The demand for convenience, digital services, and technological advancements has led to rapid growth in the fintech sector. Thus, investing in fintech ETFs can be a strategic way to gain exposure to the fintech sector with proper portfolio diversification without investing in multiple stocks.
Given the industry backdrop, let’s look at fundamentally strong FinTech Equities ETFs ARK Fintech Innovation ETF (ARKF), Amplify Transformational Data Sharing ETF (BLOK) and Global X FinTech ETF (FINX) to ride the digital finance wave.
With the rapid evolution of technology with globalized IT services, digital transformation, financial market innovations, and evolution of e-commerce, the IT market is exhibiting high growth. In addition, major trends such as cloud computing, blockchain technology, and fintech are accelerating the market. The information technology market is expected to reach $12.42 trillion by 2028, at a CAGR of 8.3%.
Additionally, the growing demand and preference of consumers for digital financial services is driving significant growth in the fintech market. Consumer demand for convenient, user-friendly, and mobile-centric financial solutions has led fintech companies to create and provide services such as digital payments, robo-advisors, and peer-to-peer lending, which are fueling the market.
The fintech market is expected to reach $1.15 trillion by 2032, with a notable compound annual growth rate of 16.5%. Some of the fintech trends that will shape the US market in 2024 include open banking, artificial intelligence in fintech, buy now, pay later (BNPL) services, blockchain and cryptocurrency, and robotic process automation (RPA).
Blockchain technologies have transformed the FinTech landscape and are reshaping the entire financial ecosystem in the United States by providing unparalleled security and transparency in financial transactions.
Given the encouraging economic trends, let’s look at the fundamentals of strong fintech ETFs.
ARK Fintech Innovation ETF (ARKF)
ARKF is an actively managed equity fund that tracks innovation in the financial technology space, defined by the issuer as the introduction of a new technologically-enabled product or service that has the potential to change the way the financial industry operates. The fund invests in domestic and foreign equity securities of companies that fall within this theme.
The fund has assets under management (AUM) of $854.10 million. ARKF’s top holdings include Coinbase Global, Inc. Class A (COIN) with a weighting of 11.26%, followed by Shopify, Inc. Class A (SHOP) with a weighting of 7.69%, and Block, Inc. Class A (SQ) and DraftKings, Inc. Class A (DKNG) with 6.71% and 5.59%, respectively.
The ETF has a total of 34 holdings, with the top 10 holdings accounting for 56.22% of its AUM. ARKF’s expense ratio is 0.75%, higher than the category average of 0.37%.
ARKF has jumped 7.1% over the past six months and 18.7% over the past year to close the last trading session at $27.52. Its beta is 1.5. The fund’s net asset value was $27.56 as of July 26, 2024.
ARKF’s POWR Ratings reflect a strong outlook. The fund has an overall rating of B, which is a Buy in our proprietary rating system. POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ARKF has an A grade for Trading and a B grade for Buy & Hold. Within the technology stock ETF group, it is ranked 49th out of 119 ETFs.
To access all of ARKF’s POWR Ratings, click here.
Amplify Transformational Data Sharing ETF (BLOCK)
BLOK is an actively managed portfolio of global stocks focused on blockchain technology. The fund seeks total return by investing in companies developing transformative data sharing technologies, primarily focused on blockchain technology.
The fund has $711.50 million in AUM. Its top holdings include Core Scientific Inc. (CORZ) with a weight of 5.19%, followed by Galaxy Digital Holdings Ltd. (GLXY) with a weight of 4.82%, and MicroStrategy Incorporated Class A (MSTR) and Coinbase Global, Inc. Class A (COIN) with 4.25% and 4.03%, respectively. BLOK has a total of 55 holdings, with the top 10 assets accounting for 36.71% of its AUM.
The fund has an expense ratio of 0.76%, compared to the category average of 0.58%. In recent months, BLOK fund inflows have amounted to $4.02 million. In addition, it has a beta of 1.5.
BLOK pays an annual dividend of $0.34, which translates to a yield of 0.92% at the current price level. The fund’s dividend payments have grown at a CAGR of 12.4% over the past five years.
BLOK has gained 32.6% over the past six months and 45% over the past year to close the last trading session at $37. The fund has a net asset value of $37.30 as of July 26, 2024.
BLOK’s POWR Ratings reflect its favorable outlook. The ETF has an overall rating of A, which is a Strong Buy in our proprietary rating system.
BLOK has been awarded an A grade for Trade and Peer. It also has a B grade for Buy & Hold. The fund is ranked 13th among 119 ETFs in the Technology Equity ETF group.
To access all POWR ratings for BLOK, click here.
ETF FinTech Global X (FINX)
FINX provides cross-sector exposure to emerging financial technologies. The fund includes, among other things, developed market stocks with significant exposure. It aims to hold up to 100 FinTech companies, selected and weighted by market capitalization. FINX tracks a market capitalization-weighted index of developed market companies.
With $281.60 million in assets under management, FINX’s top holdings are Fidelity National Information Services, Inc. (FIS) with a weighting of 6.85%, Fiserv, Inc. (FI) at 6.64%, and PayPal Holdings, Inc. (PYPL) and Intuit Inc. (INTU) at 6.03% and 6.01%, respectively.
The fund has 65 holdings in total, with 52.90% of its AUM comprised of the top 10 holdings. Its expense ratio is 0.68%, which is higher than the category average of 0.58%.
FINX has gained 6.8% over the past six months and 7.3% over the past year to close the last trading session at $26.01. Its beta is 1.04. The fund’s net asset value was $4.84 as of July 26, 2024.
FINX’s strong fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which is a Strong Buy in our proprietary rating system.
The fund received an A rating for both the Trade and Buy & Hold categories. Among the 41 ETFs in the Financial Equity ETF group rated B, FINX is ranked #21.
Click here to see all FINX notes.
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As of Monday afternoon, ARKF shares were trading at $27.37 per share, down $0.15 (-0.55%). Year-to-date, ARKF is down -0.76%, compared to a 15.34% gain in the benchmark S&P 500 Index over the same period.