Investing in broad market themes can be a smart way to allocate capital.
Look all around you. You will quickly see how technological changes are changing our economy and consumer behavior. One such area where this is surprisingly clear is that of financial technology sector.
The problem is, investors who want exposure to this secular trend may not know where to start when it comes to finding individual stocks to buy. This is where a exchange traded fund (ETF) comes into play to provide adequate exposure to your portfolio.
That being said, here’s why Ark Fintech Innovation ETF (ARKF -0.19%) might be the smartest fintech ETF investors should buy right now with $500.
Mixing finance and technology
As the term fintech suggests, it is simply the combination of finance and technology. In other words, this category includes companies that focus on integrating digital capabilities and technological innovation to better offer their users various financial services.
The Ark Fintech Innovation ETF typically holds 35 to 55 different stocks fintech stocks. However, the top 10 positions combined represent over 50% of the portfolio’s total assets, so there is a bit of concentration at the top here, with much smaller positions rounding it out.
I think it’s a good idea for investors looking to buy this ETF to understand what some of its main holdings are. The top three titles by weight are Shopify, CoinbaseAnd Block. Three other notable companies in the top 10 are SoFi Technologies, GrillAnd Robinhood Markets.
These six stocks provide investors with broad exposure to the fintech space. Shopify provides back-end technology infrastructure for online merchants, while Toast does something similar with a strict focus on restaurants and their specific needs. Coinbase, Block, SoFi, and Robinhood all offer customers, among other operations, mobile apps to meet different financial needs, such as trading cryptocurrencies, sending money to friends, opening a savings account, or shopping actions.
I will also highlight that the Ark Fintech Innovation ETF invests in Ark 21Shares Bitcoin ETFwhich is the fourth largest position with a weighting of 5%. A valid argument can be made that Bitcoin is part of the fintech trend. But for investors who are not bullish on this top cryptocurrency, this may be a deciding factor when looking to purchase this ETF.
Patience is the key
Since the Ark Fintech Innovation ETF launched in February 2019, it has soared 52%. During this same period of almost six years, the S&P500 hint generated a total return of 132%. Clearly, the fintech ETF has been a disappointment. To make matters worse, she took her investors on a very volatile journey.
This is where patience is key for potential investors, as the situation could improve. Over the past 12 months, it’s a totally different story. The Ark Fintech Innovation ETF soared 71%, nearly doubling the gain of the broader market index. Stronger performance more recently than 0.75% spending rate This seems like a good deal.
Nonetheless, it might still be difficult for some investors to want to grow their money when the ETF has surged 71% over the past 12 months. But there is still plenty of work to get back to the previous high point set in February 2021. At the time of writing, the Ark Fintech Innovation ETF is trading 51% off its high.
It’s hard to argue with the idea that this is a smart way for investors to add fintech exposure to their portfolios. The beauty of this strategy is that it does not require the time, effort, and financial or portfolio management skills that successful selection of individual winning stocks would require. Seen in this light, owning an ETF is a very low-maintenance approach. Investing $500 right now in the Ark Fintech Innovation ETF could be a good decision.
Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Bitcoin, Block, Coinbase Global, Shopify, and Toast. The Motley Fool has a disclosure policy.