ARKK vs ARKW – Which ETF Is Better?

ARKK vs ARKW

The ARK Invest ETFs are one of the more interesting ETFs to invest in.

However, there are quite a few ARK ETFs, such as ARKK and ARKW.

So how exactly are they different from each other?

The difference between ARKK and ARKW

ARKK and ARKW are 2 ETFs managed by ARK Invest. ARKW only invests in ARK’s Next Generation Internet theme, while ARKK invests in Genomic Revolution, Fintech and Industrial Innovation. As such, ARKK is a more diversified ETF compared to ARKW.

Here is an in-depth comparison between these 2 ETFs:

Fund Manager

Both ETFs are offered by ARK Invest, where Catherine Wood is the portfolio manager for both of these funds.

She has always believed in disruptors and founded ARK Invest to invest in these companies.

As such, she has a pretty strong track record in identifying what she terms as ‘innovative disruptors’.

Assets under management (AUM)

Both ARKK and ARKG started on the same date (Oct 2014). Despite that, ARKK has a much larger net assets:

ARKKARKW
AUM$17.68 Billion$5.27 Billion

Themes Tracked

ARKK and ARKW do not track an actual index. Rather, they focus on certain themes that are defined by ARK Invest.

ThemeDefinition
Genomic RevolutionAdvancements
in DNA technologies
Industrial InnovationInnovation in energy,
automation and manufacturing
Next Generation InternetInnovation in shared technology,
infrastructure and services
Fintech InnovationTechnologies that make financial
services more efficient

ARK’s main aim is to invest in companies that are expected to benefit from the technological revolution.

ARKK tracks all 4 themes

ARKK tracks ‘disruptive innovation’ as a whole. This is why the ETF’s name is the ARK Innovation ETF.

As such, it tracks all 4 themes that are defined by ARK Invest.

ARKW only tracks the ‘Next Generation Internet’ theme

ARKW is a more specific ETF that only tracks the ‘Next Generation Internet’ theme. This theme focuses on:

  1. Shared technology, infrastructure and services
  2. Internet-based products and services
  3. New payment methods
  4. Big data
  5. Internet of Things
  6. Social distribution and media

The companies that ARKW invests in are more specific to this theme. Meanwhile, ARKK invests in the broader theme of ‘disruptive innovation’. This includes the ‘Next Generation Internet’ theme as well.

Element Weightage

Due to the different themes that both ETFs track, they will have a different weightage in the thematic elements.

Here are the thematic elements in ARKK,

ARKK Element Weightage

and in ARKW.

ARKW Element Weightage

ARKK has a much broader diversification of companies in the different elements. Moreover, the weightage is much more spread out.

Meanwhile, ARKW is heavily concentrated in cloud computing and e-commerce.

Top 10 Holdings

Here are the top 10 holdings in ARKK,

ARKK Top 10 Holdings

as well as ARKW.

ARKW Top 10 Holdings

Both are heavily weighted in Tesla

Both ETFs have quite a high weightage into Tesla, compared to other stocks in the themes.

Tesla performed extremely well in 2020 with a 695% increase in it’s stock price!

This could be the reason why both ARKK and ARKW are performing really well too.

The overlap between ARKK and ARKW

There will be an overlap in the stocks found in both ARKK and ARKW. This is because both ETFs invest in ARK’s ‘Next Generation Internet’ theme.

This means that the stocks in this theme will be found in both ARKK and ARKW.

You can view the overlap in stocks using ETF Research Center’s fund overlap tool. There are a total of 28 overlapping holdings between these 2 ETFs!

Here are the top 5 holdings that overlap between ARKK and ARKW:

ARKK vs ARKW Overlap

Since there is quite a huge overlap between these 2 ETFs, you should try to have only one of these ETFs in your portfolio. If not, you may be duplicating your investments.

You’ll need to decide if you prefer to invest in all 4 of ARK’s themes or just one!

ARKW has more holdings than ARKK

ARKW has 55 holdings, while ARKK has 50 holdings. This may make ARKW slightly more diversified.

The ETFs’ holdings may change over time

Both ETFs are actively managed ETFs by Cathy Wood. As such, the holdings of both ETFs are very dynamic and may change when a new company shows a lot of promise.

This is in contrast to a passive ETF that tracks an index. The index only changes the allocation periodically. Meanwhile, active ETFs can change their holdings at any time.

Performance

The 2 ETFs will have different performances since they contain a different basket of stocks.

Here’s how the 2 ETFs have performed between Jan 2020 – Jan 2021.

ARKK vs ARKW Performance
Source: Yahoo Finance

ARKK provides the higher overall returns. However, there are times when ARKW slightly outperforms ARKK. One such such period is between Nov-Dec 2020.

Both of these ETFs invest in tech companies of the future. As such, the performance of the 2 ETFs will be extremely volatile.

It is hard to compare the performances between these ETFs

It may be hard to compare the performances of these 2 ETFs, since they contain different stocks.

However, the technology sector still has a huge potential for growth. Both of these ETFs should be able to give solid performances, especially in the long run.

Dividends

Both of these ETFs are actively managed ETFs that invest in growth stocks. As such, you will not receive much dividends from these companies.

Growth stocks mainly reinvest most of their earnings back into the company. These funds will be used to accelerate the growth of the company further.

As such, most of these companies will not distribute a dividend to shareholders.

The dividend yield for both ETFs have been rather unstable. Based on ARK’s prospectus, they intend to distribute dividends that they have received at least annually.

Here are the latest dividends that both ETFs distributed since December 2020:

YearARKKARKW
2020$2.044$1.894
2019$0.381
2018$1.091$4.939
2017$0.090$0.127

The dividend distributions are rather inconsistent. Moreover, ARKW did not distribute a dividend in 2019!

You should not worry too much about the dividend yield

You may be concerned that the dividend yields are rather low. However when you are investing in an ARK ETF, you are more concerned about capital appreciation rather than dividends.

As such, the low dividends shouldn’t worry you too much!

You may want to consider investing in the S&P 500 if you are looking for more stable dividends.

Expense ratio

On top of the trading commissions you’ll need to pay the broker, you will have to pay an expense ratio to the fund manager as well.

This expense ratio is usually deducted at the end of each year.

Here are the expense ratios for these 2 funds:

ARKKARKW
Expense ratio0.75%0.76%

Both of these ETFs have rather high expense ratios. However compared to other ETFs which are passive, these 2 ETFs are actively managed.

So long as the ARK ETFs are able to produce higher returns than passive ETFs, the expense ratio will be worth it in the end!

Ways to Invest

Both ETFs are listed on the New York Stock Exchange. This makes it rather accessible since most brokers allow trading in US stocks.

One such broker you may want to consider is Tiger Brokers.

ARKK vs ARKW Tiger Brokers

It offers a competitive trading commission of just USD1.99 per trade!

You can read my review of Tiger Brokers, as well as how it compares to FSMOne.

Alternatively, you can use commission-free brokers to purchase US stocks, such as:

  1. Firstrade
  2. TD Ameritrade

There are many brokers that you can choose from. As such, you should select one that offers the cheapest fees for your investment amount.

Investing via Kristal.AI

Alternatively, you can choose to invest in both ETFs using Kristal.AI, a robo-advisor. You can view the information of each ETF on Kristal.AI’s site.

ARKK vs ARKW Kristal.AI

However, there are some tradeoffs when you invest with Kristal.AI. This is further touched on in my guide to buying the ARKK ETF.

Verdict

Here’s a comparison between these 2 ETFs.

ARKKARKW
Fund ManagerCathy WoodCathy Wood
AUM$17.68 Billion$5.27 Billion
ARK Themes TrackedGenomic Revolution
Industrial Innovation
Next Generation Internet
Fintech Innovation
Only Next
Generation Internet
Number of Holdings5055
Number of Elements Tracked228
Expense Ratio0.75%0.76%
DividendsAnnuallyAnnually

So which ETF should you invest in?

Invest in ARKK if you want a more diversified portfolio

The ARKK ETF invests in all 4 of ARK Invest’s themes. Apart from the ‘Next Generation Internet’ theme, ARKK also invests in 3 other themes:

  1. Genomic Revolution
  2. Industrial Innovation
  3. Fintech Innovation

This makes ARKK slightly more diversified when it comes to investing in these disruptive innovations.

Your portfolio is spread across different companies from different sectors.

As such, even if one sector does poorly, the other sectors may perform well. Overall, your portfolio should still go up!

If you had just invested in that one sector, your portfolio will suffer huge losses!

This is the power of diversification. Ultimately, ARKK helps you to spread your risk over a greater number of assets.

Invest in ARKW if you are very confident in Internet technologies

ARKW is solely weighted on internet technologies.

If you are confident that these technologies will do well, then you can invest in this ETF.

Moreover, if you are confident in only a few themes that ARK has, you may want to invest in the individual ETFs instead of ARKK. The other 3 thematic ETFs that ARK Invest has are:

  1. ARKQ (Autonomous Tech and Robotics)
  2. ARKG (Genomic Revolution)
  3. ARKF (Fintech)

In this way, you will have less of an overlap compared to if you invest in both ARKK and ARKW!

Conclusion

Both actively managed ETFs have huge potential to generate large returns for you. However, there is some overlap between the stocks that are found in both ETFs.

As such, it may be better to decide on one of these ETFs and then invest with it throughout!


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