In this article, we’ll compare ARKK vs VGT:
ARK Innovation ETF (ARKK) vs Vanguard Information Technology ETF (VGT).
Both Exchange Traded Funds (ETFs) are popular investments for different reasons. This article will help you decide between ARKK and VGT.
ARKK vs VGT
The primary difference between ARKK and VGT is the company that offers the exchange-traded fund (ETF). ARKK is offered by ARK Invest. VGT is offered by Vanguard.
ARKK is also actively managed while VGT is passively managed. This means ARKK has fund managers actively seeking to beat the market. VGT is simply replicating the returns of the index it tracks which is the MSCI US IMI Info Technology 25/50 index.
Another significant difference is the expense ratio. ARKK has an expense ratio of 0.75%. VGT has an expense ratio of 0.1%. ARKK is 7.5 times as expensive compared to VGT!
- Actively Managed Fund
- Expense Ratio 0.75%
- Offered By ARK Invest
- Holds Between 35 – 55 Stocks
- Passively Managed Fund
- Tracks the MSCI US IMI Info Technology 25/50
- Expense Ratio 0.1%
- Offered By Vanguard
- Holds 362 Stocks
ARKK vs VGT Performance
ARKK and VGT have had very different performances over the last year. VGT is beating ARKK by 65% over the last year.
Over the last 3 years, VGT is beating ARKK by 11% per year.
ARKK (Orange) VGT (Green)
As you can see from the chart, VGT has significantly outperformed ARKK over the last year.
Similarities between ARKK and VGT:
- Both Are Exchange-Traded Funds (ETFs)
- Both Focus On Growth Companies
- Similar Performance Over 5 Years
ARKK and VGT Differences
ARKK and VGT primarily differ in their expense ratio and the company that offers the fund. The way the fund is managed is a key difference as well.
ARKK has an expense ratio of 0.75% while VGT has an expense ratio of 0.1%. That makes ARKK very expensive compared to VGT.
VGT is a passively managed fund
ARKK is actively managed
This means that a fund manager (Cathie Wood) at ARKK is actively trying to beat the market.
Differences Between ARKK and VGT:
- Different Number Of Holdings (~45 vs ~362)
- Company That Offers The Fund (ARK Invest vs Vanguard)
- Expense Ratio (0.75% vs 0.1%)
- ARKK Is Actively Managed
- VGT Is Passively Managed
- Fund Inception: 2014
- Expense Ratio: 0.75%
- Number Of Stocks: 35 – 55
- Actively Managed
ARK Innovation ETF (ARKK) is an actively managed ETF that looks for performance returns from companies with disruptive innovation. They define disruptive innovation as new technology that changes the way the world works.
The fund has $19.4 billion in assets under management.
ARKK was created in 2014 and currently has an expense ratio of 0.75%. This is more than 7 times the cost of VGT which has an expense ratio of 0.1%.
Here is what a 0.65% fee (difference between ARKK and VGT) will cost over 30 years. Assuming you start with an initial investment of $100,000 and contribute $10,000 each year, over 30 years.
You will have $500,000 less in your account.
This does not include costs to buy and sell your shares.
ARK Invest’s ARKK has underperformed over the last year with a return of -39%.
While ARKK has a negative 39% return, the S&P 500 has a positive return of 31%.
ARKK Top 10 Holdings
ARKK’s top 10 holdings include Tesla, Teladoc, Roku, Zoom, and Coinbase. The ETF invests in companies that are in high-growth technology.
The top 10 holdings make up over 50% of the portfolio which means you can expect higher volatility with ARKK compared to more diversified funds like Vanguard Total Stock Market Index Fund ETF (VTI).
- Fund Inception: 2004
- Expense Ratio: 0.1%
- Number Of Stocks: 362
- Dividend Yield: 0.55%
- Top 10 Holdings: 59%
- Similar ETF (VUG)
Vanguard Information Technology ETF (VGT) is an ETF focused on companies in the information technology sector. The price-to-earning (P/E) ratio for VGT is 34x which is high.
The fund has $54.1 billion in total net assets.
VGT was created in 2004 and currently has an expense ratio of 0.1%. This is much lower compared to ARKK’s expense ratio of 0.75%.
Vanguard’s VGT has outperformed the Nasdaq over the last 10 years:
VGT (Blue) Nasdaq (Yellow)
However, be mindful that this does not guarantee the next 10 years will look the same.
VGT Top 10 Holdings
Vanguard’s VGT is largely made up of Apple, Microsoft, NVIDIA, VISA, and Mastercard and provides exposure to over 300 stocks.
How To Invest In ARKK and VGT
The easiest way to invest in ARKK and VGT commission-free is with M1 Finance. (Use this link for $50 when you open a new account)
M1 Finance gives you the option to invest in both options completely free. This is important because as we saw in our earlier example, fees can affect long-term returns.
You can still invest in ARKK and VGT using other platforms but there will likely be a charge when buying and selling shares.
I like M1 Finance as the best option because it gives you the flexibility to purchase ARKK, VGT, and thousands of other stocks.
M1 Finance also lets you purchase fractional shares. This is great for buying VGT with its high share price of $433.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
Which is Better ARKK or VGT?
ARKK and VGT are different investments. ARKK has a very high expense ratio of 0.75% and has not performed well lately.
VGT offers many of the same features as ARKK but at a much lower expense ratio of 0.1%.
Out of these funds, I prefer VGT because of the lower expense ratio.
As we saw earlier, VGT is beating ARKK by 65% over the last year. That means investors in VGT have had better returns and at a lower cost!
This would suggest yet again that passive management is better than actively managed funds. Keep in mind, past performance does not predict future returns.
I would still choose VGT over ARKK and I would purchase the shares commission-free using M1 Finance. That way I keep my costs as low as possible.
Is ARKK or VGT Better for Financial Independence?
The FIRE community is big on keeping investment costs low and that’s why I would choose VGT.
Here are some other ETFs to consider with low expense ratios and similar performances:
They all have similar returns and at a lower or similar cost compared to VGT.
Also, if financial independence is your goal I would suggest looking into other funds that give you more diversification like VTSAX.
My Winner: VGT
My winner is VGT based on its lower expense ratio of 0.1% and excellent performance. I always lean towards keeping costs as low as possible.
Returns are not guaranteed but fees are!
If you like ETF comparisons like these check out more in our related posts below.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.