馃攳
ETF Battles: QQQ vs ARKK - Which ETF is Better Positioned for Future Growth? - YouTube
Channel: unknown
[12]
- Welcome to ETF Battles.
[14]
I'm Ron DeLegge.
[15]
And in case you didn't get the memo, ETF Battles
is far more than just ETFs battling each other.
[21]
Well, maybe that's the main point, but it
certainly isn't the only point.
[25]
Because when you think about it, we're all
really engaged in some type of combat, whether
[29]
that's to overcome unfriendly markets or perhaps
our own self destructive behavior.
[35]
And really we're aiming to deploy our money
into assets that produce the best returns.
[41]
It's very much along the same lines as Gerald
Loeb's famous book, The Battle for Investments
[46]
Survival, with the chief difference being
we're not just trying to survive, we're trying
[51]
to help you thrive.
[53]
Today's arm wrestle is between the Invesco
NASDAQ 100 ETF, that's ticker symbol QQQ against
[58]
the ARK Innovation ETF.
[61]
That's ticker symbol, ARKK.
[63]
This is a match up of two cocky ETFs with
lots of chatter surrounding them.
[68]
And although both funds own some of the same
types of stocks, QQQ follows an index, whereas
[74]
ARK is actively managed.
[76]
Meaning the manager has the freedom to pick
which particular stocks they feel are best
[82]
to own.
[83]
QQQ, by the way, has been featured in several
rounds of ETF battles and despite its super
[88]
hot performance and popularity, QQQ has yet
to win against any of the ETF opponents it's
[95]
faced in the short history of this program.
[98]
I know it's hard to believe, but will today
be different?
[101]
Well, we're about to find out.
[103]
Now, before I introduce our judges, keep your
ETF battle requests coming and make it good.
[109]
We want some battle matchup requests that
have some teeth, you know the drill, hit us
[113]
up on YouTube with our comment section.
[116]
Be sure to drop your ETF ticker symbols.
[118]
You can also find us on Twitter @etfguide
and also be sure to hashtag ETF Battles.
[125]
Helping us to judge today's matchup is Dave
Kreinces at ETF Portfolio Management and Mike
[130]
Akins at ETF Action, the absolute brightest
and best in the business.
[136]
Judges, welcome back to the show.
[138]
Great to see you.
[139]
- Great to be here Ron.
[140]
- Thanks Ron, great to see you.
[142]
- So our four battle categories are cost,
strategy, performance, and then we've got
[147]
a mystery category.
[148]
That's where our judges can choose one factor
or possibly multiple factors that they feel
[153]
are important to their analysis.
[156]
And who knows that mystery category, it could
be the deciding factor in which ETF wins today's
[163]
battle.
[164]
As you can see, my scorecard is ready.
[166]
It's blank.
[168]
That means we're gonna fill it out together
in real time live.
[172]
And we're gonna begin with the first category.
[175]
It's cost.
[176]
Let's start with you, Dave, you got 30 seconds,
go.
[179]
- Well, the expense ratio is 0.20% for QQQ,
known as the Q's and ARK has a 0.75% expense
[189]
ratio.
[190]
So ARK is charging more than triple the cost
of the Qs.
[193]
However, ARK employs an active aggressive
growth strategy.
[197]
So the higher cost may be worth it at times,
but on a lower cost, I'll give the win to
[202]
the NASDAQ 100.
[203]
- Excellent.
[204]
That's a good start.
[205]
- Let's shift to you, Mike.
[207]
What's your take on cost, which ETF wins?
[208]
- Yeah, I think it's gonna be hard to argue
with the absolute cost being, going to the
[214]
triple Q's, but you gotta point out the fact
that ARK is definitely an actively managed
[220]
strategy.
[221]
It's a super high conviction, 40 stocks versus
a hundred stocks in the triple Q's.
[226]
And it's getting you into port securities
that you may not be familiar with and you
[230]
probably don't already own in your portfolio.
[232]
So something, at the end of the day cost is
probably not a factor that should be thought
[238]
of too long with these two strategies.
[241]
- Let's move to the next battle category.
[242]
And you alluded to it Mike, exposure strategy.
[246]
So let's stick with you, QQQ versus ARK.
[249]
Talk about the differences in which ETF you
think wins.
[252]
- All right, So the Q's are gonna follow an
exchange.
[255]
They follow what's listed on the NASDAQ, the
largest 100 companies on the NASDAQ exchange.
[261]
As history has played out, NASDAQ has tended
to get more of the technology exposure companies.
[267]
As a result it's heavily tilted towards technology.
[271]
ARK is an innovation strategy.
[272]
They're trying to find companies that they
refer to as disruptors and that's across a
[277]
number of different themes that they've laid
out, including health innovation, technology
[282]
enablers, industrial revolution, a number
of different things.
[286]
So from a cost and exposure perspective, Q's
are gonna be broader, are gonna be more diversified
[292]
across sectors.
[294]
ARK is going to be very high conviction into
a smaller number of names.
[300]
Calling a winner here is tricky, but I'm gonna
go with ARK simply because I think it gives
[305]
you exposure to something you probably don't
already own.
[308]
And what I mean by that is the Q's have about
40% overlap with the S&P 500 in common names,
[315]
ARK has less than 2%.
[317]
Q's and ARK only have about 5% in overlap
exposure.
[322]
So the idea here is that you're again, you're
expanding your portfolio into areas of the
[327]
market that you believe, or that ARK believes
have really high growth potential.
[332]
So I'm gonna give it to ARK on exposure strategy
as an additive to your existing portfolio.
[338]
- That's a pretty convincing argument.
[341]
Thank you, Mike.
[342]
Dave, how do you see it?
[343]
Who wins on exposure strategy?
[344]
So Ron, you know, the NASDAQ 100 tech heavy
core index holding recently became the fourth
[354]
ETF to surpass a hundred billion in assets.
[357]
We consider the NASDAQ 100 to be the next
generation S&P 500.
[361]
And as for ARK, it's more of a satellite exposure,
is an actively managed ETF.
[366]
It has somewhat higher position concentration,
higher exposure to healthcare, a much more
[371]
complicated investment process.
[373]
So this means investors will need more diligence
each year to understand the risk and reward
[378]
of ARK.
[379]
So on a risk adjusted basis, I have to give
the win on strategy to QQQ given the higher
[383]
process efficiency and broader diversification.
[386]
But I do understand Mike's preference, I love
ARK, they got great research, but I still
[391]
give the win on strategy to QQQ.
[393]
- All right, thank you for your fine analysis.
[396]
Let's move to the next battle category, which
is performance.
[399]
We're gonna stick with you, Dave, which of
these two ETFs wins when it comes to performance?
[404]
- So over the six years since ARK's inception,
ARK delivered over 300% versus under 200%
[411]
for the NASDAQ 100, but ARK is higher risk.
[415]
In the crash this year, ARK fell 46%, almost
cut in half while the NASDAQ 100 fell 31%.
[422]
Still overall ARK does win on performance
against QQQ, which is a huge accomplishment.
[428]
So bravo to team ARK on great work.
[431]
However, investors should know that leveraged
ETFs are the big innovation wildcard this
[436]
past decade.
[437]
And the three times leveraged ETFs for the
NASDAQ 100 technology and semiconductors,
[443]
all delivered over 650%, which was more than
double the return of ARK.
[449]
- Wow.
[450]
- But these leveraged ETFs also fell by over
70% in the crash this year.
[454]
So they're all extremely volatile.
[457]
And over the past decade, the NASDAQ 100 three
times, symbol TQQQ returned 59 times your
[464]
money or 51% annualized, which was also 23
times the S&P 500 return.
[471]
So the common wall street Jedi mind trick
that leveraged ETFs are for day trading only
[476]
makes no sense to me.
[477]
For performance, ARK does win against QQQ
for unleveraged investors, but it comes up
[483]
far short against our favorite, the NASDAQ
100 three times, symbol TQQQ.
[487]
- All right, well, thank you for that excellent
analysis on performance.
[492]
Let's shift to you, Mike.
[493]
What's your take on performance, who wins
the battle?
[496]
- Without losing perspective, ARK has been
on absolute tear.
[499]
Their themes have lined up really well.
[502]
Not only with over the six years that they've
been in inception, kind of spotting the opportunities
[508]
of where growth exists, but then to capitalize
that there, they set up extremely well for
[515]
the COVID world that we're currently living
in.
[518]
So their performance recently has been off
the charts with names like Square.
[522]
You know, Tesla's been on a roll, that's nearly
20% of their portfolio right there.
[529]
So for performance, I gotta give it to ARK.
[531]
You gotta give a hat tip deck to management
when it's there.
[535]
Just recognize that with, you know, big swings
up just like the leverage portfolios that
[541]
Dave was referring to, you can get big swings
down.
[545]
If you're gonna allocate to either one of
these strategies stay the course, but I will
[549]
give the hat tip to ARK in the sense that
I believe it's additive to the portfolio.
[555]
And I just wanna stress that there's, the
idea of using these ETFs is using them together,
[561]
right?
[562]
So a little bit with strategies like ARK can
go a long way.
[566]
We're not talking about the core of your portfolio.
[568]
We're talking about a satellite position that
can add growth to your portfolio, be additive.
[573]
So while I think if you give it a full market
cycle, 10, 15 years, I believe that Cathie
[580]
and team over at ARK can outperform Q's.
[583]
And, so they've done it in the past and I
believe they can do it going forward, but
[586]
it will come with bumps in the road.
[588]
So ARK with all those disclosures.
[590]
- All right, very good.
[591]
Then we're gonna read the fine print after
the show is done and make sure that we've
[596]
got all those points, but excellent points
made.
[599]
Now we need to move on to the mystery battle
category.
[601]
This is where our judges get to pick whatever
factor or maybe multiple factors they think
[606]
are important to the battle between QQQ and
ARK.
[610]
So let's stick with you, Mike, who wins the
mystery battle, and what is the mystery battle?
[615]
- Well, it's a great question.
[618]
For mystery in this one, I struggled with
it for a little while, then I realized that
[622]
I think it has to come down to this idea of,
one strategy, you're buying into a manager
[629]
and that manager's team of analysts that are
doing due diligence.
[633]
And I've told you that they believe in a handful
of themes that are gonna lead to innovation
[639]
in the future, going to drive growth.
[641]
The other strategy you are counting on NASDAQ
winning business to list on their exchange.
[648]
And that's the strategy you're buying.
[650]
It's an exchange specific strategy.
[652]
And I think that hands down from a mystery
perspective, I'm gonna go with a research
[657]
team putting thought into that if you believe
in that research team.
[661]
And in this case I do, versus broadly on an
exchange, which can get a little goofy based
[667]
on when they're listing business in the future,
right?
[671]
So they won Tesla, that worked out really
well.
[674]
Had they not, it may not have worked out so
well.
[677]
So I'm gonna go with that mystery category,
being the methodology in one being a team
[681]
of analysts and the other being a team of
salespeople hoping that they get the next
[687]
greatest company to list on their exchange.
[689]
- All right, brains versus haystacks is what
you're telling us.
[694]
We got that.
[695]
So let's shift to you, Dave, your mystery
battle category.
[699]
What is it, and who's the winner?
[701]
- So, Ron, before I mention our mystery category,
I should also full disclosure that we are
[706]
trading TQQQ and QQQ, and we do not trade
Ark.
[711]
But my opinions are objective regardless of
what we're trading.
[716]
The mystery category for me is always portfolio
weighting and position sizing, because it's
[721]
a very big indication of how these positions
fit into your portfolio.
[727]
And the waiting for our aggressive growth
clients in the unleveraged TQQQ could be as
[732]
much as a 100% while a position in ARK, we
would typically limit to five to 15% exposure
[739]
if we were going to trade it.
[741]
And for teaching TQQQ, we generally cap that
leveraged holding around 60%.
[747]
So the win on portfolio weighting goes to
QQQ.
[750]
- Now we need to get your take on your overall
battle winner.
[754]
So we're gonna recap this and give each of
our judges one final chance before we declare
[759]
a winner.
[760]
Let's stick with you, Dave, who is your overall
winner between QQQ and ARK?
[764]
- So to recap, I love ARK, especially the
extra exposure to Tesla.
[769]
But while ARK is an awesome ETF from a great
firm, the NASDAQ 100 is the next generation
[776]
S&P 500.
[777]
So for me, on a risk adjusted basis, the battle
win still goes to QQQ.
[782]
- Okay, very good.
[783]
Mike, what's your take overall battle winner?
[786]
- All right.
[787]
Well, I'm gonna go with ARK as my overall
battle winner because I do believe in themes,
[792]
and I do believe that investing across themes
is a very powerful way to think about the
[797]
market and find company exposure that meets
where we believe the economy is gonna be in
[803]
five, 10, 15, 20 years.
[805]
I wanna put one big asterisk on this though.
[808]
ARK is my winner if you're using it as part
of an overall portfolio construction tool,
[813]
you're giving it a 10% weighting, a 15% weight,
depending on your risk tolerance.
[818]
If we're choosing one ETF to own and you have
to own it for next 20 years, I gotta give
[822]
it to Q 'cause you're getting a much broader
exposure and it's gonna ride out the cycles
[826]
much better.
[827]
So ARK with my asterisk in standard form.
[831]
- All right, very good.
[832]
Well, the judges have spoke and according
to my battle score card, this is a split decision
[839]
between QQQ and ARK.
[841]
It was really the only place our judges agreed
on was pretty much performance and cost, but
[850]
the other categories from exposure strategy
to mystery, and then the overall winner was
[855]
a split decision.
[857]
And I really enjoyed today's program nonetheless,
even though I hate split decisions.
[861]
'Cause as I've said to you before, I always
like to see an ETF get beat up, but that's
[866]
just me.
[868]
Some things though that I wanna point out
for today's program, I guess what you might
[871]
say key takeaways.
[873]
First, indexing wins most of the time, but
not all the time.
[877]
Next, to outperform major stock indexes, you
gotta be radically different than the index.
[883]
That usually means concentrating risk in just
a few better performing stocks, which is a
[890]
lot said than done.
[892]
And then finally, certain leverage ETFs linked
to major stock indexes like the NASDAQ 100
[898]
as Dave pointed out, have produced even better
returns versus stock-picking funds.
[903]
So maybe that's the road to getting your market
out-performance.
[909]
So I don't know about you, but I enjoyed again
today's epic battle between QQQ and ARK, and
[914]
a huge thanks to our judges, Dave and Mike
for doing such a great job as always.
[920]
So what ETF battles would you like to see
in our next episode?
[923]
Hit us up on our YouTube comment section.
[926]
Give us your ticker symbols.
[927]
You can also find us on Twitter @etfguide
is where you find us on Twitter.
[933]
And until we meet next time, watch the battle
before you invest right here on ETFguide TV.
Most Recent Videos:
You can go back to the homepage right here: Homepage