Updated: 01/03/2024

How to Invest in ARK ETFs: A Step-by-Step Guide

Investing in ARK ETFs means placing your money into funds that are actively managed with a…

How to Invest in ARK ETFs
29 Nov 2023
WRITTEN BY Chad Smith
EDITED BY Henry Hicks
REVIEWED BY Chris Padgett

Table of Contents

Investing in ARK ETFs means placing your money into funds that are actively managed with a focus on disruptive innovation. ARK Invest, led by Cathie Wood, has positioned itself as a leader in investing in companies involved in cutting-edge technology and revolutionary shifts in various sectors. By buying shares of an ARK ETF, I get exposure to a portfolio of such innovative firms, without having to select individual stocks myself.

I understand the importance of doing my due diligence before investing. This includes familiarizing myself with the fund’s objectives, assessing the risks, and understanding both the Net Asset Value (NAV) and the market price of the ETF shares. I also need to consider how to manage my investment post-purchase, such as keeping up with the market trends and the performance of the underlying assets, which may influence the value of my ETF holdings.

Key Takeaways

Understanding ARK ETFs

When considering ARK ETFs, it’s essential for investors to grasp the innovative approach of ARK Investment Management, understand the distinctive features of their ETFs, and appreciate the forward-thinking investment philosophy that guides their strategy.

Overview of ARK Investment Management

ARK Investment Management LLC is an investment firm that I recognize for its focus on disruptive innovation. Founded by Cathie Wood in 2014, ARK Invest has made a name for itself by investing in sectors that promise substantial change and potential growth. ARK’s actively managed ETFs are a testament to their dynamic investment approach, setting them apart from many traditional investment firms.

Key Features of ARK ETFs

The ETFs managed by ARK Invest are notable for several reasons:

  • Actively Managed: Unlike many ETFs that track a passive index, ARK ETFs are actively managed. This allows for dynamic portfolio adjustments in response to market changes and research findings.
  • Concentration on Innovation: ARK ETFs specifically target companies poised for growth in sectors like robotics (ARKQ)genomics (ARKG)fintech (ARKF)next-generation internet (ARKW), and space exploration (ARKX). Additionally, they offer the 3D Printing ETF (PRNT) and the Israel Innovative Technology ETF (IZRL).

The ARK Investment Philosophy

My understanding of ARK Invest’s philosophy revolves around in-depth research and a conviction that innovation drives long-term growth. The firm’s investment objectives are clearly reflected in its portfolios, which are designed to capitalize on cross-sector opportunities and companies leading the way in their respective fields. By centring their strategies around disruptive sectors and companies, ARK positions their ETFs as vehicles for investors who share their belief in innovation as a catalyst for growth.

Pre-Investment Analysis

In evaluating ARK ETFs for potential investment, it’s essential for me to conduct thorough research and understand various factors. This includes looking into their historical performance, assessing the sectors and companies they focus on, and weighing the associated risks.

Evaluating ARK ETFs’ Past Performance

When I consider investing in ARK ETFs, I review past performance data to gain insights into historical trends. For instance, I scrutinize ARK ETFs’ list on Morningstar for performance charts and data points such as Total Return Rankings. This background offers a context on how these funds have navigated market changes over time. I note that past performance, though informative, does not guarantee future results.

Assessing the Innovative Sectors and Companies

ARK ETFs are known for targeting companies at the cutting edge of innovation. This includes high-growth areas like Tesla in the electric vehicle industry or Coinbase Global within the cryptocurrency space. I conduct a thorough analysis of these sectors, looking for growth potential and the role companies like Tesla or Sq (Square Inc.) play in the ecosystem. I dive into resources such as ARK’s own explanation of their investment process to understand their strategies in identifying innovative companies poised for growth.

Understanding ARK ETFs’ Risks

Every investment carries risk, and ARK ETFs are no exception. I pay close attention to the principal risks which include equity securities risk and foreign securities risk. Innovation-centric portfolios like ARK’s may also have exposure to highly volatile assets such as Bitcoin, which requires a solid understanding of market fluctuations. I examine the potential risks using resources like the ARK ETF Help Center to identify the unique challenges and opportunities that may impact my investment’s principal.

How to Purchase ARK ETFs

When investing in ARK ETFs, it’s essential to select the right trading platform, understand how to execute a purchase and be aware of any fees and commissions.

Selecting an Investment Platform

I start by researching various investment platforms, considering factors such as user-friendliness, security features, and access to different financial instruments. Most leading platforms like UBS and E-Trade offer the ability to invest in exchange-traded funds (ETFs), including the variety of funds offered by ARK Invest. It’s crucial to ensure that the chosen platform supports the ARK ETF I am interested in.

Executing the Purchase through a Broker

Once my account is set up with a brokerage, I proceed to make the actual purchase. It’s straightforward: login, search for the ARK ETF symbol, for example, “ARKK” for the ARK Innovation ETF, and enter the number of shares I wish to buy. Before confirming, I review the order type, whether it’s a market order or a limit order, to match my investment strategy.

Understanding the Fees and Commissions

Cost is a significant factor in any investment. Brokerage commissions are the fees a broker charges to execute a trade. These can vary between platforms and can affect the investment return. I make it a point to understand these costs upfront as they factor into the overall expenses of purchasing ARK ETFs. Also, it’s important to be aware that fees can erode the principal amount invested over time.

I take note that ARK ETFs, like all ETFs, are traded on an exchange, and this means that they can be bought and sold like stocks through a brokerage. ETFs work with authorized participants and deal in creation units, which are large blocks of shares of the ETF. However, as an individual investor, I generally work with the shares available through the exchange.

Managing Your ARK ETF Investments

Investing in ARK ETFs means actively engaging with the markets and applying solid investment strategies to manage your portfolio. Below, I outline effective portfolio allocation strategies and methods to monitor performance—critical steps for maintaining the value and growth potential of your investments.

Portfolio Allocation Strategies

When considering portfolio allocation with ARK ETFs, it’s key to determine the percentage of your portfolio that aligns with your investment goals and risk tolerance. For instance, if I aim to invest in emerging sectors, ARK ETFs might constitute a larger share of my portfolio. However, diversification is paramount; hence, it’s wise to spread investments across various sectors and asset classes. Doing so can mitigate risk and stabilize potential returns. A common tool I employ is a chart or data analysis platform for visual representation of my investments, which aids in making informed allocation decisions.

Monitoring Performance and Adjusting

Consistent performance monitoring is crucial. I scrutinize the markets and rely on periodic performance data to ensure my investment stays on track. Adjustments may be necessary when there’s significant market movement or a shift in the sectors ARK ETFs concentrate on. I use a blend of services and tools that provide me with real-time updates and analysis which help in recognizing trends and making precise adjustments. While a specific percentage threshold for readjustment is subjective, staying informed can lead to strategic decisions that secure my investment value over time.

Understanding Net Asset Value (NAV) and Market Price

When investing in ARK ETFs or any ETFs, understanding the Net Asset Value (NAV) and Market Price is crucial. These figures help investors gauge the fund’s current value and its shares’ trading price.

Defining Net Asset Value (NAV)

Net Asset Value (NAV) is a fundamental concept in the ETF world. It represents the per-share value of the ETF and is calculated by subtracting the fund’s liabilities from its assets, and then dividing this by the number of shares outstanding. For funds like the ARK ETFs, NAV is critical because it reflects the value of the underlying securities that make up the portfolio, and it is typically computed at the end of each trading day.

Importance of the Market Price

Market Price is the price at which shares of an ETF are traded on the listing exchange. Unlike the NAV that’s calculated at the end of the trading day, the market price can fluctuate throughout the day based on supply and demand. It’s influenced by factors such as investor sentiment, and the highest bid and lowest offer for the shares. Understanding market price is vital as it’s what investors will pay or receive when they buy or sell shares.

Analyzing Premium/Discount Chart

A Premium/Discount Chart demonstrates the relationship between an ETF’s market price and its NAV. When the daily market price is above the NAV, the ETF is said to be trading at a premium; conversely, if it’s below, it’s trading at a discount. The vertical axis shows the percentage of premium or discount, while the horizontal axis displays time. For ARK ETFs, looking at this chart can help in evaluating whether the ETF’s shares are aptly priced in the market. The mid-point between bid and offer, used in the calculation, can provide a more refined view than just the closing price.

Advanced Considerations for ARK ETF Investors

As an investor looking to engage with ARK ETFs, it’s imperative to understand the nuances of how they operate, especially regarding active trading and differences from traditional funds.

Active Trading and Market Liquidity

When I consider investing in actively managed ETFs like those offered by ARK Investment Management LLC, market liquidity is a crucial factor. ARK’s ETFs trade intraday on exchanges, meaning I can buy and sell shares during market hours, which provides flexibility. However, it’s important to note that frequent trading can affect liquidity. For example, if an ARK ETF has a high trading volume, it improves liquidity, making it easier for me to execute trades at desirable prices.

The risks associated with active trading markets can’t be ignored. Active trading strategies often go hand-in-hand with increased market impact costs and potential tax implications from short-term capital gains. Therefore, I must be cognizant of these factors when engaging in active trading of ARK ETFs.

Monitor Ark Daily Trades here – Ark Invest Daily Trades

Differences Between ARK ETFs and Traditional Funds

ARK ETFs stand out from traditional funds in several ways, most notably in their management style and investment products. Traditional mutual funds are often passively managed and follow a specific benchmark index. In contrast, ARK ETFs represent a kind of investment management that’s active, with a specialized focus on disruptive innovation.

The actively managed ETFs helmed by ARK employ a different strategy where the fund managers are continuously analyzing and adjusting the portfolio to align with dynamic market conditions. This means that as an investor, I must have a firm grasp on the philosophy and goals of ARK ETFs to ensure they align with my own investment objectives. Unlike some traditional funds, which may come with minimum investment requirements, ARK’s products offer the flexibility to invest without such constraints, appealing to a wide range of investors seeking exposure to innovative market sectors.

Afterword: The Future of Investing with ARK ETFs

As I reflect on the evolving landscape of investment, ARK ETFs stand out to me as a vanguard of disruptive innovation. Led by the forward-thinking Cathie Wood, these funds focus on the potential of groundbreaking companies reshaping industries and, by extension, our future. In these ETFs, I see a bold push toward a global and interconnected market, driven by themes like artificial intelligence, genome sequencing, and blockchain technology.

  • Global Impact: ARK’s ETFs have a worldwide scope, considering emerging markets alongside developed ones.
  • Thematic Investing: Each ETF revolves around a specific theme believed to be integral to future growth.

In the coming years, I anticipate that ARK’s thematic approach will either continue to disrupt traditional market practices or become a more widely accepted part of them. My confidence stems from observing how well these focused themes have resonated with investors hungry for a slice of the future.

I look at the ARK Innovation ETF (ARKK) and see not just a fund, but a statement about the shape of things to come. Sure, it carries risk—as all investments do—but its performance following the market downturn early in the decade speaks to its resilience and to the inherent potential within the portfolios it curates.

For me, charting a path through the markets with ARK ETFs involves a strategic eye on their chosen themes—

  • Disruptive Innovation
  • Genomics
  • Autonomous Technology & Robotics
  • Next Generation Internet
  • Fintech

—and aligning my investments with these themes that are projected to define our future. It’s about believing that these focused areas will continue to expand and evolve, presenting opportunities for growth and progressive change within the global investment community.

Frequently Asked Questions

What are the steps to purchasing shares of an ARK ETF?

To purchase shares of an ARK ETF, I first identify a brokerage or financial services firm where ARK funds are available. I complete the brokerage’s account setup process, then proceed to fund my account and execute a buy order for the desired number of shares.

Which ARK ETF has shown the best performance historically?

The performance of ARK ETFs varies, with historical data indicating differing results over time. I look at performance metrics like annual returns and compare them to see which ARK ETF has excelled in the past. Information on individual fund performance is available on their official website.

How can I track the daily performance of ARK ETFs?

To track the daily performance of ARK ETFs, I can subscribe to trade notification emails or monitor updates via financial news platforms. Specific websites and ARK’s ETF Help Center also offer insights into daily trades and performance metrics.

What are the key differences between ARK ETFs and traditional ETFs?

ARK ETFs differ from traditional ETFs by focusing on disruptive innovation and offering actively managed investment strategies. I consider factors such as their thematic investment approach and higher management fees when comparing them with traditional, often passively managed, ETFs.

What fees are associated with investing in ARK ETFs?

When investing in ARK ETFs, I account for the management fees, typically expressed as a percentage of assets under management (AUM). These fees can be higher than traditional ETFs due to the active management component.

How do ARK ETFs respond to changes in cryptocurrency markets, specifically Bitcoin?

ARK ETFs that hold cryptocurrency-related assets can be influenced by changes in the crypto market. For instance, fluctuations in Bitcoin’s price can impact ARK ETFs like the ARK Next Generation Internet ETF (ARKW) which may hold positions in Bitcoin Investment Trust. I monitor market news and fund holdings to understand the impact.

author avatar image
Chad Smith

Chad Smith is the Director of Research & Analysis here at ForexBrokerListing.com. Chad previously served as an Editor for a number of websites related to finance and trading, where he authored a significant number of published articles about trading and the impact of technology in transforming investing as we know it. Overall, Chad is an active fintech and crypto industry researcher with more than 15 years of trading experience, and you can find him teaching his dog how to trade in his free time.

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