Is ARKF A Good ETF To Buy?

Traders who want to keep a finger on the pulse of the technology world and benefit from fintech advancement could do worse than getting involved in an exchange traded fund called ARKF that represents the accomplishments of the Ark company run by entrepreneur and business guru Catherine Wood.

First, technology is a sector that continues to rocket forward in its domination of the global economy. Companies like Square and others, including the renowned FAANG group [Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google (GOOG)] have revolutionized what it means to be a Fortune 500 firm, each with their own branded technologies to offer the global user base.

Enter ARKF, that’s unique in focusing on very specific kinds of technology holdings. Yes, there are many ETFs out there, but this one is unique in its own way (it’s actively managed unlike most passively managed ETFs), tailoring its portfolio holdings deliberately according to an idea that many feel represents the zeitgeist of our times.

What is an Exchange Traded Fund?

The idea of an exchange traded fund in the new market is to bring together a basket of equities of a certain kind, and make the resulting single fund ticker abundantly tradable. Instead of saying “are you invested in companies (x, y, z) you can just ask: are you invested in (the ETF)?”

ARKF is a diversified ETF that can be bought, sold and hedged on a daily market.

One of the key goals of ARKF as it was designed by Catherine Wood and the leadership at Ark is to find the big disruptors – companies practicing disruptive innovation that’s going to change markets in a big way.

Another major goal revealed by the team at Ark is to open up research and development, bringing new opportunities for markets to evolve. Both of these philosophies guide the fund, which is very diverse in the instruments (equities that it holds) to help investors earn.

Fund managers say that ARKF “combines bottom-up and top-down research” to build on a stronger foundation, compared to funds that may only proceed on technicals, or get a little more risky about finding those valuations for fund growth.

“We’re all about finding the next big thing,” Wood says on the web site. “Those hewing to the benchmarks, which are backwards looking, are not about the future. They are about what has worked. We’re all about what is going to work.”

Catherine Wood: Predictions and Technology Prowess

It’s a major feather in Catherine Wood’s cap that she was able to predict the meteoric rise of Tesla’s stock over the last year.

Few investors understood with such clarity that Tesla was poised to rocket upward as it did during 2020, leading to a 700% increase and a 5 to 1 stock split. As Tesla (TSLA) continued to dominate the electric vehicle market, holders saw their stocks sizzle, for historic gains.

Many Tesla millionaires have been made this past year, and it’s an excellent example of how betting on disruptive innovation works to cash in on the rapid changes going on in today’s technology world.

Catherine Wood’s predictive capabilities aren’t just limited to Tesla (TSLA). By making plays based on companies like Netflix (NFLX) and Salesforce (CRM), Ark became a big name in fintech.

Again and again, the team’s research was vindicated by the growth of companies that were really changing the game in at least one particular industry whether it be streaming video, robotics, or ERP.

What Makes Are So Different?

What binds the ARKF ETF to the original Ark philosophy is that commitment to learning what’s behind technological advances and what’s coming next.

Decentralized finance has taken our world by storm, and cryptocurrency has changed what the average investor sees as the holding with the best return as equities markets respond to pandemic closures and more.

At the same time, cryptocurrency and blockchain have leveled payment industries, eliminating the need for the kinds of traditional banking verifications that were so costly and time-intensive to perform.

The key, as shown by ARKF’s trajectory, is that to benefit financially, it’s important to learn the technology, to have a knowledge base of what’s going on and how disruptive innovations work.

In other words, it’s the knowledge about the technology itself that helps to drive the right strategy and a notion of what is going to be the ultimate impact of a company’s wares.

ARKF Holdings

In the world of ETFs, ARKF has a good track record, with current six-month returns around 30%.

In addition to major holdings in the Square company, ARKF holds portions of a number of different top innovators. There’s Zillow (Z), Shopify (SHOP), and PayPal (PYPL), along with Docusign (DOCU), a service that’s been very much an innovator in real estate and other paper-heavy business fields.

As for the aforementioned FAANG group, ARKF holds Facebook (FB) and Amazon (AMZN) in some capacity.

Also on the list are Tencent Holdings and Alibaba (BABA), two Chinese companies that the Trump administration sought to blacklist, but which represent major global technology engines in international markets.

For Q3 2020, LendingTree and Intercontinental Exchange were two other top holdings mentioned in the ARKF report.

ETF Fees

In terms of fees, ARKF also has a favorable expense ratio of 0.537% along with an annual dividend of $0.19 to help entice investors.

In the end, it’s the belief in finding those disruptive innovation payoffs that spurs many traders to consider buying into ARKF.

It’s the track record and the experience of the fund, too, as well of the predictive success and the way the fund is set up.

Of the fund’s “exposure to disruption,” Ark team members write: “(the fund) aims for thematic multi-cap exposure to fintech innovations including mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and risk transformation.”

It’s a well-rounded basket of implementations of the fintech strategy: get into big movers on the ground floor as they start to remake their industries.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.