ARKK vs. VHT: What’s The Difference?

The ARK Innovation ETF (ARKK) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and VHT is a Vanguard Health fund. So, what’s the difference between ARKK and VHT? And which fund is better?

The expense ratio of ARKK is 0.65 percentage points higher than VHT’s (0.75% vs. 0.1%). ARKK also has a higher exposure to the technology sector and a lower standard deviation. Overall, ARKK has provided higher returns than VHT over the past 5 years.

In this article, we’ll compare ARKK vs. VHT. We’ll look at industry exposure and holdings, as well as at their performance and risk metrics. Moreover, I’ll also discuss ARKK’s and VHT’s annual returns, portfolio growth, and fund composition and examine how these affect their overall returns.

Summary

ARKK VHT
Name ARK Innovation ETF Vanguard Health Care Index Fund ETF Shares
Category Mid-Cap Growth Health
Issuer ARK ETF Trust Vanguard
AUM 25.52B 17.94B
Avg. Return 55.45% 16.04%
Div. Yield 0.0% 1.15%
Expense Ratio 0.75% 0.1%

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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

ARKK’s dividend yield is 1.15% lower than that of VHT (0.0% vs. 1.15%). Also, ARKK yielded on average 39.41% more per year over the past decade (55.45% vs. 16.04%). The expense ratio of ARKK is 0.65 percentage points higher than VHT’s (0.75% vs. 0.1%).

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Fund Composition

Industry Exposure

ARKK vs. VHT - Industry Exposure

ARKK VHT
Technology 30.5% 0.05%
Industrials 2.11% 0.05%
Energy 0.0% 0.0%
Communication Services 25.01% 0.0%
Utilities 0.0% 0.0%
Healthcare 29.47% 99.57%
Consumer Defensive 0.93% 0.0%
Real Estate 0.51% 0.0%
Financial Services 0.04% 0.02%
Consumer Cyclical 11.42% 0.0%
Basic Materials 0.0% 0.31%

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 Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

ARKK is 30.45% more exposed to the Technology sector than VHT (30.5% vs 0.05%). ARKK’s exposure to Healthcare and Communication Services stocks is 70.10% lower and 25.01% higher respectively (29.47% vs. 99.57% and 25.01% vs. 0.0%). In total, Utilities, Energy, and Financial Services also make up 0.02% more of the fund’s holdings compared to VHT (0.04% vs. 0.02%).

Holdings

ARKK - 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%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

ARKK VHT
Mean Return 0 1.33
R-squared 0 59.86
Std. Deviation 0 13.58
Alpha 0 7.99
Beta 0 0.75
Sharpe Ratio 0 1.13
Treynor Ratio 0 20.74

The ARK Innovation ETF (ARKK) has a Mean Return of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while ARKK’s Alpha is 0. Furthermore, the fund has a Beta of 0 and a Sharpe Ratio of 0.

The Vanguard Health Care Index Fund ETF Shares (VHT) has a R-squared of 59.86 with a Mean Return of 1.33 and a Treynor Ratio of 20.74. Its Alpha is 7.99 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Beta of 0.75.

ARKK’s Mean Return is 1.33 points lower than that of VHT and its R-squared is 59.86 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than VHT. The Alpha and Beta of ARKK are 7.99 points lower and 0.75 points lower than VHT’s Alpha and Beta.

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Performance

Annual Returns

ARKK vs. VHT - Annual Returns

Year ARKK VHT
2020 152.52% 18.21%
2019 35.73% 21.97%
2018 3.58% 5.55%
2017 87.38% 23.34%
2016 -1.96% -3.33%
2015 3.76% 7.22%
2014 0.0% 25.38%
2013 0.0% 42.67%
2012 0.0% 19.1%
2011 0.0% 10.57%
2010 0.0% 5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

ARKK vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ARKK $10,000 $65,218 55.45%
VHT $10,000 $18,145 16.04%

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 VHT, the end total would have been $18,145. This equates to a $8,145 profit over 5 years and a compound annual growth rate (CAGR) of 16.04%.

ARKK’s CAGR is 39.41 percentage points higher than that of VHT and as a result, would have yielded $47,073 more on a $10,000 investment. Thus, ARKK outperformed VHT by 39.41% annually.


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