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VGT vs. ARKK: What’s The Difference?

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

The expense ratio of VGT is 0.65 percentage points lower than ARKK’s (0.1% vs. 0.75%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided lower returns than ARKK over the past ten years.

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

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Summary

VGTARKK
NameVanguard Information Technology Index Fund ETF SharesARK Innovation ETF
CategoryTechnologyMid-Cap Growth
IssuerVanguardARK ETF Trust
AUM54.13B25.52B
Avg. Return20.84%55.45%
Div. Yield0.66%0.0%
Expense Ratio0.1%0.75%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

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%.

VGT’s dividend yield is 0.66% higher than that of ARKK (0.66% vs. 0.0%). Also, VGT yielded on average 34.61% less per year over the past decade (20.84% vs. 55.45%). The expense ratio of VGT is 0.65 percentage points lower than ARKK’s (0.1% vs. 0.75%).

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Fund Composition

Industry Exposure

VGT vs. ARKK - Industry Exposure

VGTARKK
Technology88.89%30.5%
Industrials1.67%2.11%
Energy0.0%0.0%
Communication Services0.61%25.01%
Utilities0.0%0.0%
Healthcare0.0%29.47%
Consumer Defensive0.0%0.93%
Real Estate0.0%0.51%
Financial Services8.83%0.04%
Consumer Cyclical0.0%11.42%
Basic Materials0.0%0.0%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

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%.

VGT is 58.39% more exposed to the Technology sector than ARKK (88.89% vs 30.5%). VGT’s exposure to Financial Services and Industrials stocks is 8.79% higher and 0.44% lower respectively (8.83% vs. 0.04% and 1.67% vs. 2.11%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 12.86% less of the fund’s holdings compared to ARKK (0.00% vs. 12.86%).

Holdings

VGT - Holdings

VGT HoldingsWeight
Apple Inc19.58%
Microsoft Corp16.53%
NVIDIA Corp4.22%
Visa Inc Class A3.16%
PayPal Holdings Inc2.76%
Mastercard Inc Class A2.76%
Adobe Inc2.39%
Intel Corp1.94%
Salesforce.com Inc1.91%
Cisco Systems Inc1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

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

VGTARKK
Mean Return1.760
R-squared74.840
Std. Deviation16.610
Alpha10.410
Beta1.020
Sharpe Ratio1.230
Treynor Ratio20.550

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Standard Deviation of 16.61 with a Sharpe Ratio of 1.23 and a Beta of 1.02. Its Mean Return is 1.76 while VGT’s Treynor Ratio is 20.55. Furthermore, the fund has a R-squared of 74.84 and a Alpha of 10.41.

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

VGT’s Mean Return is 1.76 points higher than that of ARKK and its R-squared is 74.84 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than ARKK. The Alpha and Beta of VGT are 10.41 points higher and 1.02 points higher than ARKK’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. ARKK - Annual Returns

YearVGTARKK
202045.94%152.52%
201948.68%35.73%
20182.52%3.58%
201737.07%87.38%
201613.73%-1.96%
20155.02%3.76%
201418.01%0.0%
201330.91%0.0%
201214.05%0.0%
20110.52%0.0%
201012.74%0.0%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% 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

VGT vs. ARKK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$34,67720.84%
ARKK$10,000$65,21855.45%

A $10,000 investment in VGT would have resulted in a final balance of $34,677. This is a profit of $24,677 over 5 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

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%.

VGT’s CAGR is 34.61 percentage points lower than that of ARKK and as a result, would have yielded $30,541 less on a $10,000 investment. Thus, VGT performed worse than ARKK by 34.61% annually.


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