The ARKK ETF has caught the eyes of many investors as it has shown exceptional growth.
You may want to invest in this actively-managed ETF, but how do you go about doing it?
Here’s a guide to help you get started with investing in the ARKK ETF.
Table of Contents
What is the ARKK ETF?
The ARK Innovation ETF (ARKK) is an actively managed fund. This fund invests in companies that participate in ‘disruptive innovation’.
ARK defines ‘disruptive innovation’ as the introduction of a technologically enabled new product or service that potentially changes the way the world worksARK Invest
Holdings of this fund
The companies in this fund will fall into either of these 4 categories:
- Genomic Revolution (DNA technologies)
- Autonomous Tech and Robotics
- Next Generation Internet
- FinTech Innovation
If you prefer to invest in just one out of the 4 themes, you can consider ARK Invest’s other ETFs too:
|ARKW||Next Generation Internet|
Some of these companies you may know of include:
- CRISPR therapeutics
You can view the entire holdings of the ARKK ETF on ARK’s website.
Performance of the ETF
The ARKK ETF has been performing really well since its inception in 2014.
Here’s the performance from the past 2 years.
With the fund performing really well, you may want to start investing in it!
What ARKK ETF funds are there?
There are actually 3 ARKK ETFs that you can invest in!
The main ARKK ETF is listed on the New York Stock Exchange.
There are also ETFs that are listed on the London Stock Exchange (0H7G),
and the Berlin Stock Exchange (09KB).
Why are there so many ETFs?
You may be wondering why there are so many ETFs? If you choose to invest in the LSE version (0H7G), you will incur a lower dividend withholding tax.
The dividend withholding tax for US stocks are 30%. For ETFs listed in the LSE, you will only incur a 15% dividend withholding tax.
However, are ETFs listed on the LSE always the better option? Here’s a comparison between US and LSE ETFs that will help you to decide on the better option.
Here are some considerations:
#1 ARKK’s dividend yield is rather low
Here’s the dividend yield of the ARKK so far:
The yield is rather low. As such, it may not be worth investing in the LSE ETF to reduce the dividend withholding tax.
#2 Liquidity is much lower
One of the main considerations of US vs LSE ETFs is the ETF’s liquidity.
If you are a long-term investor, the ETF’s liquidity may not matter that much. However if you are a frequent trader, you would want to invest in a more liquid ETF.
To determine an ETF’s liquidity, one of the indicators is the trade volume.
Based on the volume, the ARKK is the most liquid form.
There is also a Nikko AM ARK mutual fund
Nikko AM has also partnered with ARK Invest to provide the Nikko AM ARK Fund.
However, there are some limitations to this fund, such as:
- Limited availability to a few platforms
- Larger minimum amount to invest ($1,000 SGD or $1,000 USD)
- Higher fees charged
You can view my comparison between the Nikko AM ARK Fund and the ARK ETF to see which one is more suitable for you.
You should invest in the NYSE version if you are able to
I would recommend you to invest in ARKK and not the other 2 as:
- The dividend withholding tax difference may be negligible
- The ARKK is the most liquid ETF
The only thing that may deter you from investing with ARKK is the estate tax for US-domiciled ETFs.
You may incur a tax ranging from 18-40% when you want to transfer your US-based assets after you pass on!
How can I invest in the ARKK ETF?
The ARKK ETF is listed on the NYSE ARCA. Here are 2 ways that you can invest in it:
#1 Online brokerages that give you access to US markets
You are able to buy the ARKK on any online brokerage that gives you access to the US markets.
This includes (but not exhaustive):
- Interactive Brokers
- TD Ameritrade
- Tiger Brokers
When you are choosing the best brokerage to buy this ETF, here are some things you might want to consider.
- Commissions for each trade
- Currency conversion spread
- The platform’s user interface (UI) and user experience (UX)
- Ease of depositing and withdrawing funds
You may also want to consider Tiger Brokers as it provides really affordable commissions for each trade.
The commissions are really affordable at a minimum of USD$1.99 per trade!
Ultimately, you should choose an online brokerage that you’re most comfortable with.
#2 Robo-advisor (Kristal.AI)
Most robo-advisors will only allow you to invest in a portfolio of ETFs. This is usually based on an algorithm that allocates the best portfolio for you.
However, Kristal.AI is rather unique. It also allows you to invest in individual ETFs on its platform.
Moreover, you do not have to pay any management fees for your first USD$10k invested with them! This is definitely one of the more cost efficient ways of investing.
You are even able to set up a systematic investment plan (SIP). This allows you to invest in the ARKK ETF on a monthly basis.
You can even change the investment frequency to every:
However, there are some drawbacks when you invest with Kristal.AI:
1. Minimum investment of USD$100 and no fractional shares
To invest in Kristal.AI, you will need a minimum sum of USD$100 for each transaction.
Moreover, Kristal.AI does not allow you to purchase fractional shares. You can only buy whole units of each ETF that you wish to purchase.
ARKK’s value is around USD$90 (at time of writing). As such, you are unable to purchase just one unit of ARKK. Instead, you’ll have to invest in at least 2 units each time.
If you plan to do a SIP, you will need at least USD$180 to invest each month! This can be rather hefty if you’re just starting your investment journey.
2. There may be a time lag when investing with Kristal.AI
When you invest with Kristal.AI, you may experience a time lag. Your order may take up to 24 hours to be processed.
The NAV that you see on the ETF’s page is based on the last market close price.
The price that you purchase ARKK may fluctuate to be higher or lower than this last close price. Anything can happen in the markets!
As such, you may want to have slightly more cash in your Kristal account than the last close price. This is because Kristal.AI only allows you to invest in whole units.
If the amount in your account is lower than the purchase price, you will be unable to purchase the ARKK ETF!
This is in contrast to the online brokerages, where your trades can be done almost instantly.
Moreover, Kristal.AI is a rather new firm, and you may be worried that it might close down. You can read my analysis on why the robo-advisor Smartly closed down to understand this issue further.
What other fees are involved?
Besides the transaction fee or management fee that you need to pay, you will have to pay the fund’s expense ratio as well.
The expense ratio is the annual fee that all funds or exchange-traded funds charge their shareholders.Morningstar
Since ARKK is an actively managed ETF, the expense ratio is really high at 0.75%!
This expense ratio may have a significant impact on your investment returns. However due to the active management of the fund, the ETF has been performing really well.
This high expense ratio should be something that you’ll need to consider if the returns are worth the cost.
The ARKK ETF is a really interesting ETF that has huge potential in terms of returns. If you are interested to invest in this ETF, here are the 2 main ways that you can do so:
- Online brokerages
- Robo-advisor (Kristal.AI)
Here are some things you’ll need to consider to find the best method to invest in this ETF:
- What are the fees that I’ll incur when using these methods?
- Am I comfortable with the time lag if I use Kristal.AI?
- How easy is it for me to deposit and withdraw my funds?
The ARKK ETF is just one of the investment products out there. There are other things that you can invest in, such as: