The ARK Innovation ETF (ARKK) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between ARKK and SCHA? And which fund is better?
The expense ratio of ARKK is 0.71 percentage points higher than SCHA’s (0.75% vs. 0.04%). ARKK also has a higher exposure to the technology sector and a lower standard deviation. Overall, ARKK has provided higher returns than SCHA over the past 5 years.
In this article, we’ll compare ARKK vs. SCHA. We’ll look at industry exposure and fund composition, as well as at their performance and holdings. Moreover, I’ll also discuss ARKK’s and SCHA’s portfolio growth, annual returns, and risk metrics and examine how these affect their overall returns.
Summary
| ARKK | SCHA | |
| Name | ARK Innovation ETF | Schwab U.S. Small-Cap ETF |
| Category | Mid-Cap Growth | Small Blend |
| Issuer | ARK ETF Trust | Schwab ETFs |
| AUM | 25.52B | 16.51B |
| Avg. Return | 55.45% | 12.62% |
| Div. Yield | 0.0% | 0.98% |
| Expense Ratio | 0.75% | 0.04% |
The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.
The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
ARKK’s dividend yield is 0.98% lower than that of SCHA (0.0% vs. 0.98%). Also, ARKK yielded on average 42.83% more per year over the past decade (55.45% vs. 12.62%). The expense ratio of ARKK is 0.71 percentage points higher than SCHA’s (0.75% vs. 0.04%).
Fund Composition
Industry Exposure
| ARKK | SCHA | |
| Technology | 30.5% | 14.91% |
| Industrials | 2.11% | 15.37% |
| Energy | 0.0% | 3.35% |
| Communication Services | 25.01% | 3.5% |
| Utilities | 0.0% | 1.83% |
| Healthcare | 29.47% | 16.5% |
| Consumer Defensive | 0.93% | 3.75% |
| Real Estate | 0.51% | 7.83% |
| Financial Services | 0.04% | 14.49% |
| Consumer Cyclical | 11.42% | 14.48% |
| Basic Materials | 0.0% | 3.98% |
The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.
ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.
The Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
ARKK is 15.59% more exposed to the Technology sector than SCHA (30.5% vs 14.91%). ARKK’s exposure to Healthcare and Communication Services stocks is 12.97% higher and 21.51% higher respectively (29.47% vs. 16.5% and 25.01% vs. 3.5%). In total, Utilities, Energy, and Financial Services also make up 19.63% less of the fund’s holdings compared to SCHA (0.04% vs. 19.67%).
Holdings
| ARKK Holdings | Weight |
| Tesla Inc | 9.56% |
| Roku Inc Class A | 6.48% |
| Teladoc Health Inc | 5.76% |
| Square Inc A | 4.37% |
| Zoom Video Communications Inc | 4.36% |
| Shopify Inc A | 4.27% |
| Spotify Technology SA | 3.68% |
| Twilio Inc A | 3.66% |
| Coinbase Global Inc Ordinary Shares – Class A | 3.65% |
| Unity Software Inc Ordinary Shares | 3.41% |
ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.
Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.
| SCHA Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.67% |
| Caesars Entertainment Inc | 0.51% |
| Cloudflare Inc | 0.48% |
| NovoCure Ltd | 0.45% |
| Plug Power Inc | 0.41% |
| 10x Genomics Inc Ordinary Shares – Class A | 0.34% |
| GameStop Corp Class A | 0.28% |
| RH | 0.27% |
| Penn National Gaming Inc | 0.27% |
| Axon Enterprise Inc | 0.27% |
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
Risk Analysis
| ARKK | SCHA | |
| Mean Return | 0 | 1.14 |
| R-squared | 0 | 82.26 |
| Std. Deviation | 0 | 18.68 |
| Alpha | 0 | -4.65 |
| Beta | 0 | 1.25 |
| Sharpe Ratio | 0 | 0.7 |
| Treynor Ratio | 0 | 9.62 |
The ARK Innovation ETF (ARKK) has a Alpha of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Beta is 0 while ARKK’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.
The Schwab U.S. Small-Cap ETF (SCHA) has a Treynor Ratio of 9.62 with a R-squared of 82.26 and a Standard Deviation of 18.68. Its Sharpe Ratio is 0.7 while SCHA’s Alpha is -4.65. Furthermore, the fund has a Beta of 1.25 and a Mean Return of 1.14.
ARKK’s Mean Return is 1.14 points lower than that of SCHA and its R-squared is 82.26 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than SCHA. The Alpha and Beta of ARKK are 4.65 points higher and 1.25 points lower than SCHA’s Alpha and Beta.
Performance
Annual Returns
| Year | ARKK | SCHA |
| 2020 | 152.52% | 19.35% |
| 2019 | 35.73% | 26.54% |
| 2018 | 3.58% | -11.75% |
| 2017 | 87.38% | 15.04% |
| 2016 | -1.96% | 19.88% |
| 2015 | 3.76% | -4.24% |
| 2014 | 0.0% | 6.53% |
| 2013 | 0.0% | 39.59% |
| 2012 | 0.0% | 18.24% |
| 2011 | 0.0% | -2.95% |
| 2010 | 0.0% | 28.31% |
ARKK had its best year in 2020 with an annual return of 152.52%. ARKK’s worst year over the past decade yielded -1.96% and occurred in 2016. In most years the ARK Innovation ETF provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 3.58% respectively.
The year 2013 was the strongest year for SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| ARKK | $10,000 | $65,218 | 55.45% |
| SCHA | $10,000 | $18,380 | 12.62% |
A $10,000 investment in ARKK would have resulted in a final balance of $65,218. This is a profit of $55,218 over 5 years and amounts to a compound annual growth rate (CAGR) of 55.45%.
With a $10,000 investment in SCHA, the end total would have been $18,380. This equates to a $8,380 profit over 5 years and a compound annual growth rate (CAGR) of 12.62%.
ARKK’s CAGR is 42.83 percentage points higher than that of SCHA and as a result, would have yielded $46,838 more on a $10,000 investment. Thus, ARKK outperformed SCHA by 42.83% annually.
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