Many growth-heavy investors might have felt it when the Nasdaq 100 slipped close to 8% as part of a tech-driven correction.
Nothing against the Ark Innovation ETF (ARKK), which is having a glorious year, now up more than 35% year to date and over 78% in the last two years.
I am a huge fan of Cathie Wood. I am also an ardent critic.
Markets move fast, and in the ETF corner of the world, sometimes it feels like it's practically impossible to keep up. Product development and proliferation have been so intense in recent months.
Hot take of the day: buy a fund that has climbed 111% in the past six months and that appears overbought. ARKK is exposed to the themes that I believe will create substantial value over the very long run. Valuation does not matter as much, since standard metrics like next-year P/E capture expected short-term performance and do not match the long-term duration of ARKK's investments.
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Recent fund flow divergence signals higher perceived bubble risk in ARKK vs. QQQM, with ARKK seeing outflows and QQQM consistent inflows. ARKK's holdings are more speculative and carry extreme valuation risks. QQQM's lower-cost and passive approach makes more sense with more established tech firms trading at less extreme P/E ratios.
The ETF is having quite a year, which might be leading investors to take some profits.
Smart money isn't always smart, and following it blindly is unlikely to pay off.
ETFs pulled in $38B last week, led by QQQ, VOO, ARKK, ETHA and VCIT as cooling inflation and rate-cut hopes boosted markets.
ARKK's active management fails to generate statistically significant alpha, making its high fees unjustified versus passive alternatives. QQQ, a passive ETF with a lower expense ratio, has outperformed ARKK over the long term and shows mild, occasional outperformance. Given current market conditions and QQQ's strong recovery, I recommend holding QQQ rather than switching to ARKK.
Cathie Wood's ARK ETFs, ARKK and ARKW, roar back with record single-day inflows, flipping 2025 flows from deep red to billions in the black.