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An ETF for Fintech Innovation

03/10/2020 5:00 am EST

Focus: ETFS

Jim Woods

Editor, Successful Investing, Intelligence Report

Financial technology, or fintech, is a relatively new and growing part of the market, explains Jim Woods, exchange-traded fund expert and editor of The Deep Woods.

It features interesting companies that transform the way in which we engage in transactions, as well as how financial processes are handled on a business-to-business level. One way to gain exposure to this theme is through the actively managed exchange-traded fund ARK Fintech Innovation ETF (ARKF).

This fund seeks to be on the cutting edge of new technology in this space. According to ARK Invest, fintech innovation companies include those involved in transaction innovations, blockchain technology, risk transformation, frictionless funding platforms, customer-facing platforms and new intermediaries, among other areas.

All these themes, of course, have the potential to create hugely profitable ventures. While the blockchain craze has largely died down, there still are companies that are legitimately engaged with the technology as a source of profit.

Financial technology may be a more interesting theme than companies that have, as was popular a few years ago, simply appended “blockchain” to their names to attract investors.

The largest position in this fund by far is Square (SQ), the maker of small card readers for small businesses. The company’s technology has become ubiquitous over the past few years, and shareholders have profited handsomely.

This fund is up by about 20% over the last year. It currently trades at a small premium to net asset value (NAV), as usual, and has an expense ratio of 0.75%.

With assets under management of just $83 million, this fund falls below my recommended threshold for investment, but its strategy is an interesting one that merits bringing to your attention. ARKF has powered upward since October, leaving its moving averages in the dust.

Top holdings for this fund include Square, Tencent Holdings (TCHEHY), Apple (AAPL), MercadoLibre (MELI), 4.48% and PayPal Holdings (PYPL).

New investment themes for investors to consider are always interesting. If you believe that the frontier of fintech is a promising source of further upside, ARK Fintech Innovation ETF (ARKF) may be a fund worth considering for possible investment.

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