Not Your Grandpa's ETF

It’s the week before Christmas and you’re probably still trying to track down gifts for the family… if it makes you feel better I still don’t know what I’m getting my girlfriend.

While that’s probably your biggest worry at least we can start to relax knowing the Pfizer vaccine is being shipped out and distributed across the country. A light at the end of the tunnel? I sure hope so.

Meanwhile…bitcoin is flying again and every other tweet on my timeline reminds my of why I should’ve bought more.

With that said I’m going to use this week’s email to go over a few growth ETFs I have been considering for my Roth IRA and the details of each.

“If you try and fail, people will praise you for trying. If you fail to even try, people will ignore you.” - Jordan Belfort

When it comes to new and innovative ETF’s the market has exploded.

In the past ETF’s that tracked the total market and S&P 500 were the main show. Investors loved (and still do love) these for there simplistic design and consistent returns over the years.

But what about for those who are looking for something more?

Something that can allow them to capture new markets without the increased risks from buying individual stocks.

Well, let’s just say these aren’t your grandpas ETF’s.

The following are three different exchange traded funds I have been considering adding to my Roth IRA. I’m going to introduce each then give my favorite at the end.

$ARKK (Ark Innovation ETF)

Goal: This ETF does exactly what it’s name says, invests into innovative companies. This is unique, as the focus of $ARKK is across a number of new sectors. The businesses being bought in this fund are attacking areas where the market is often not fully defined but has massive potential. Ark describes innovation as “a technologically enabled product or service that potentially changes the way the world works.”

Investment Focus

Expense Ratio: 0.75%

Top 10 Holdings: Tesla, Invitae Corp, Square, Roku, CRISPR, Photo Labs, Zillow Group, 2U Inc, Lending tree, Teladoc Health.

Returns (as of September 30,2020):

YTD: 83%

3 Year: 41%

5 Year: 39%

Since Inception: 31%

My take: As one who is still getting into the growth ETF scene I like how ARKK is diversified across a number of businesses. An important thing to note though is that Tesla accounts for 11% of the fund as has a 5 year return of 1,300% that has without a doubt had a large influence on ARKK’s return. Despite this the fund has been focusing on managing these heavy positions which eases my worries a bit.

$QQQJ (Invesco NASDAQ Next Gen 100 ETF)

Goal: This is the new kid on the block as it was just commissioned this October and is modeled after it’s big brother QQQ. The strategy for QQQJ is to invest “at least 90% of its assets in the 101st to 200th largest companies on the NASDAQ.” Basically this means the fund is buying companies that are next up to join the famous NASDAQ 100 which consists of companies such as Apple, PayPal, Amazon, Tesla, and Google. By taking this approach a large amount of the fund is invested into mid-cap stocks.

Expense Ratio: 0.15%

Top 10 Holdings: Trade Desk, Roku, Okta, Atlassian Corp, Marvell Technology, Liberty Broadband, Zscaler, Old Dominion Freight Line, Garmin, Yandex,.

Returns: N/A due to just starting. Though the NASDAQ composite has a 10 year average return of 18%.

My take: I’m super interested in this ETF. The strategy being used here has great potential in my eyes and QQQJ can also be used as a way to diversify into mid-cap stocks. The only think that makes me hesitant is having no performance history, but a big positive is the low expense ratio compared to the other two Ark funds on this list.

$ARKG (Genomic Revolution ETF)

Goal: I’ll let the description from the Ark website describe this one. “Companies within ARKG are focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business.”

Investment Focus

Expense Ratio: 0.75%

Top 10 Holdings: Invitae Corp, CRISPR, Pacific Biosciences, Twist Bioscience, Arcturus Therapeutics, Compugen, Seres Therapeutics, Iovance, Teladoc Health, Personalis Inc.

Returns:

YTD: 89%

3 Year: 37%

5 Year: 29%

Since Inception: 22%

My take: I’m not even going to begin to act like I know what is going on in the DNA world, I’m a mechanical engineer, chemistry was my worst subject for a reason. That being said this is why I’m looking into this ETF. Gene editing, gene therapy, and DNA sequencing is the future which is hard to deny. The companies in this fund are attacking what I would classify as an “un-tapped” market. Advances in this type of technology could literally change the make-up of the world as we know it. The question is, how much is that worth?

Conclusion

*Drum rolllllllll*

At the moment ARKK is at the top of my list. Advantages of this fund are it’s diversity into creative technology companies. Some of it’s investments also include those made by ARKG. While it is my favorite of the three, the expense ratio is quite high which is somewhat of a turn off. Going into the future though I’ll be looking to add ARKK to my Roth IRA and will likely take small positions in ARKG and QQQJ in my normal brokerage account. And for those who are going to ask, QQQJ would be my second place followed by ARKG.

Who knew ETF investing could be so exciting?!

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Now what you all came here for.

Who else’s family functions involve trashing each others investing strategies?

Funny thing is the crypto kids will be roasting on all the boomers this Christmas.

“Who BuYS INdeX FuNdS?!?!?!”

Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you next week!