Why the disdain for managed funds like ARKK that destroy total market funds?

[richard.h.gao]

ARKK up +12% today

[artpennypacker]

I cant even begin to wrap my head around what has happened with ARKK in the last 3 years, so with that I stay out like I assume most here do.

But maybe Wood knows a V shaped recovery is still on the menu.

I hope she's right.

[nisiprius]

...And ironically I saw on my homepage (MSN) an article titled (something to the effect of): "What expert investor Cathie Wood suggests investing in right now"...

I am completely cold to articles of this kind. It's a genre, but I don't get it. If you want the benefit of Cathie Wood's insights, just buy ARKK. If you want the benefit of Warren Buffett's insight, just buy BRK.B. You don't just get cryptic sound bites, with no details and no guidance in between, you get the full strategy, with no time lag between when they buy something and when you buy it.

Also, you should not even assume that they are speaking sincerely about their own real opinions! I don't know anything about Wood, but I was pleased to find my general suspicions confirmed in a book about Bill Gross:

One former Treasury official recalls Bill Gross appearing on CNBC five minutes before 1 P.M. one day in the early aughts, talking about how he saw no value in U.S. Treasury inflation-protected securities, known as TIPS—and then, at 1 P.M., Pimco entered a huge bid in the TIPS auction.

[stoptothink]

...And ironically I saw on my homepage (MSN) an article titled (something to the effect of): "What expert investor Cathie Wood suggests investing in right now"...

I am completely cold to articles of this kind. It's a genre, but I don't get it. If you want the benefit of Cathie Wood's insights, just buy ARKK. If you want the benefit of Warren Buffett's insight, just buy BRK.B. You don't just get cryptic sound bites, with no details and no guidance in between, you get the full strategy, with no time lag between when they buy something and when you buy it.

Also, you should not even assume that they are speaking sincerely about their own real opinions! I don't know anything about Wood, but I was pleased to find my general suspicions confirmed in a book about Bill Gross:

One former Treasury official recalls Bill Gross appearing on CNBC five minutes before 1 P.M. one day in the early aughts, talking about how he saw no value in U.S. Treasury inflation-protected securities, known as TIPS—and then, at 1 P.M., Pimco entered a huge bid in the TIPS auction.

I agree 100% and I assume the huge majority of those on this board would as well. But, this is the "investing information" that the vast majority of the public is reading.

[NotWhoYouThink]

Wow, I hadn't noticed the timing. The OP coincides almost exactly with the peak. Impressive

[asif408]

ARKK up +12% today

Great! Only 400% more to go to get back to even for those investors who jumped in around the time of the original post.

[arcticpineapplecorp.]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

[arcticpineapplecorp.]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

if the FIL didn't ask to see the tax returns of the day trading buddy, he's heard a fish tale. nothing more. you don't do your due diligence by believing what others say. You ask to see the receipts.

[arcticpineapplecorp.]

This is one of the big problems with speculating: "quitting while you're ahead" is not easy.

Almost by definition, the usual way to make a big score is to make risky investments that look bad to most investors. Having multiplied your money by ten, and then multiplying it by ten again (which ARKK almost did), the temptation to believe you must be a wizard and try again is almost irresistible. It was so easy to get to 10 and to 100, why stop there when 1000 seems easily within reach? The stocks you invested in looked bad to everyone but you, so people saying "quit now, the stocks you are in are obviously bad" isn't likely to convince you.

It's hard to hold onto speculative gains.

A colleague of mine in the 1970s had a story of "how I turned $2,500 into $2,500 on the commodities market." (He made and then lost $1 million.)

Jesse Livermore, who made a fortune by shorting stocks just before the crash in 1929, didn't keep his gains. He "made and lost" several fortunes, and finally, after a big loss, committed suicide.

"you gotta know when to hold em
know when to fold em
know when to walk away
and know when to run"
--The Gambler

[atdharris]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

[Grt2bOutdoors]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

Never try to catch a falling knife.

[arcticpineapplecorp.]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

[atdharris]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

[arcticpineapplecorp.]

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

so was it good to speculate or not?

if you got out Jan 31, 2001, pretty fun.

if you didn't and rode it down, not so much fun.

much lower risk adjusted returns for arkk than just owning the total market.

slow and steady wins the race.



source:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

[atdharris]

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

so was it good to speculate or not?

if you got out Jan 31, 2001, pretty fun.

if you didn't and rode it down, not so much fun.

much lower risk adjusted returns for arkk than just owning the total market.

slow and steady wins the race.



source:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

We don't know the end game with this fund. Anyone who used ARKK as a replacement for VTI obviously chose poorly, but my small investment in ARKK was never to replace index funds. It was for speculation. For less than 2% of my net worth, it wasn't a tremendous risk. Do I wish I sold it all off in 2021? Sure, but I didn't and I can't dwell on it.

[HomerJ]

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

Fair point.

However, old wisdom still rings true... "Slow and steady wins the race" was said by Aesop, what, 2,500 years ago?

Or you could go with Homer J. Simpson wisdom.

"After years of disappointment with get rich quick schemes, I know I'm gonna get rich with this scheme. And quick"

[Scott S]

Investing in ARKK and its sister funds was one of the best decisions of my life. After a year of having a professional job at the age of 23 and a decent amount of money, I decided to invest in all of Wood's funds at its height in in beginning of February 2021.

Welcome to the forums. You had me in the first couple of sentences, not gonna lie...

7. Step 7 would be investors pulling out too late after realizing this fund manager got lucky and that opportunity for insane gains was never possible. But if you adjust for Wood's losses, her main fund has posted inflows, which is absolutely incredible given how far it's fallen.

I guess her mental tricks of saying I'm innovation. I picked Tesla, I'm a genius and I will pick the next one has really worked on people. It was over $150 at one time and it looks like it will be below $40 tomorrow. When does the madness end and her investors cut their losses? It's certainly the most incredible destruction of wealth I've seen since I've starting following the markets that isn't a single stock (incredible not being a positive word). Will be interesting to see where this goes in the future and I will keeping following.

I think "buy the dip" has become a part of the zeitgeist, so there are more people out there to step in and try their luck when ARKK (or the market at large) has a "bad day." I have to wonder: does that provide a floor for the market that hasn't always been there, or does it just delay the inevitable?

[diabelli]

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

so was it good to speculate or not?

if you got out Jan 31, 2001, pretty fun.

if you didn't and rode it down, not so much fun.

much lower risk adjusted returns for arkk than just owning the total market.

slow and steady wins the race.



source:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

We don't know the end game with this fund. Anyone who used ARKK as a replacement for VTI obviously chose poorly, but my small investment in ARKK was never to replace index funds. It was for speculation. For less than 2% of my net worth, it wasn't a tremendous risk. Do I wish I sold it all off in 2021? Sure, but I didn't and I can't dwell on it.

I have also used the speculation-on-purpose, small part of my portfolio rationalization.
I did it moreso with cryptocurrency -- made about 17k of realized gains, then bought in more at the top and lost about 18k.
These small losses however, not to mention the opportunity cost of having not averaged into a broad index fund with the extra money, over time probably add up over decades to make the difference between a good investor and a mediocre one. A few thousand dollar loss because I was speculating for fun is a much larger deal after the theoretically missed compounding if it had been in VT or VTI etc for years. Not to mention the loss of valuable time spent reading all of the trash articles talking up the speculative funds, trying to time them, buying dips etc.

In a nutshell if I were to look at my overall return it's now underperforming the market, because I was speculating. Even if it feels like a small objective loss.

[arcticpineapplecorp.]

Guru Grades:



source:
https://www.cxoadvisory.com/gurus/

[SlowMovingInvestor]

I wrote in this thread a year back that one should consider putting a small portion of one's portfolio (2-3%) into speculative, high growth investments.

But I would not and did not invest in ARKK, I would rather invest in individual stocks after reading about their technology. It helps to keep me informed about the tech sector. I don't expect to do better with these stocks than I would with VTI or QQQ.

[drk]

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

Definitely. This is a point that Eric Balchunas (Bloomberg's ETF guy and author of The Bogle Effect) makes regularly. Assuming one understands the strategy, a fund like ARKK can be OK as a spicy side to a wholesome core fund like VTI or VT. The issue is when someone decides to chase performance and make this the whole meal.

[secondopinion]

My FIL was pumping this fund cause his day trading buddy was raving about ARK about a year ago. I told him his buddy is chasing hot funds and past performance and he is too. That's a recipe for disaster despite his insistence. Hopefully he remembers that now...

One of my family friends who is a wealth management advisor was telling me he had been buying ARKK all the way down. I wonder if he still is doing that now that it is trading under $40.

if you loved it at $158.56, you're gonna love it 4 times as much at $40.

It's possible at $40/share you could see some nice returns. It's hard to know.

that's why it's called speculation and not investing.

people know the price of everything and the value of nothing.

I know we disagree on what we consider speculation, but I do resent the notion that speculation is not investing. Investing requires that the underlying returns be based fully on their merits rather than their price. Speculation merely is the taking of speculative risks (risks that have a potential of profit). Market timing is a type of speculation, but only one kind of speculation. Investing in any stocks (total market or singletons) is by definition speculative, so stock investors are speculators.

If one firmly believes in the management of the fund and one is very willing to do invest money for the investment timeframe, then that is speculation but not market-timing; it is still investing. For these speculators, the lower price is always welcome but not the reason they buy.

If the speculator is buying/selling just because of the price, it is market timing.

I do not want ARKK because I do not think it will produce sufficient long-term returns for the risk it takes, nor do I think it is appropriate for my portfolio. Speculative to assert this, yes; but I am not market timing in this assessment.

[atdharris]

I think the whole point of the fund is to speculate, no? That's all I ever considered it at least. Nearly all of the companies it is invested in (aside from Tesla) are newer, speculative companies.

Definitely. This is a point that Eric Balchunas (Bloomberg's ETF guy and author of The Bogle Effect) makes regularly. Assuming one understands the strategy, a fund like ARKK can be OK as a spicy side to a wholesome core fund like VTI or VT. The issue is when someone decides to chase performance and make this the whole meal.

Yes, and I agree with that assessment. I never bought it to replace VTI. I am obviously not thrilled with where it is today, but considering it's below 2018 levels, I think we are slightly oversold. But I am not adding more. I am fine with only 100 shares.