In this guide, we compare two of the most popular ETF investment products: ARKK vs ARKQ.
This guide will help investors decide which investment fund is better for their personal circumstances.
Each fund has some tremendous upsides and drawbacks. Let’s take a deep dive.
ARKK vs ARKQ – Full Comparison
Below you will find an in-depth comparison between ARKK vs ARKQ. These are both popular ARK Funds.
The ARK Invest website contains good information about the fund.
“ARK defines ‘‘disruptive innovation’’ as the introduction of a technologically enabled new product or service that potentially changes the way the world works.
ARKK is an actively managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the Fund’s investment theme of disruptive innovation.”
Here is the ARKQ fund description on the Ark Invest website.
“Companies within ARK Autonomous Technology & Robotics ETF are focused on and are expected to substantially benefit from the development of new products or services, technological improvements, and advancements in scientific research related to automation and manufacturing, materials, and transportation.
ARKQ is an actively managed ETF that seeks long-term growth of capital by investing in autonomous technology and robotics companies that are relevant to the Fund’s investment theme of disruptive innovation.”
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ARKK vs ARKQ: Minimum Investment
Because both ARKK and ARKQ are ETF products offered by ARK Invest, the minimum investment is one share.
Neither product allows partial share purchases (this may change with time).
For example, you cannot buy 0.40 shares in either fund like you can with mutual funds.
By keeping the minimum investment so low, Ark Invest prides itself on being a more “beginner-friendly” company.
I love the idea of trying to democratize the stock market!
“Turnover typically measures the replacement of holdings in a mutual fund and is commonly presented to investors as a percentage over a one-year period.
If a fund has 100% turnover, it may be construed that the fund replaces all of its holdings over a 12-month period.”
Both ARKK and ARKQ have higher fund turnover ratios than their peers. Typically, having low turnover means you are more tax-efficient.
This is because you only generate a capital gain when you sell your investments. If you never sell, you never pay a capital gain tax.
As an investor, I wish these funds would focus a little more on the tax consequences of their decisions.
So, you may be asking, “What are the underlying holdings for ARKK and ARKQ?” Here are some of the top holdings for ARKK:
Here are some of the top holdings for ARKQ:
- Lockheed Martin
- Unity Software
As you can see, there is a ton of industry overlap between the two funds, but ARKQ invests in more privately held companies.
This allows ARKQ more access to start-ups and potential big wins.
Here are some of the upsides to investing in ARKK.
- Low Minimum Investment
- More Mature Companies
- Tries to Beat the Market
First, ARKK has no minimum investment, as previously discussed, so it’s possible to put your money to work right now.
Next, ARKK invests in more mature companies than ARKQ. This gives me a higher level of confidence that the ARKK returns will be more stable.
Returns are never guaranteed, but a company that has made it past the start-up stage has a record of getting results.
Lastly, some people may like that ARKK tries to beat the basic market return. Active management has been dying in recent years, but Ark Invest is disrupting the conversation.
Here are a few downsides to investing in ARKK.
- High Volatility
- 0.75% Expense Ratio
ARKK, unfortunately, has a 0.75% expense ratio. Keeping your investing costs low is one of the biggest factors in long-term investing success.
0.75% may not seem like a high expense ratio, but it is well above the mutual fund average expense ratio.
Finally, ARKK returns are going to fluctuate more than the general market.
ARKQ has been an excellent product for ARK Invest in recent years. These are a few of my favorite things about the fund.
- Robotic Automation
- Operating Leverage
I absolutely love investing in companies trying to improve robotic automation. Here are the best things about robots:
- No sick days
- No worker’s compensation
- Depreciable Assets
- R&D Tax Credits (Possibly)
Robotics supplement human labor, and they increase a company’s operating leverage.
By having a skewed cost structure toward fixed costs, rather than variable, each additional dollar of revenue has a higher profit margin.
This is how a company like WhatsApp can be worth billions of dollars and only employ a few dozen people. The code and computers do all the heavy lifting.
Lastly, start-ups have the greatest potential for exponential returns. Mature companies in the S&P 500 are unlikely to 10x in price.
Here are a couple of cons to ARKQ.
- High Uncertainty
- No Historical Record
First, because the companies ARKQ invests in are so new, there is no historical track record.
While historical record (or lack thereof) does not determine the future, I like to see strong past performance for my investments.
We do not have the luxury of this for ARKQ holdings.
Next, because these companies are so new, there is a lot of uncertainty. Will they still be around 5-10 years from now?
Most start-ups fail, and that means your investment capital could go to zero. It’s the risk you take for the potentially large upside.
Other Fund Comparisons
I have written many other investment fund comparison reviews. I highly recommend reading any of the following for more information.
Additionally, I recommend subscribing to a multitude of investment newsletters to broaden your horizons.
ARKK vs ARKQ
Both ARKK and ARKQ are investing in companies that will define the next generation. The biggest differences are underlying holdings, investment mission statement, and return performance.
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ARKK vs ARKQ FAQ
What’s the difference between ARKK and ARKQ?
ARKK is an innovation ETF, and ARKQ is a robotic automation ETF.
Is ARKK or ARKQ Better?
Each ETF can serve a specific function in your portfolio. Neither is better for everyone.
What are the Holdings of ARKK and ARKQ?
ARKK and ARKW both own technology firms focused on innovation.
How do I Buy ARKK or ARKQ?
You can buy ARKK or ARKQ on any brokerage website or with Ark Invest.