Differences and Similarities: Ark Next Generation Internet ETF versus Ark Innovation ETF

Cathie Wood's Ark Invest offers investors a range of Exchange-Traded Funds (ETFs) focused on the latest technology trends such as Artificial Intelligence (AI), robotics, and cloud computing. Unlike many other ETFs, these are actively managed funds aiming to outperform a benchmark index over time. Among the most popular are the Ark Innovation ETF (NYSEMKT: ARKK) and the Ark Next Generation Internet ETF (NYSEMKT: ARKW). While both are tech-oriented and even have significant overlaps in their top holdings, there are some key differences to consider before making an investment decision. The main difference lies in their investment objectives. The Ark Innovation ETF has a broader focus and invests in companies engaged in "disruptive innovation." The Ark Next Generation Internet ETF also focuses on disruptors but with a clear emphasis on the internet. This includes cloud infrastructure, mobile internet, online and mobile payments, AI, the Internet of Things, and more. These differences are reflected in the top holdings. The Ark Next Generation Internet ETF's top investment is a Bitcoin ETF (internet-based payments). Additionally, it holds shares in Meta Platforms (social media), indicating a clear internet focus. On the other hand, the Ark Innovation ETF holds shares in the genetics company CRISPR Therapeutics, a disruptive health innovator that does not obviously relate to internet technology. Shopify is another top-10 position found only in the Ark Innovation ETF. Beyond the top-10 holdings, there are significant differences in specialization. Another difference lies in costs. The Ark Innovation ETF has an expense ratio of 0.75%, meaning that $7.50 per $1,000 in assets are charged annually as management fees. In contrast, the Ark Next Generation Internet ETF has an expense ratio of 0.88%. Generally, specialized ETFs are more expensive, but this seemingly small cost deviation can make a significant difference in returns over time. There is no clear winner here. If one believes in Cathie Wood's ability to identify disruptive winners, the Ark Innovation ETF might be the better choice, as it is more cost-effective and offers a broader selection of companies. However, for those specifically looking to invest in the next phase of internet innovation, the Ark Next Generation Internet ETF could be a valuable addition to the portfolio.