VEA vs. ARKK: What’s The Difference?

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

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

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

Summary

VEA ARKK
Name Vanguard FTSE Developed Markets Index Fund ETF Shares ARK Innovation ETF
Category Foreign Large Blend Mid-Cap Growth
Issuer Vanguard ARK ETF Trust
AUM 157.48B 25.52B
Avg. Return 7.05% 55.45%
Div. Yield 2.49% 0.0%
Expense Ratio 0.05% 0.75%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.

VEA’s dividend yield is 2.49% higher than that of ARKK (2.49% vs. 0.0%). Also, VEA yielded on average 48.40% less per year over the past decade (7.05% vs. 55.45%). The expense ratio of VEA is 0.70 percentage points lower than ARKK’s (0.05% vs. 0.75%).

Fund Composition

Industry Exposure

VEA vs. ARKK - Industry Exposure

VEA ARKK
Technology 11.67% 30.5%
Industrials 15.47% 2.11%
Energy 4.17% 0.0%
Communication Services 5.41% 25.01%
Utilities 3.1% 0.0%
Healthcare 10.6% 29.47%
Consumer Defensive 8.61% 0.93%
Real Estate 4.04% 0.51%
Financial Services 17.39% 0.04%
Consumer Cyclical 11.31% 11.42%
Basic Materials 8.24% 0.0%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.

VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.

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%.

VEA is 17.35% more exposed to the Financial Services sector than ARKK (17.39% vs 0.04%). VEA’s exposure to Industrials and Technology stocks is 13.36% higher and 18.83% lower respectively (15.47% vs. 2.11% and 11.67% vs. 30.5%). In total, Real Estate, Energy, and Communication Services also make up 11.90% less of the fund’s holdings compared to ARKK (13.62% vs. 25.52%).

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
Samsung Electronics Co Ltd 1.4%
ASML Holding NV 1.16%
Roche Holding AG 1.1%
Toyota Motor Corp 0.92%
LVMH Moet Hennessy Louis Vuitton SE 0.84%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.

LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.

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%.

Performance

Annual Returns

VEA vs. ARKK - Annual Returns

Year VEA ARKK
2020 10.29% 152.52%
2019 22.08% 35.73%
2018 -14.47% 3.58%
2017 26.44% 87.38%
2016 2.51% -1.96%
2015 -0.21% 3.76%
2014 -5.71% 0.0%
2013 22.12% 0.0%
2012 18.6% 0.0%
2011 -12.57% 0.0%
2010 8.47% 0.0%

VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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

VEA vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $14,926 7.05%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in VEA would have resulted in a final balance of $14,926. This is a profit of $4,926 over 5 years and amounts to a compound annual growth rate (CAGR) of 7.05%.

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%.

VEA’s CAGR is 48.40 percentage points lower than that of ARKK and as a result, would have yielded $50,292 less on a $10,000 investment. Thus, VEA performed worse than ARKK by 48.40% annually.


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