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All you should know about ARKK and ETFs

Published by: Lucien Paulemil
August 24, 2022 8:39 pm

Ark Innovation exchange-traded fund's stock, which is traded and known by the ticker ARKK, has been the centre of attention for investors and financial advisors all over the country for a couple of years now. The company managed to rake in a huge sum of 1.5 billion dollars in the first half of 2022. But what does that mean for anyone and everyone eyes the ARKK stock? Is it wise for you to toss your coin to the Ark ETF? Does the company have plans that will come to fruition in the long run? Or will tossing that money in a wishing well do you more good? Stay with us right until the end of the article to find out!

What is an exchange-traded fund?

Before we jump right to the main part, it is important to discuss what an exchange-traded fund is and how it works since ARK is an ETF, and some of you might be hearing the term for the first time.

If you focus on the words, an ETF is precisely what it says; an exchange-traded fund. In simple words, it is a diverse collection of securities that can be traded on a particular exchange, just like a regular stock. But the difference between a regular stock is that an ETF can contain all types of stocks, bonds, or commodities which can either be US-only or international. Hence, if you own a single share of an ETF, you indirectly own a share in all the assets of the fund. For this reason, an ETF is an excellent and inexpensive way to buy several stocks at a time.

ETFs themselves invest in stocks of a specific index. You might have heard of the S&P 500. Its ETF invests in 500 successful companies, replicating that specific index.

An ETF can have several advantages over a regular stock. For instance, due to diversification, there is an increased chance of return if you invest in an ETF. Additionally, an exchange-traded fund is less volatile than a regular stock since it does not swing in value much. For this reason, an investment in an ETF offers a reduced risk when compared to normal stocks. An ETF is also a suitable investment if a particular investor wants to spend only in a specific industry without picking a winner.

We mentioned that an ETF is an inexpensive way to buy a collection of stocks simultaneously. The reason behind this is that an ETF, especially the good ones, has a low expense ratio, and the funds cost only a small percentage of the entire investment. Above all, an investment in an ETF does not require a high level of skill set or expertise in investment, stock market, and finances and saves you from the legwork that the owners of individual stocks have to do.

ARKK and its top holdings

Now that we all know what an ETF is and how it works, let's discuss the Ark Innovation ETF and its top holdings.

ARK is a renowned ETF that focuses on earning from long-term capital by investing in cutting-edge firms and top-tier companies that are on board with Ark's idea of disruptive innovation. ARKK has a rich portfolio of corporations that are an icon in sectors like artificial intelligence, automation, energy, genomics, infrastructure, robotics, transportation, and technologies that help in making financial services more efficient. Primarily, the ETF focuses its fundamental and macroeconomic research on assessing a company's potential, which drives weighting and security selection. As a secondary assessment, the company integrates ESG considerations during its research.

Ark Innovation ETF consists of 11 sectors. Among these, the IT and healthcare sectors are the most represented. In fact, both sectors account for almost 33.2 percent and 32.2 percent, respectively, of the entire fund's sectors. Among the cyclical sectors, consumer cyclical and financial services are the largest. After IT, communication service is the most important in the sensitive sector.

ARK has some of the most successful and renowned companies as its holdings. The top 10 lineup, which consists of 55 percent of the entire holdings, is pretty impressive itself and includes companies like Tesla Inc., Zoom Video Communications Inc., Roku Inc., Block Inc., Unity Software Inc., Teladoc Health Inc., CRISPR Therapeutics AG, UiPath Inc., Exact Sciences Corporation, and Beam Therapeutics. Among these, Tesla, Zoom Video Corporations, and Roku alone constitute 21.4 percent of the entire fund.

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The information provided in this article is for information purposes only. This article and its content are not, and should not be deemed to be an invitation to engage in any financial activity. This article should not be construed as advice or a personal recommendation. We are not authorised and regulated by any Financial Authority. The content of this article is not authorised by any financial authority. Reliance on this promotion for the purpose of engaging in any financial activity may expose an individual to a significant risk of losing all of the funds.

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