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IWM vs. ARKK: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between IWM and ARKK? And which fund is better?

The expense ratio of IWM is 0.56 percentage points lower than ARKK’s (0.19% vs. 0.75%). IWM also has a lower exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided lower returns than ARKK over the past ten years.

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

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Summary

IWMARKK
NameiShares Russell 2000 ETFARK Innovation ETF
CategorySmall BlendMid-Cap Growth
IssueriSharesARK ETF Trust
AUM66.48B25.52B
Avg. Return13.52%55.45%
Div. Yield0.86%0.0%
Expense Ratio0.19%0.75%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

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%.

IWM’s dividend yield is 0.86% higher than that of ARKK (0.86% vs. 0.0%). Also, IWM yielded on average 41.93% less per year over the past decade (13.52% vs. 55.45%). The expense ratio of IWM is 0.56 percentage points lower than ARKK’s (0.19% vs. 0.75%).

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Fund Composition

Industry Exposure

IWM vs. ARKK - Industry Exposure

IWMARKK
Technology14.21%30.5%
Industrials14.78%2.11%
Energy3.74%0.0%
Communication Services3.79%25.01%
Utilities2.44%0.0%
Healthcare20.3%29.47%
Consumer Defensive3.65%0.93%
Real Estate8.59%0.51%
Financial Services13.76%0.04%
Consumer Cyclical10.99%11.42%
Basic Materials3.74%0.0%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

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%.

IWM is 9.17% less exposed to the Healthcare sector than ARKK (20.3% vs 29.47%). IWM’s exposure to Industrials and Technology stocks is 12.67% higher and 16.29% lower respectively (14.78% vs. 2.11% and 14.21% vs. 30.5%). In total, Consumer Defensive, Basic Materials, and Energy also make up 10.20% more of the fund’s holdings compared to ARKK (11.13% vs. 0.93%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

ARKK - Holdings

ARKK HoldingsWeight
Tesla Inc9.56%
Roku Inc Class A6.48%
Teladoc Health Inc5.76%
Square Inc A4.37%
Zoom Video Communications Inc4.36%
Shopify Inc A4.27%
Spotify Technology SA3.68%
Twilio Inc A3.66%
Coinbase Global Inc Ordinary Shares – Class A3.65%
Unity Software Inc Ordinary Shares3.41%

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%.

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Risk Analysis

IWMARKK
Mean Return1.120
R-squared77.730
Std. Deviation18.870
Alpha-5.120
Beta1.230
Sharpe Ratio0.680
Treynor Ratio9.560

The iShares Russell 2000 ETF (IWM) has a Beta of 1.23 with a Treynor Ratio of 9.56 and a Sharpe Ratio of 0.68. Its Alpha is -5.12 while IWM’s Mean Return is 1.12. Furthermore, the fund has a Standard Deviation of 18.87 and a R-squared of 77.73.

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

IWM’s Mean Return is 1.12 points higher than that of ARKK and its R-squared is 77.73 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than ARKK. The Alpha and Beta of IWM are 5.12 points lower and 1.23 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. ARKK - Annual Returns

YearIWMARKK
202019.89%152.52%
201925.42%35.73%
2018-11.02%3.58%
201714.66%87.38%
201621.36%-1.96%
2015-4.33%3.76%
20144.94%0.0%
201338.85%0.0%
201216.39%0.0%
2011-4.19%0.0%
201026.76%0.0%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

IWM vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$18,61713.52%
ARKK$10,000$65,21855.45%

A $10,000 investment in IWM would have resulted in a final balance of $18,617. This is a profit of $8,617 over 5 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

IWM’s CAGR is 41.93 percentage points lower than that of ARKK and as a result, would have yielded $46,601 less on a $10,000 investment. Thus, IWM performed worse than ARKK by 41.93% annually.


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