The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between VBR and ARKK? And which fund is better?
The expense ratio of VBR is 0.68 percentage points lower than ARKK’s (0.07% vs. 0.75%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than ARKK over the past 5 years.
In this article, we’ll compare VBR vs. ARKK. We’ll look at risk metrics and annual returns, as well as at their industry exposure and holdings. Moreover, I’ll also discuss VBR’s and ARKK’s fund composition, portfolio growth, and performance and examine how these affect their overall returns.
Summary
| VBR | ARKK | |
| Name | Vanguard Small-Cap Value Index Fund ETF Shares | ARK Innovation ETF |
| Category | Small Value | Mid-Cap Growth |
| Issuer | Vanguard | ARK ETF Trust |
| AUM | 48.08B | 25.52B |
| Avg. Return | 12.28% | 55.45% |
| Div. Yield | 1.6% | 0.0% |
| Expense Ratio | 0.07% | 0.75% |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
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%.
VBR’s dividend yield is 1.60% higher than that of ARKK (1.6% vs. 0.0%). Also, VBR yielded on average 43.17% less per year over the past decade (12.28% vs. 55.45%). The expense ratio of VBR is 0.68 percentage points lower than ARKK’s (0.07% vs. 0.75%).
Fund Composition
Industry Exposure
| VBR | ARKK | |
| Technology | 8.39% | 30.5% |
| Industrials | 18.44% | 2.11% |
| Energy | 5.15% | 0.0% |
| Communication Services | 1.77% | 25.01% |
| Utilities | 3.65% | 0.0% |
| Healthcare | 7.16% | 29.47% |
| Consumer Defensive | 4.36% | 0.93% |
| Real Estate | 10.92% | 0.51% |
| Financial Services | 20.04% | 0.04% |
| Consumer Cyclical | 13.82% | 11.42% |
| Basic Materials | 6.31% | 0.0% |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.
VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.
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%.
VBR is 20.00% more exposed to the Financial Services sector than ARKK (20.04% vs 0.04%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 16.33% higher and 2.40% higher respectively (18.44% vs. 2.11% and 13.82% vs. 11.42%). In total, Utilities, Consumer Defensive, and Energy also make up 12.23% more of the fund’s holdings compared to ARKK (13.16% vs. 0.93%).
Holdings
| VBR Holdings | Weight |
| Diamondback Energy Inc | 0.55% |
| VICI Properties Inc Ordinary Shares | 0.54% |
| IDEX Corp | 0.54% |
| Nuance Communications Inc | 0.5% |
| Molina Healthcare Inc | 0.48% |
| Signature Bank | 0.46% |
| Novavax Inc | 0.44% |
| Howmet Aerospace Inc | 0.44% |
| Apollo Global Management Inc Class A | 0.42% |
| Brown & Brown Inc | 0.41% |
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
| 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
| VBR | ARKK | |
| Mean Return | 1.08 | 0 |
| R-squared | 82.2 | 0 |
| Std. Deviation | 18.37 | 0 |
| Alpha | -5.09 | 0 |
| Beta | 1.23 | 0 |
| Sharpe Ratio | 0.67 | 0 |
| Treynor Ratio | 9.15 | 0 |
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Sharpe Ratio of 0.67 with a R-squared of 82.2 and a Beta of 1.23. Its Standard Deviation is 18.37 while VBR’s Alpha is -5.09. Furthermore, the fund has a Treynor Ratio of 9.15 and a Mean Return of 1.08.
The ARK Innovation ETF (ARKK) has a R-squared of 0 with a Standard Deviation of 0 and a Sharpe Ratio 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.
VBR’s Mean Return is 1.08 points higher than that of ARKK and its R-squared is 82.20 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than ARKK. The Alpha and Beta of VBR are 5.09 points lower and 1.23 points higher than ARKK’s Alpha and Beta.
Performance
Annual Returns
| Year | VBR | ARKK |
| 2020 | 5.82% | 152.52% |
| 2019 | 22.76% | 35.73% |
| 2018 | -12.22% | 3.58% |
| 2017 | 11.79% | 87.38% |
| 2016 | 24.8% | -1.96% |
| 2015 | -4.67% | 3.76% |
| 2014 | 10.55% | 0.0% |
| 2013 | 36.57% | 0.0% |
| 2012 | 18.78% | 0.0% |
| 2011 | -4.05% | 0.0% |
| 2010 | 24.97% | 0.0% |
VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% 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 |
| VBR | $10,000 | $15,908 | 12.28% |
| ARKK | $10,000 | $65,218 | 55.45% |
A $10,000 investment in VBR would have resulted in a final balance of $15,908. This is a profit of $5,908 over 5 years and amounts to a compound annual growth rate (CAGR) of 12.28%.
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%.
VBR’s CAGR is 43.17 percentage points lower than that of ARKK and as a result, would have yielded $49,310 less on a $10,000 investment. Thus, VBR performed worse than ARKK by 43.17% annually.
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