USMV vs. ARKK: What’s The Difference?

The iShares MSCI USA Min Vol Factor ETF (USMV) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between USMV and ARKK? And which fund is better?

The expense ratio of USMV is 0.60 percentage points lower than ARKK’s (0.15% vs. 0.75%). USMV also has a lower exposure to the technology sector and a lower standard deviation. Overall, USMV has provided lower returns than ARKK over the past 5 years.

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

Summary

USMV ARKK
Name iShares MSCI USA Min Vol Factor ETF ARK Innovation ETF
Category Large Blend Mid-Cap Growth
Issuer iShares ARK ETF Trust
AUM 27.6B 25.52B
Avg. Return 13.89% 55.45%
Div. Yield 1.5% 0.0%
Expense Ratio 0.15% 0.75%

The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

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%.

USMV’s dividend yield is 1.50% higher than that of ARKK (1.5% vs. 0.0%). Also, USMV yielded on average 41.56% less per year over the past decade (13.89% vs. 55.45%). The expense ratio of USMV is 0.60 percentage points lower than ARKK’s (0.15% vs. 0.75%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

USMV vs. ARKK - Industry Exposure

USMV ARKK
Technology 20.53% 30.5%
Industrials 10.51% 2.11%
Energy 0.21% 0.0%
Communication Services 11.03% 25.01%
Utilities 6.93% 0.0%
Healthcare 18.42% 29.47%
Consumer Defensive 12.82% 0.93%
Real Estate 2.73% 0.51%
Financial Services 9.65% 0.04%
Consumer Cyclical 5.53% 11.42%
Basic Materials 1.65% 0.0%

The iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

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%.

USMV is 9.97% less exposed to the Technology sector than ARKK (20.53% vs 30.5%). USMV’s exposure to Healthcare and Consumer Defensive stocks is 11.05% lower and 11.89% higher respectively (18.42% vs. 29.47% and 12.82% vs. 0.93%). In total, Basic Materials, Real Estate, and Consumer Cyclical also make up 2.02% less of the fund’s holdings compared to ARKK (9.91% vs. 11.93%).

Holdings

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

USMV ARKK
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Alpha of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Standard Deviation is 0 while USMV’s Mean Return is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.

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

USMV’s Mean Return is 0.00 points lower than that of ARKK and its R-squared is 0.00 points lower. With a Standard Deviation of 0, USMV is slightly less volatile than ARKK. The Alpha and Beta of USMV are 0.00 points lower and 0.00 points lower than ARKK’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

USMV vs. ARKK - Annual Returns

Year USMV ARKK
2020 5.6% 152.52%
2019 27.77% 35.73%
2018 1.36% 3.58%
2017 18.97% 87.38%
2016 10.5% -1.96%
2015 5.5% 3.76%
2014 16.34% 0.0%
2013 25.11% 0.0%
2012 11.04% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% 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

USMV vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
USMV $10,000 $17,978 13.89%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in USMV would have resulted in a final balance of $17,978. This is a profit of $7,978 over 5 years and amounts to a compound annual growth rate (CAGR) of 13.89%.

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%.

USMV’s CAGR is 41.56 percentage points lower than that of ARKK and as a result, would have yielded $47,240 less on a $10,000 investment. Thus, USMV performed worse than ARKK by 41.56% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply