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VB vs. ARKK: What’s The Difference?

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

The expense ratio of VB is 0.70 percentage points lower than ARKK’s (0.05% vs. 0.75%). VB also has a lower exposure to the technology sector and a higher standard deviation. Overall, VB has provided lower returns than ARKK over the past ten years.

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

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Summary

VBARKK
NameVanguard Small-Cap Index Fund ETF SharesARK Innovation ETF
CategorySmall BlendMid-Cap Growth
IssuerVanguardARK ETF Trust
AUM137.72B25.52B
Avg. Return14.25%55.45%
Div. Yield1.14%0.0%
Expense Ratio0.05%0.75%

The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.

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%.

VB’s dividend yield is 1.14% higher than that of ARKK (1.14% vs. 0.0%). Also, VB yielded on average 41.20% less per year over the past decade (14.25% vs. 55.45%). The expense ratio of VB is 0.70 percentage points lower than ARKK’s (0.05% vs. 0.75%).

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Fund Composition

Industry Exposure

VB vs. ARKK - Industry Exposure

VBARKK
Technology16.85%30.5%
Industrials16.11%2.11%
Energy3.67%0.0%
Communication Services2.4%25.01%
Utilities2.19%0.0%
Healthcare14.34%29.47%
Consumer Defensive4.14%0.93%
Real Estate9.56%0.51%
Financial Services13.06%0.04%
Consumer Cyclical13.03%11.42%
Basic Materials4.63%0.0%

The Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.

VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.

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%.

VB is 13.65% less exposed to the Technology sector than ARKK (16.85% vs 30.5%). VB’s exposure to Industrials and Healthcare stocks is 14.00% higher and 15.13% lower respectively (16.11% vs. 2.11% and 14.34% vs. 29.47%). In total, Communication Services, Energy, and Consumer Defensive also make up 15.73% less of the fund’s holdings compared to ARKK (10.21% vs. 25.94%).

Holdings

VB - Holdings

VB HoldingsWeight
Charles River Laboratories International Inc0.34%
Pool Corp0.32%
Bio-Techne Corp0.32%
Avantor Inc0.32%
PerkinElmer Inc0.31%
Diamondback Energy Inc0.31%
VICI Properties Inc Ordinary Shares0.3%
IDEX Corp0.3%
Entegris Inc0.3%
Novavax Inc0.29%

VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.

Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.

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

VBARKK
Mean Return1.150
R-squared85.030
Std. Deviation17.820
Alpha-4.020
Beta1.210
Sharpe Ratio0.740
Treynor Ratio10.150

The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Sharpe Ratio of 0.74 with a Beta of 1.21 and a Treynor Ratio of 10.15. Its R-squared is 85.03 while VB’s Alpha is -4.02. Furthermore, the fund has a Standard Deviation of 17.82 and a Mean Return of 1.15.

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

VB’s Mean Return is 1.15 points higher than that of ARKK and its R-squared is 85.03 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than ARKK. The Alpha and Beta of VB are 4.02 points lower and 1.21 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

VB vs. ARKK - Annual Returns

YearVBARKK
202019.08%152.52%
201927.37%35.73%
2018-9.3%3.58%
201716.24%87.38%
201618.31%-1.96%
2015-3.65%3.76%
20147.51%0.0%
201337.8%0.0%
201218.22%0.0%
2011-2.68%0.0%
201027.89%0.0%

VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% 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

VB vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VB$10,000$18,91814.25%
ARKK$10,000$65,21855.45%

A $10,000 investment in VB would have resulted in a final balance of $18,918. This is a profit of $8,918 over 5 years and amounts to a compound annual growth rate (CAGR) of 14.25%.

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%.

VB’s CAGR is 41.20 percentage points lower than that of ARKK and as a result, would have yielded $46,300 less on a $10,000 investment. Thus, VB performed worse than ARKK by 41.20% annually.


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