Roku (NASDAQ:ROKU) – Cathie Wood’s Ark ETF Gets Crushed – The Basic Investing Lesson We Can All Learn

Two years have passed since Cathie Wood’s ARK Invest broke through during the pandemic, and since then the fund has fallen on hard times.

In 2021, the fund’s holdings in Roku ROKUTeladoc TDOCand Zoom ZM caused the value of the ETF to fall. However, the latest market implosion has crushed the company under strain. Ark was down more than 60% through August, fifty percentage points lower than the S&P 500.

Market rout proves too big for concentrated positions

Many believe that in 2021 the fund manager was far too overexposed to its concentrated positions in science and technology growth stocks. As meme stocks went “over the moon,” the lack of diversification decimated Wood’s business.

In the latest market downturn, critics say the company didn’t learn its lesson. In August, the hedge fund was still focused on tech growth positions. According to Ark’s latest 13F filing, tech stocks still made up 34% of its portfolio.

Billionaires Survive By Following This Basic Investing Rule Of Thumb

Prior to Ark’s decline, Wood had received backlash due to his contrary views on the markets. Insiders believe Ark’s continued lack of diversification was another key contributor to the fund’s performance.

Many alternative assets can prevent investors from suffering the same fate, especially tangible assets with low correlation to traditional equities. Real estate provides a hedge for many, but currently experts are predicting a real estate recession, dependent on inflation and Fed interest rate hikes.

This may sound unconventional. Businesses make profits. Rental properties collect rents. But what can fine arts deliver?

Well, it can potentially provide the one thing that matters most to investors: growth.

Contemporary art prices have outpaced S&P 500 returns by 164% over the past 25 years, according to Citi. And investing in art is becoming a popular way to diversify, as it is a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no connection, Citi found that the correlation between contemporary art and stocks was only -0.04 over the past 25 years.

Earlier this year, Bank of America chief investment officer Michael Harnett pointed to artworks as an effective way to potentially outperform over the next decade – largely due to the asset’s track record in as a hedge against inflation.

Fine art has long been the asset class of choice for the financial elite, and has recently been unlocked by tech entrepreneurs through companies like masterpieces.

Image from Shutterstock

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investment advice.

Comments are closed.