Cathie Wood's Ark Innovation ETF Has Delivered a Negative 7.5% Annualized Return Over the Past Five Years, While the S&P 500 Gained 11.2% a Year. Does Her High-Conviction Style Still Deserve a Place

Key Points The Ark Innovation ETF is designed to invest in “disruptive innovation.” It's not always clear, however, which companies are actually going to prove disruptive. And even when it becomes clear which innovations are going to disrupt their industries, that doesn't necessarily guarantee those companies' stocks will perform as previous disruptors' tickers have. 10 stocks we like better than Ark ETF Trust - Ark Innovation ETF › In theory, the fund should have trounced the market during the time frame in question. The Ark Innovation ETF (NYSEMKT: ARKK) is built to capitalize on "disruptive innovation," after all, and there's certainly been plenty of that of late. Yet, it hasn't happened. Since September of 2021, the S&P 500 (SNPINDEX: ^GSPC) has gained 69.7% (or 81.2% with reinvested dividends), while Ark's Innovation ETF has lost 32.4% of its value. That's annualized growth of 11.2% and -7.5%, respectively. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » ^SPX data by YCharts. What gives? Simply put, Ark founder and chief stock picker Cathie Wood is sticking with the wrong stocks. Perhaps more than that, she's not actually sticking with the right ones long enough. The Ark Innovation ETF under the microscope The premise holds enough water. Many of the market's most rewarding stocks have represented the world's most disruptive companies. Think Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL) . To this end, some of the Ark Innovation ETF's top holdings right now are electric vehicle (EV) maker Tesla (NASDAQ: TSLA) , SpaceX (NASDAQ: SPCX) , and gene-editing biotechnology CRISPR Therapeutics (NASDAQ: CRSP) . And despite the fund's lingering underperformance, Wood is still picking stocks based on their companies' apparent potential to change the world. There are two arguable pitfalls with the fund, however. One is that, while Cathie Wood remains convinced of ARKK's underlying philosophy, her actual long-term confidence in the ETF's positions appears low. According to its disclosure documents, last year's turnover rate was a relatively high 43%, meaning the fund replaced 43% of its holdings during the 12-month stretch. And that figure arguably understates the amount of trading activity ARKK actually saw for that time frame. It's not unusual for the fund to buy and sell the same stock over and over within the same year. It's a concern simply because -- as veteran investors can attest -- frequent trading works against you more often than it works for you. Through no fault of her own, Wood can't time the market's ebbs and flows any better than most amateur and professional investors. Image source: Getty Images. And the other factor crimping the Ark Innovation ETF's performance? It's not owning companies that are potentially disruptive. It's the notion that one can actually know if a company with a potentially disruptive product, technology , or service is actually worth owning before that disruption materializes. As a reminder, Apple didn't actually pioneer smartphones. That honor arguably belongs to BlackBerry . Even though it was largely expected to, it never disrupted the mobile phone business. Apple was the unlikely name to do so about a decade later. Amazon also wasn't the first seemingly disruptive e-commerce outfit. It just ended up becoming the dominant one several years into its existence. The point is, while ARKK's holdings like Tesla and SpaceX are considered disruptors, that doesn't necessarily mean their stocks are guaranteed to perform like past, proven disruptors' tickers have. Not a must-have In answer to the initial question then, no, despite Cathie Wood's high confidence that some companies in certain industries will prove disruptive, the Ark Innovation ETF doesn't inherently belong in your portfolio. The fund's relatively frequent trading activity actually implies a lack of conviction in its stocks. Plus, many of the ETF's holdings appear to be all-or-nothing bets rather than proven buy-and-hold investments . Should you buy stock in Ark ETF Trust - Ark Innovation ETF right now? Before you buy stock in Ark ETF Trust - Ark Innovation ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ark ETF Trust - Ark Innovation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $445,833 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,402,153 !* Now, it’s worth noting Stock Advisor’s total average return is 993 % — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of September 5, 2026. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Tesla. The Motley Fool recommends BlackBerry and CRISPR Therapeutics. The Motley Fool has a disclosure policy .

The Ark Innovation ETF is designed to invest in “disruptive innovation.”

It's not always clear, however, which companies are actually going to prove disruptive.

And even when it becomes clear which innovations are going to disrupt their industries, that doesn't necessarily guarantee those companies' stocks will perform as previous disruptors' tickers have.

In theory, the fund should have trounced the market during the time frame in question. The Ark Innovation ETF (NYSEMKT: ARKK) is built to capitalize on "disruptive innovation," after all, and there's certainly been plenty of that of late.

Yet, it hasn't happened. Since September of 2021, the S&P 500 (SNPINDEX: ^GSPC) has gained 69.7% (or 81.2% with reinvested dividends), while Ark's Innovation ETF has lost 32.4% of its value. That's annualized growth of 11.2% and -7.5%, respectively.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Simply put, Ark founder and chief stock picker Cathie Wood is sticking with the wrong stocks. Perhaps more than that, she's not actually sticking with the right ones long enough.