There’s so much excitement about it, but a peek over the history of ARKK shows that most years it performed similar to S&P or even below it.
Why is it doing so well this year?
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Ark invests in disruptive innovation, looking to take advantage of the technology adoption life cycle, which has a very slow start (innovators+early adopters) and moves onto aggressive, often exponential, growth as people catch up to it (early+late majority).
A recent example of this is TSLA, which Ark has been a huge advocate of and holds in multiple of their ETFs. While it has been part of their growth, a disadvantage of Ark's methodology is that they are forced to sell once a holding exceeds 10% of their portfolio, so this alone isn't the full picture.
With COVID, the adoption of many disruptive companies got accelerated as we moved towards an online world. They were supposed to be in the innovators stage for a few more years, but moved into the early adopter this year alone, which puts them quite ahead of their original time-line. Ark already held and benefited from many of these companies.
Moreover, vaccine development has forced investors to look for companies in that space to capitalize on their future growth and it has been a huge factor in ARKGs recent popularity. Cathie Wood has also often mentioned that the next trillion/TSLA/FANG company will come from the genomics space.
There is also a slow shift in how people are choosing to invest. People are realizing that there is a lot of dead weight in the S&P500 and there is no reason to carry bad companies in their ETFs. This is one aspect of the so called "ETF bubble", which isn't as dramatic as clickbait titles make it sound, but there is a school of thought that believes more ETFs will change their approach to be Ark-like, where only the companies with growth potential will remain as they clean house by removing all the low performers.
Slowly but surely you can see this change in Blind alone. Last year and early this year most people would spam VOO/QQQ, where as if you look at recent sentiment ARK ETFs are gaining popularity, but there are many people that still haven't caught up to it. If you believe in Ark then this trend is expected to only continue growing and next year something like QQQ may just be treated as an afterthought.