The temptation out there today is run towards cash. I’ve already received multiple messages from relatives asking if it’s time to get out, recounts David Dierking, fund specialist and editor of TheStreet's ETF Focus.
This is historically speaking, one of the worst things you can do because than investors ultimately miss out on the rebound that no one can see coming. Be mindful but take advantage of opportunities when they present themselves.
One such opportunity I see today is ARK Fintech Innovation ETF (ARKF). Yes, I know that ARK and Cathie Wood have become pariahs in this market. For the record, I’m still a fan — and for disclosure, I own shares of ARKF — but you certainly need to understand what you’re buying with the ARK ETFs.
Her funds are home run swings. When they work, they’re terrific. When they don’t, well, you probably already know the answer. ARK is down more than 70% from its 2021 peak and is now down since its early 2019 inception.
Here’s the way I look at it. When a fund is down more than 70%, most of the worst case scenario is already priced in. Could it still go lower? Sure, but I think most of the excess has been shaken out of this sector.
Its recent performance is a result of higher interest rates, high inflation, growing recession risk and the geopolitical uncertainties in Ukraine. All of these are highly negative for emerging growth stocks like the ones that the ARK ETFs own.
Fintech as a theme is going to grow by leaps and bounds over the next decade. If you’re a believer in this trend, you should probably have at least a minor exposure to it in your portfolio.
Buying after it’s down 70% means you missed the worst of it and can buy when it’s much more reasonably priced. Plus, when this turns around, the ARK ETFs are probably going to rip faster than most funds. It’s a high risk play, but one that could pay off.