Is ARK Next Generation Internet ETF a Good Investment?

The ARK Next Generation Internet ETF looks like a pretty solid investment from the outside looking in. It’s an actively managed fund from Cathie Wood’s advisory firm, Ark Invest, which actually has a pretty impressive track record of beating the market.

Nonetheless, this shouldn’t be the only go-ahead or “sign” to invest in the ETF. There’s a lot more you must consider before making that kind of investment move and the nitty gritty details might surprise you.

Key Points

• It’s been 10 years since ARK Next Generation Internet ETF’s inception.
• ARKW’s top holdings include Tesla, Meta, and Roku. 
• ARKW is best suited for growth investors with an appetite for risk. 

About ARK Next Generation Internet ETF

This ETF’s ticker symbol is ARKW. Created in 2014, ARK Next Generation Internet ETF has over $1.8 billion in assets under management, or AUM, and 16.1 million in shares outstanding so far. 

Unlike passively managed ETFs, and indeed some actively managed ones, the ARK Next Generation Internet ETF doesn’t track any market indices. Instead, it’s actively managed by the ARK investment team, meaning that its stock holdings change based on the fund manager’s selections. 

The goal of ARKW is long-term capital growth by investing assets primarily, at least 80% or so, in domestic U.S. companies as well as equities overseas. The companies chosen are required to align with the fund’s theme of next-generation internet. And the domino fallout of that mandate is that ARKW is a non-diversified fund.

ARKW Holdings

All ARKW holdings are, in the eyes of the ARK Invest team, concentrated on next-generation internet, with sectors ranging from artificial intelligence, e-commerce and mobile technology to cloud computing, financial technology, and social platforms. ARKW’s top holdings include:

• ARK 21Shares Bitcoin ETF 
• Meta Platforms
• Tesla 
• Block 
• Roku 
• Palantir Technologies 
• Coinbase Global 
• Robinhood Markets
• Roblox

From a weighting perspective, it’s worth paying attention to the fact that ARKW’s top ten holdings combined make up over 60% of its total assets. 

ARKW Cost and Fees

ARK Next Generation Internet ETF’s expense ratio is 0.87%, which errs on the high end, especially if you compare it to passive ETFs that can be as low as 0.01%.

However, an actively managed fund charging just shy of 0.90% is generally regarded as reasonable and a fair rate. This expense ratio means that for every $10,000 invested, you can expect to pay an annual fee of $87. 

ARKW Performance 

So far, ARKW has performed exceptionally well relative to its peers. Its annualized five-year return was 14.32% compared to the category average, which was 10.28% as of December 2024. 

As for its ten-year annualized return, it stood at 20.52% by the end of last year. So, say you invested $1,000 in January 2015, it would be worth $6,465.34 with a return of 546.80%. 

The stellar returns have largely been due to the ongoing technology boom, ranging from the explosion in social media to the need for semiconductors in AI applications. Between 2020 and 2021, the ETF’s price grew to highs of $190 on the back of some solid fundamentals as well as some frothy tailwinds.

But like most growth-oriented funds, Cathie Wood’s Internet ETF has also had its fair share of volatility, especially due to rising interest rates. A great example is between 2021 and 2022, when the price crashed to as low as $42 per share on the back of Federal Reserve’s tightening policies. 

Its last dividend, dated December 2021, was $3.31 per share. 

ARKW’s Strengths

ARKW’s percentage returns so far builds a strong case for why it may be a good investment but other factors are worth considering too.

Active Management

For one, the fact that this ETF is actively managed means that it can pivot quickly based on market dynamics and trends. The fund actively reallocates investments, which means it can capitalize on new technologies and innovative companies. 

The downside of active manage, though, is few managers actually generate market-beating returns, or alpha, over the long haul.

Exposure to High-Growth Industries

If you were to invest in the ARKW ETF, the opportunity for outsized returns is certainly ever present, not least because its holdings concentrate on companies to the forefront of the technology curve, and for the most part rank among the fastest-growing and most valuable market leaders globally.

Strong Fundamentals

Some of ARKW’s top holdings consistently report rapid top line growth companies as well as high market caps and solid profits. For instance, Tesla has a market cap of over $1 trillion and its stock is among the hottest ones to invest in. Additionally, it has so far recorded revenues trailing 12 months (TTM) of $97.2 billion as of January 2025.

ARKW’s Weaknesses

Like most investments, ARK Next Generation Internet ETF also has its fair share of disadvantages that are worth exploring to get a balance view.

Concentration Risk 

The biggest drawback of investing in the ARK Next Generation Internet ETF is the lack of diversification.

All the fund’s holdings lie within one sector, so a market downturn, specifically in the technology sector, means that the fund would likely suffer significant losses.

In addition, because the top ten holdings make up over 60% of its portfolio, poor performance by any of these companies can significantly impact the ETF’s returns.

High Volatility

While growth stocks often end up outperforming the overall market over the short haul, their volatility can make them less enticing.

One day the prices are so high that you’re smiling all the way to the bank, while the other, the prices dip so low you question the reason you invested in the ETF. 

Is ARKW Suitable For You?

As is with most investments, ARKW isn’t a one-size-fits-all kind of opportunity. Its theme — disruptive internet technologies — points to a growth-oriented investor with a long-term outlook, meaning that buyers must be willing to accept a higher risk due to short-term volatility for the potential of substantial returns. Moreover, if you’re a thematic investor, particularly one who’s a tech enthusiast, the ETF may be perfect for you.

Is ARKW a Good Investment?

ARKW is a good investment choice for investors who are looking for exposure to leading-edge technologies as part of an actively managed portfolio that is likely to undergo substantial volatility.

However, if your investment goals lean more towards consistent income then this ETF is likely to be too turbulent to hold long-term.

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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.