remain uncertain for some time.
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Posted In: AAPL AMZN ARKK AVGO COIN MSFT NVDA QQQ RBLX ROKU SQ TDOC TSLA ZM
