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
| VB | ARKK | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | ARK Innovation ETF |
| Category | Small Blend | Mid-Cap Growth |
| Issuer | Vanguard | ARK ETF Trust |
| AUM | 137.72B | 25.52B |
| Avg. Return | 14.25% | 55.45% |
| Div. Yield | 1.14% | 0.0% |
| Expense Ratio | 0.05% | 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 | ARKK | |
| Technology | 16.85% | 30.5% |
| Industrials | 16.11% | 2.11% |
| Energy | 3.67% | 0.0% |
| Communication Services | 2.4% | 25.01% |
| Utilities | 2.19% | 0.0% |
| Healthcare | 14.34% | 29.47% |
| Consumer Defensive | 4.14% | 0.93% |
| Real Estate | 9.56% | 0.51% |
| Financial Services | 13.06% | 0.04% |
| Consumer Cyclical | 13.03% | 11.42% |
| Basic Materials | 4.63% | 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 | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
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 | 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%.
Risk Analysis
| VB | ARKK | |
| Mean Return | 1.15 | 0 |
| R-squared | 85.03 | 0 |
| Std. Deviation | 17.82 | 0 |
| Alpha | -4.02 | 0 |
| Beta | 1.21 | 0 |
| Sharpe Ratio | 0.74 | 0 |
| Treynor Ratio | 10.15 | 0 |
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
| Year | VB | ARKK |
| 2020 | 19.08% | 152.52% |
| 2019 | 27.37% | 35.73% |
| 2018 | -9.3% | 3.58% |
| 2017 | 16.24% | 87.38% |
| 2016 | 18.31% | -1.96% |
| 2015 | -3.65% | 3.76% |
| 2014 | 7.51% | 0.0% |
| 2013 | 37.8% | 0.0% |
| 2012 | 18.22% | 0.0% |
| 2011 | -2.68% | 0.0% |
| 2010 | 27.89% | 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
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $18,918 | 14.25% |
| ARKK | $10,000 | $65,218 | 55.45% |
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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