so one of our awesome subscribers wrote in and asked the following question
hey bob during the hype of 2021 i bought into ark etf because everybody seemed to be saying it
was the best instead of doing my own research i jumped in and bought in now i'm down over
60 percent of my value is there a better growth fund to consider
yes yes and yes times sixty percent so there's a lot of hype and talk about the investor kathy ward
and her art investment firm ark is the innovation etf that focuses specifically on companies that
have a lot of upside potential this really isn't about making your portfolio grow to a lot of money
it's about offering disruptive innovative companies now kathy ward has said that herself
but the thing is ark did have a beautiful run as a part of having a significant holding in tesla
that of course got anybody that loves to throw in their money as if the stock market is a gambling
machine to try to get their next million the only problem was they all bought in on the
high and have felt the pain ever since it's come back down but if we look here on seeking alpha at
ark and look specifically at the 52-week range look at that it was at 126.32 per share and now
at the lowest was 35.14 now presently as of the recording of this video going for 45.90 per share
that is a significant decline you can see it right here at the bottom one year at a 62.25
decline in the last year alone the problem we're faced with how do we find a better growth fund
that will make us wealthy long-term and not cost us a lot of money in expenses or potential
risky volatile decline in the case of ark if you lost money on ark and you're willing to share it
drop me a comment down below how much percentage did you lose from the time that you bought it now
let's start with the holdings of ark so we can kind of decide what is the best growth etf for us
so if we come over here to the holdings on seeking alpha it'll tell us what the top 10 holdings are
right there they are and you can see right here tesla for example at only eight point seven four
percent now that's interesting because last year in july tesla represented a total of 10.53 percent
of the overall ark holdings in fact it was the top holding of this particular fund the issue though
with the rest of these companies is most of them are not fundamentally strong enough yet to get
excited about in fact they're producing negative cash flow so on their top 10 holdings let's take a
look here so crispr is negative cash flow you have ui negative cash flow you have exact science corp
negative cash flow you have intellia negative cash flow you have twilio guess what negative cash flow
now this right here these right here one two three four five that is fifty percent of the top ten
holdings within a rkk that represent negative cash flow now again remember what kathy wood says the
goal is to be a disruptor and innovator well the problem that with that is that comes with a lot of
high risk so if you're getting into this without doing your research what you're doing is you're
just saying hey this sounds sexy let me get in on it and then you realize that um it's not sexy at
all because 50 of it is looking kind of nasty now the hope would be these companies turn it around
but the problem with this is you can actually wait until you see fundamentals catch up to itself so
for example let's take one for example crispr okay so crispy right here all of a sudden comes out
and you start seeing the revenue increase you start seeing the free cash flow increase you
start seeing positive numbers and that negative cash flow becomes positive cash flow at that
point you can decide to buy in you're not going to miss any boat at that point because what's going
to happen is a lot of the value investors a lot of the hedge funds a lot of people that are smarter
at investing than the average joe blow will then decide to start putting money potentially into
that stock and that's why fundamentals are so important sure the people that maybe got in when
it was only a dollar a share or whatever the price was way back is going to make a lot of money but
the problem is is you don't know what's going to perform and what doesn't perform you're taking a
risk with your money and if you're okay losing your money then maybe that's okay but long term
there's better growth funds out there that we're going to talk about this brings us to the first
point though about losing money with something like ark see arkk is an actively managed fund
kathy wood and her team are buying and selling stocks within the fund which means that they can
sell at a gain and they pass that gain onto you as the shareholder if you hold this fund in a taxable
brokerage account like most likely something that's a non-retirement account that means
anytime they sell their holdings within the art etf those gains are passed on to you and can be
taxed up to the ordinary tax rate which could be up to and including 37 of tax so if you invested
in this long enough not only did you get a tax bill from 2021's sell-off of some of the tesla and
some of the other things that they've been doing within the account you also are down 60 percent
you see how this is going and there's another big big expense within ark that we'll discuss
in just a moment but let's go back to the question that was originally asked is there a better growth
fund well considering a 60 drop in aok almost any type of fund would be better than this particular
fund but let's get serious with what could be out there that is a little bit more fundamentally
smarter from a growth perspective first up let's talk about a relatively conservative
growth fund and then we'll get one that's a little bit more mild and wild the fund is called
vug otherwise known as vanguard's growth fund let's go pull this up right here on seeking alpha
bug vanguard growth etf and you can see right here in the summary section both quant and arthur's
rate this at a buy by the way if you want to get additional tools just like what we're looking at
on this video you can get seeking alpha premium for yourself there's an app as well as a web-based
environment as we're seeing right here and just because you're awesome and watching this video
seeking alpha has given you 50 off if you use the link down in the description below so let's look
at the holdings of vug and they're going to be a little bit different than ark for a lot of obvious
reasons look at the top 10 holdings we have apple microsoft amazon tesla nvidia visa and the home
depot but these are very solid proven companies producing positive cash flow seeing growth apple
is one of the biggest stocks in the world right now and then if we go back here to the summary
tab it gets a little bit more exciting because as we saw with ark it's not the same with vug
if we look here we're down 20 year-to-date we're down 26 percent much different than 60
knowing that the entire stock market is down in 2022 but if we look up here at the five year 81
percent 10-year 244 percent that's looking pretty darn good especially if you compare that 10-year
244 percent on the vanguard etf with arks only 129 on the last 10 years it had its high but then
because of that crash it really brought back the tenure so that kind of shows you right there that
vug is looking much better than something like ark now topped off with an expense ratio here of only
0.04 now compare that to ark at 0.75 that's a big difference in cost that we'll talk about in just a
moment so here's the fun part let's stack them up next to each other let's say you have two people
they each invest 10 000 into one of these etfs the first person we're gonna call this person john boy
decides to invest ten thousand dollars into a rkk then you have this other person we'll
call this person billy bob decides to invest ten thousand dollars into vug they invested it just
one time no more and they invested it in 2015. what would their values be worth today let's see
billy bob john boy who's winning the overall amount of money so right here we go you can see
the ten thousand dollar balance grew to twenty one thousand seven hundred and fifty
for a rkk and twenty three thousand oh eighty nine for vug that's a difference of ten point
nine two percent versus eleven point eight percent hmm considering the cost and the expense ratio vug
and billy bob they're making a little bit more money in the long term
verse is a rk but if you want something a little bit more wild than vug but not as crazy as ark
enter qqq now this particular fund tracks the nasdaq 100 the top 100 companies in the
nasdaq index you can see right here on the one year it's only down 17.27 percent if you go to
the 10 year on qqq up 366 percent beating both vug and ark you can also see the quant rating
on seeking alpha at a strong buy now as far as holdings they are similar to vug as a result
of being in the nasdaq top 100 apple microsoft and so on however the holding percentages will
be a little bit different and this particular fund only has 100 companies versus vug which holds 266
different stocks now the expense ratio a little bit higher than vug at 0.2 percent
but a lot lower than ark is 0.75 but let's go back and compare this one to the other two so
we have john boy who's uh not doing as well you have billy bob with his bug and let's say we have
sallie mae and sally mae is going to say i'm going qq all the way with my ten thousand dollars in
2015. let's see how she does so i'm gonna analyze the portfolios john boy growing his balance of 21
750 we have billy bob at 23 000 and check out sally may 28 843 that is a return of 15.17
beating the other two completely now here's what's interesting about this entire thing
if we look at the portfolio growth over time see how it's kind of going up and the blue line
actually represents a rkk now what you're going to probably see around here in 2021 when kathy
wood was getting tons of recognition as a result of some of the stock plates that really helped
push ark up everybody's thinking well vanguard and invesco qq you're just a bunch of boomer etfs
that are completely and utterly conservative look at us way up here at 74 000 versus your measly 25
and 32 but remember high risk high reward and also high risk high potential for a bad day and
that bad day now look at this at the very end we have ark underperforming both of these funds now
this could happen back here it did as well arc was underperforming back in 2016 both vanguard and qq
could this happen again where maybe things change for the better and art takes another job
you don't know but if you want to be a smart investor you got to make sure that you feel
good about whatever you decide to do if you decide to buy into art and you feel good with
that just get ready for the potential insanity of what is a rollercoaster ride now of course
the subscriber that asked me is a little bit concerned about the fact that he is down 60
on his money so in order to be a little bit more i feel better about this maybe consider getting into
something like bug or qqq while they're still down from the 2021 height that they were at they're not
down as much now a lot of noobs don't take in the fact that we have something called the expense
ratio i mentioned it earlier in the video we have 0.04 0.20 and 0.75 in the case of arc those type
of expense ratios when taken out of your portfolio balance every single year can make a significant
impact on your long-term holdings and your long-term growth potential depending on the fund
thanks to nerdwallet they have this particular calculator and i want to show you an example
of what this really means so even though this is meant for mutual funds we'll do it in the case of
our etfs but if you look at the initial investment amount let's do ten thousand dollars future plan
contributions uh we're going to say one dollar and time horizon will be seven years from 2015 to 2022
rate of return now what we could do here for the rate of return is take the average here let's
just say on the conservative side uh 11 as the average so our rate of return is going to be 11
and the expense ratio in the case of arc is 0.75 if we calculate this look at the cost of the fees
over that period of time your ending value would be 19 809 your ending value gross would be twenty
thousand seven seventy two so you're spending nine hundred and sixty two dollars to own
ark but in the case of vanguard's vug considering the same exact example here eleven percent return
on the ten thousand dollars for seven years if we change this from 0.75 to .04
your cost of fees will go from 962 down to only 52.33
so what you have to figure is if i'm losing money because of the market value going down
stacked on top of the fact that the expense ratio will cost money
even though they pull it out of your portfolio balance it's something that you need to consider
for the long term so beyond just bug and qq is some alternatives what are some other great
etfs that could potentially help you grow your balance over the long term well in that case
check out this video next that'll guide you through that and we'll see you over there