ETF Battles: - Active vs. Passive Triple Header - ARKK vs. QQQ vs. SPY!

Well, the investing debate of active versus passive is one of those neverending arguments. It's like Republicans versus Democrats, Yankees versus Red Sox, Mozart versus Beethoven. I mean, it never ends. And for today's ETF battle, it's a triple header of an active versus passive.

This time between the actively managed ARK Innovation ETF versus the passively managed Triple Q's along with the Spider S&P 500 ETF. So, who wins? Find out right after this. Welcome to ETF Battles. I'm Ronda Ley and it's great to see you. We're so glad to have you watching.

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So today's tussle is a heavyweight bout between the actively managed ARK Innovation ETF, that's ticker ARKK, overseen by Kathy Wood and the Triple Q's from Invesco and the Spider S&P 500 ETF from State Street Global Advisors. Now, once upon a time, ARKK was once the largest and best performing active ETF out there. And since then, it has struggled and is still looking to rediscover its mojo.

Helping us to judge today's matchup is Dave Krenis at ETF Portfolio Management and David Durkin, an independent ETF analyst with a newsletter called ETF Focus. It's available at Substack. Guys, great to have you back. Thanks, Ron. Good to see you. Hey, Ron, David, great to see you guys. Yeah.

So, we're going to go through our four battle categories and we're going to give each of you an opportunity to give us your analysis. We've got the cost category, we've got the performance along with the mystery category, and of course, exposure. And by the way, the mystery category is where you, our judges, can surprise us with that thing, that factor that you feel is crucial to today's matchup. It's completely up to our judges.

You can also nominate wildcard ETFs. I have a feeling we'll get some of those. And you can also opt for split decisions if you feel that there is no clear winner. So keep in mind none of today's battle outcomes or analysis is ever known in advance by myself or our judges nor are they outcome is ever predetermined. So let's kick things off with the first category cost.

David Durkin, please get us started. I think when you look at the absolute expense ratios on these funds, ARKK at 75 basis points obviously isn't going to win going up against funds like QQQ or SPY that are the biggest most liquid funds in the world. But again, ARKK is actively managed. It looks into the high innovation areas of this economy. So you're going to pay for that.

So I don't think 75 basis points is actually unreasonable for the strategy that you're buying with the fund. But on an absolute basis, SPY at 9 basis points is going to beat QQQ at 20 basis points. But I'm going to throw out a bunch of wild cards in this one. For QQQ, I prefer QQQM, which is the smaller, lighter version, if you want to call it at 15 basis points. So, if you want to focus on that, I'd go with QQQM. It's cheaper.

And then, of course, SPY. You could go with VO, the Vanguard S&P 500 at three basis points, or you can go with SPLG, the SPDR Portfolio S&P 500 at two basis points if you really want to get dirt cheap on these things. So, on a cost battle, I'm going to go with SPLG as the winner just because at two basis points, it's the cheapest of the bunch. Well, that's a solid start. Thank you, David.

Dave Crrenis, you're up next on cost. How do you see it, Ron? This is an important aggressive growth update. US equity has been the biggest long-term growth engine globally for quite some time now. And among these three battle ETFs, SPY has the lowest cost as Dave mentioned, although we do also prefer wildcard VO for even cheaper exposure to the S&P 500.

And looking at cost on a value adjusted basis, QQQ and the lower cost QQQM have roughly double the systematic technology exposure through the NASDAQ 100. So on a value adjusted basis, I give the win on cost to wildcard QQQM. All right, we got some agreement there among our judges. How does it look in the other categories?

Well, let's go to exposure strategy. And Dave Crrenis says, "You're still up. So give us your analysis." For exposure, the S&P 500 and NASDAQ 100 both employ weighted passive indexing, while ARK uses an active predictive strategy. And historically, the main evolution on Wall Street has been from predictive strategies to indexing.

So I give the exposure win to QQQM for efficient technology exposure. And at our firm ETF PM, we do believe the NASDAQ 100 is the next generation S&P. All right. Thank you, Dave. You're up next, David Durkin. What's your take?

Yeah, I don't think we need to spend a lot of time on talking about what's in QQQ or SPY. I think everybody probably knows that already. ARKK is kind of I don't want to call it the wild card here, but it is unusual in how it's composed and it actually does provide a real good diversified add-on or satellite holding to one of the big index ETFs.

It's still mostly in large caps. So you're not differing a whole lot there. It gets a reputation as a tech ETF and it really isn't. Tech is about 20% of the fund and that's only the third largest sector holding. It's actually pretty well diversified between healthcare, you got communication stocks and the consumer discretionary sector is also big a big holding but that's mostly Tesla.

That's the fund's top holding has been for a while. It's a little more concentrated. It's only got about 35 to 55 names. It's topheavy. You know Tesla at the top is more than 10% of the fund and then you got several more holdings that are at 7%. So as far as a pure composition basis I kind of like ARKK on this one. You know the QQQ and SPY are great for long-term core holdings in a portfolio.

I like how ARKK would fit in with these types of funds. It's very unique. There's not any overlap there. You really get some nice exposure to some of the nextgen tech exposure. So, as far as exposure, I'm actually going to go with ARKK as the winner on this one. All right, got you down for ARKK.

That takes us next to performance. So, David Durkin, you're still up. Break it down for us. How do these funds compare? Yeah, the performance basis is really going to be dependent entirely on what time frame you're looking at. And you know, I don't need to tell anybody that ARKK has had some really high highs and some really low lows over the last few years.

But if you go back over the last 10 years, ARKK, even with the volatility, has actually outperformed SPY by a narrow margin over the last 10 years. But, anytime between that, it's just been very hit and miss. It's up like over 60% over the last year, which is terrific. If you look at the annualized return over the last five years, it's only about 1%. It's almost break even just because of where it's hitting those cycles.

So, if you're judging performance, I think you have to look longer term and the clear winner here is QQQ. I mean, it's vastly outperformed the indexes and almost any other ETF, any other growth ETF out there. So, I think QQQ or QQQM would be the clear winners here. Dave Crrenis, you're up next. How do you see it when it comes to performance?

On performance this past decade, the NASDAQ 100 strongly outperformed. ARKK and the S&P both delivered roughly two and a half times your money, while the NASDAQ 100 returned over four times. Adding leverage, the three times NASDAQ 100 wild card TQQQ delivered almost 16x and the three times technology tech returned 23x.

This means tech gave you almost n times the return from ARKK and the S&P. Still on a riskadjusted basis, I agree with my fellow Dave and I give the performance win to the more diversified NASDAQ 100 through either QQQM or TQQQ. All right. Well, that takes us next to our mystery battle category.

This is where our judges can give us a single factor or multiple factors or a thing that they feel is crucial to today's contest. So Dave Crrenis, give us your mystery battle category. What is it and which of these ETFs wins it? Ron, when it comes to portfolio management, I think all PMs will tell you that position size is critical.

With regard to these battle ETFs, these two leading equity indexes could be over 100% of our active strategies when appropriate. While a satellite strategy like ARKK would typically be limited to a 10% position if we traded it at all, which we don't. So, I call the position size category a split decision between wild cards VO and QQQM. All right. Thank you very much.

David Durkin, you're up next. What is your mystery battle category and which of these ETFs wins it? Well, I don't even know what you'd call the category I'm talking about, but it's you kind of alluded to it earlier. Kathy Wood is pretty much a polarizing figure in the industry. Either you love her or hate her.

And I kind of want to just explain why I like ARKK and I like what she does. And I think it's really the fact that she has a very unique strategy with these funds and the other ARK funds as well. But I have to respect the fact that throughout this re...