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SCHB vs. ARKK: What’s The Difference?

The Schwab U.S. Broad Market ETF (SCHB) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. SCHB is a Schwab ETFs Large Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between SCHB and ARKK? And which fund is better?

The expense ratio of SCHB is 0.72 percentage points lower than ARKK’s (0.03% vs. 0.75%). SCHB also has a lower exposure to the technology sector and a higher standard deviation. Overall, SCHB has provided lower returns than ARKK over the past 5 years.

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

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Summary

SCHBARKK
NameSchwab U.S. Broad Market ETFARK Innovation ETF
CategoryLarge BlendMid-Cap Growth
IssuerSchwab ETFsARK ETF Trust
AUM21.44B25.52B
Avg. Return14.43%55.45%
Div. Yield1.39%0.0%
Expense Ratio0.03%0.75%

The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.

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%.

SCHB’s dividend yield is 1.39% higher than that of ARKK (1.39% vs. 0.0%). Also, SCHB yielded on average 41.02% less per year over the past decade (14.43% vs. 55.45%). The expense ratio of SCHB is 0.72 percentage points lower than ARKK’s (0.03% vs. 0.75%).

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Fund Composition

Industry Exposure

SCHB vs. ARKK - Industry Exposure

SCHBARKK
Technology24.15%30.5%
Industrials9.29%2.11%
Energy2.78%0.0%
Communication Services10.52%25.01%
Utilities2.32%0.0%
Healthcare13.37%29.47%
Consumer Defensive5.76%0.93%
Real Estate3.58%0.51%
Financial Services13.88%0.04%
Consumer Cyclical11.9%11.42%
Basic Materials2.45%0.0%

The Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.

SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.

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%.

SCHB is 6.35% less exposed to the Technology sector than ARKK (24.15% vs 30.5%). SCHB’s exposure to Financial Services and Healthcare stocks is 13.84% higher and 16.10% lower respectively (13.88% vs. 0.04% and 13.37% vs. 29.47%). In total, Basic Materials, Energy, and Real Estate also make up 8.30% more of the fund’s holdings compared to ARKK (8.81% vs. 0.51%).

Holdings

SCHB - Holdings

SCHB HoldingsWeight
Apple Inc4.86%
Microsoft Corp4.61%
Amazon.com Inc3.33%
Facebook Inc A1.88%
Alphabet Inc A1.66%
Alphabet Inc Class C1.61%
Berkshire Hathaway Inc Class B1.19%
Tesla Inc1.18%
NVIDIA Corp1.13%
JPMorgan Chase & Co1.06%

SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.

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

SCHBARKK
Mean Return1.230
R-squared99.330
Std. Deviation14.120
Alpha-0.580
Beta1.040
Sharpe Ratio10
Treynor Ratio13.580

The Schwab U.S. Broad Market ETF (SCHB) has a Mean Return of 1.23 with a Sharpe Ratio of 1 and a R-squared of 99.33. Its Treynor Ratio is 13.58 while SCHB’s Alpha is -0.58. Furthermore, the fund has a Beta of 1.04 and a Standard Deviation of 14.12.

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

SCHB’s Mean Return is 1.23 points higher than that of ARKK and its R-squared is 99.33 points higher. With a Standard Deviation of 14.12, SCHB is slightly more volatile than ARKK. The Alpha and Beta of SCHB are 0.58 points lower and 1.04 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

SCHB vs. ARKK - Annual Returns

YearSCHBARKK
202020.77%152.52%
201930.94%35.73%
2018-5.25%3.58%
201721.18%87.38%
201612.56%-1.96%
20150.45%3.76%
201412.67%0.0%
201333.37%0.0%
201216.22%0.0%
20111.4%0.0%
201017.1%0.0%

SCHB had its best year in 2013 with an annual return of 33.37%. SCHB’s worst year over the past decade yielded -5.25% and occurred in 2018. In most years the Schwab U.S. Broad Market ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.67%, 16.22%, and 17.1% 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

SCHB vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHB$10,000$20,43714.43%
ARKK$10,000$65,21855.45%

A $10,000 investment in SCHB would have resulted in a final balance of $20,437. This is a profit of $10,437 over 5 years and amounts to a compound annual growth rate (CAGR) of 14.43%.

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%.

SCHB’s CAGR is 41.02 percentage points lower than that of ARKK and as a result, would have yielded $44,781 less on a $10,000 investment. Thus, SCHB performed worse than ARKK by 41.02% annually.


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