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ARK Innovation ETF Is Expensive

Dec. 03, 2021 4:11 PM ETARK Innovation ETF (ARKK) ETFQQQ23 Comments
Michael Harris profile picture
Michael Harris


  • Average return per unit of risk has plunged due to recent correction.
  • Expense ratio is high as compared to simpler alternatives.
  • The ETF appears to be on mean-reversion path.

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When compared to Invesco QQQ Trust Series 1 and even to a simple momentum strategy, ARK Innovation ETF now appears too expensive.

Below we compare the performance of ARK Innovation ETF (NYSEARCA:ARKK) from inception to

This article was written by

Michael Harris profile picture
Ex-fixed-income quant. Ex-hedge fund quant trader. Worked on developing bond portfolio optimization software and trading systems for commodities and stocks, as a trader for a hedge fund. Author of "Short-Term Trading with Price Patterns" (1999), "Stock Trading Techniques with Price Patterns" (2000), "Profitability and Systematic Trading" (2008), and "Fooled By Technical Analysis" (2016). Michael Harris holds a Master's degree in Operations Research, with an emphasis in forecasting and financial engineering, and another Master's degree in Mechanical Engineering. Website: www.priceactionlab.com

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

Mister Doom profile picture
Woods asks God what to buy or sell. She’s a religious freak.
You want to invest with her? Good luck. I couldn’t believe I read that
About her.attack me all you want....she’s nuts.
When starting January the tech sector coming to the market, things will be better. But it's difficult to recover from 40% down. Even they don't do well in short term trade too. They need something new strategy.
With a fund down 40% from its high this year and a manager who smiles and remains sanguine as if things are better than they have ever been (lower prices mean higher future returns! she exclaims) I'm wondering how she will spin things if/when ARKK is selling at 70, or perhaps 60. Funny Farm time?
She keeps trying to convince us that she is a long term investor and that she invests for the long term, but when looking at her trades, what I see is a short term trader.
@Pisang Not really, she typically buys and holds, transacting only for fund inflows and outflows, rebalancing, and dividends.
draconian5849 profile picture
What fund(s) are representing the momentum strategy? Because a 22% average return with only a 9% drawdown is quite good.
Michael Harris profile picture
@draconian5849 Yes but up to this point. Non-stationarity can kill any of these schemes so I hesitate discussing it further.
With double or tripple the voters due to COVID, people forgot that the market is a voting machine only in the short term, but a weighing machine in the long term..

She sure got many votes, but after Friday it looks like the beauty contest is over and we are now at the weigh-in of the UFC main event.
Any fund that invests in Zillow is dubious
They are fundamentally wrong. They bought large before sizable crash. ZM, HOOD, TDOC, COIN, PLTR, DOCU, U, DIDI, BIDU, PDD...Seems like they don't read well what's going on the market trend. They need some real experience people.
Cathie is a charming, articulate, media savvy snake oil saleswoman who spouts jargons like disruptive and innovation and charges a nosebleed fee. I sold my small position in ARKK with a modest loss in summer, and I'm not going back. It was an expensive lesson as jumping on the momentum bandwagon is the surefire way to lose if your investment horizon is long.
Yechwando profile picture
@Dave Dasgupta, it's almost like you read my mind. My experience perfectly mirrors yours. I drank the kool-aid, invested a decent amount and naively kept buying on the dips on all her funds ARKK, ARKQ, ARKG, ARKF ARKW. Eventually, I sold out and I'm glad to have lost $20k. Had I held on, I'd be down $50k. By buying the dips I reduced my percentage loss, but increased my capital loss dramatically. Cathie Wood and all her funds are freaking poison.
I'm sorry for your loss. Her success is fluke -- even a broken watch gives you the correct time twice a day.

But then we both learned something valuable -- momentum investing is for in-and-out trading, not if you're investing for the long haul. An expensive lesson today saves you from another mistake tomorrow. GLTY with future investments.
@Yechwando no offense but if you lost on ARKK you perhaps bought at the top looking for a quick flip. Figure it'll make it's way back up to 156 mid 2022. Patience pays off here imo. The chart from Mar 2020 for the year is an insane 200% climb from 34 to 157 that had to cool off at some point.
Manzanita Research profile picture
Listening a few minutes to Cathie Wood discuss markets and her rationale for investing in companies and you immediately know she is not someone to entrust your wealth with. She is full of aspiration and jargon. Very little investment acumen.
I would rather buy VUG from Vanguard. I don't think the management of ARK is much better than an algorithmic ETF. Actually studies have shown that simple algorithms beat most high paid money managers (according an author that won the Nobel prize in economics). WD
this is excellent, very clear. now i understand nyer1's reference to drawdown and another person's insistence on reversion to mean. i do not understand mar or sortino, don't need to. this is very simple to understand, people should get it. i have not been a fan of this vehicle for past year as an experienced trader/investor. thanks for sharing this with readers. the cooler
John Hopper profile picture
Is ARKK NAV per share tracked on a daily basis anywhere?
Michael Harris profile picture
@John Hopper ETF website
tedfor profile picture
@John Hopper Most brokers will give you a quote in real time if you have add .iv or /iv to the end of the ETF ticker. For example, Fidelity will give real time IV with the ticker symbol ARKK/IV
John Hopper profile picture
@Michael Harris I saw this on the ARK website. The NAVs are for the previous day. I was referring to a real time NAV. Probably this is not possible due to the buying and selling going on during the day in ARKK. Having the previous day is not bad though.
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