Everyone's coming into 2021 with a new attitude. We're all hoping for the best when it comes to a healthier new year, and we want to see the gains in the last nine months of 2020 continue into the future. In particular, high-growth investors want to take the momentum they've gained and keep benefiting from the great companies whose shares they own.
Whether you've already benefited from the big gains in high-growth stocks in 2020 or you're just looking at them for the first time, there's an easy way to get exposure to some of the most exciting companies available in the stock market. By buying shares of the ARK Next Generation Internet ETF (ARKW -0.18%), you'll find yourself invested in some of the most promising areas of the investing universe right now. Even better, when new and better companies come along, you'll have a chance to own them as well.
Not just your average ETF
Most exchange-traded funds have one of two focus areas. Some are broad-based and try to cover an entire broad-based market index, such as the S&P 500. Inevitably, that means owning some of the best stocks in the market -- but also owning some of the worst.
Other ETFs drill down on certain market sectors. You can find specialized ETFs for nearly any industry you want, as well as some that look for stocks with certain attractive characteristics like high dividend yields. These specialized ETFs do a better job of separating out the good stocks from the bad, but you're still largely beholden to the whims of market-cap weightings or other arbitrary methodologies for determining the ETF's holdings.
What makes ARK Next Generation Internet different is that it's a rare actively managed ETF. That means that the fund managers can pick whatever stocks best fit the investment objective of the fund. And if they want to switch out a stock because they think it's a loser, they don't have to wait for an index rebalancing -- they can just sell it and buy a replacement.
A cornucopia of high growth stocks
ARK Next Generation Internet's objective is broader than its name would suggest. The ETF generally invests in tech stocks that will benefit from the digital revolution, including the shift to cloud and mobile computing, the internet of things, and social media. Data analytics, new payment methods, and internet-based products and services are all fair game.
As a result, the top 10 stocks that ARK Next Generation currently owns span a wide range of the investing universe:
- It's no surprise to find top-name tech giants like Facebook (META 0.14%), Netflix (NFLX 2.60%), and China's Tencent Holdings (TCEHY -0.40%) prominently featured in the ETF. These three stocks have been longtime winners for years, and they continue to have promising prospects.
- Similarly, companies like streaming television disruptor Roku (ROKU 0.55%), streaming music giant Spotify (SPOT 0.68%), and cloud storage-as-a-service provider Pure Storage (PSTG 2.37%) fit well with ARK Next Generation's overall theme.
- The ETF also goes beyond pure tech to find applications in other industries for technology. Virtual healthcare specialist Teladoc Health (TDOC -2.18%) takes internet-based video communication and uses it to improve the delivery of high-quality care to patients around the world. Similarly, Square (SQ -0.23%) has developed a high-tech payment system that rivals the largest payments networks in the world.
- But somewhat further afield, you'll also find some plays that have paid off big for the ETF despite being on the fringes of its objective. Automaker Tesla (TSLA 4.06%) might not seem to fit the bill for ARK Next Generation at first glance, but its artificial intelligence capabilities give the electric vehicle manufacturer an invitation. Similarly, cryptocurrency investment vehicle Grayscale Bitcoin Trust (GBTC -2.24%) is a play on the technology of blockchain and its use in facilitating person-to-person payments.
But arguably the best feature of the ARK Next Generation Internet ETF is its ability to adapt. The fund will typically have between 35 and 50 holdings, but it's up to the managers to decide which stocks to own and how much of each the fund buys.
Paying for performance
It's true that ARK Next Generation Internet also comes with higher costs than a typical ETF. Annual expenses of 0.76% are far greater than the less than 0.10% annual fees that most index funds charge.
But at least so far, ARK Next Generation has been worth the cost. Average annual returns of 36% per year since 2014 have crushed the market, and 2020's gain of 157.5% was outright phenomenal.
Some high-growth investors can pick their own stocks and do this well or even better. But if you're not sure you're one of them, ARK Next Generation Internet offers a great alternative that's put together an impressive track record of outperformance.