Back to top

Image: Bigstock

Are You a Fan of Ark ETFs' Cathie Wood? Follow This Portfolio

Read MoreHide Full Article

Ark Investment Management founder Cathie Wood has been dominating headlines lately for seeing massive inflows into her ETF lineup. In fact, it has managed a spot among the top 10 issuers in the $5.5-trillion ETF industry, thanks to solid asset gain in 2020, per a BloombergQuint article.

In mid January, the Ark Investment Management oversaw about $41.5 billion in ETF products, compared with $39.7 billion for WisdomTree, according to data compiled by Bloomberg.

Despite taking a beating this year, Ark Investment’s star product Ark Innovation ETF (ARKK - Free Report) is up 195.3% in the past year. Meanwhile, ARK Next Generation Internet ETF (ARKW - Free Report) has gained about 205.2%. No wonder, Cathie Wood, famous for the success of Ark Investment’s winning products, has created a great fan following.

Inside A Wood-Like Portfolio

Wood said that a 60-40 portfolio that’s divided between stocks and bonds may be obsolete now. The new trend should be 60% in equities, 20% in bonds and 20% in cryptocurrency, as quoted on CNBC.

Cathie Wood: A Supporter of Cryptocurrency

Cathie Wood lately said in a Bloomberg interview that she’s “very positive on Bitcoin.” Square also said lately that it bought approximately 3,318 bitcoins (worth about $170 million), adding to its October 2020 purchase of 4,709 bitcoins. Wood also spoke on CNBC’s “Closing Bell” lately that she believes cryptocurrencies could stabilize and gradually start behaving like bonds. However, since the currency is highly volatile, one can tap the equity areas that support/behave like cryptocurrencies.

BlockchainTransformational Data Sharing Amplify ETF (BLOK - Free Report) – 10% Weight

Bitcoin tore the $60,000-mark to the new record high on Mar 14. Greater mainstream acceptance has been powering the rally, though several central banks still have reservations about the cryptocurrency. Recently, the world’s largest asset manager BlackRock, world’s largest electric-car maker Tesla, Apple, PayPal and Mastercard have all shown their support for bitcoin in one way or the other.

Though bitcoin ETFs are not available to investors, they have blockchain ETFs at their disposal. Per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.” Hence, the blockchain ETF BLOK is a good way to play the bitcoin potential.

  • Real Estate Vanguard Real Estate ETF (VNQ - Free Report) – 10% Weight   

Cathie Wood went on to highlight that the price of bitcoin is most closely associated with real estate prices. Such remarks make VNQ a look-alike of bitcoin. Plus, there has been a rise in cost of shelter in the United States, which is a plus for the real estate stocks. The moderate inflation trend also points to the fact that rates are going to rise in the coming days at a moderate pace. Expectation of modest gains in rates should also back a real estate rally.

Bond Bull Market Less Likely to Fizzle Fully – 20% Focus

Although an economic rebound is round the corner thanks to vaccination globally, investors can expect the current trend of a subdued long-term U.S. treasury yields to remain in 2021. This should be a great scenario for bond investing. The central banks are less likely to raise rates. Since a recovering economy would support risk-on sentiments to some extent, investors can bank on investment-grade corporate bond ETFs like FlexShares Credit-Scored U.S. Long Corporate Bond Index Fund (LKOR - Free Report)  (yields 7.42% annually) and JPMorgan Corporate Bond Research Enhanced ETF JIGB (yields 4.30% annually).

Mid-Cap Growth – 20% Weight

Since Wood is known for growth investing and the U.S. economy is on the verge of recoiling higher thanks to the hefty stimulus, mid-cap growth ETFs should stage a rebound. Nuveen ESG Mid-Cap Growth ETF (NUMG - Free Report) could act as a great bet in this context as mid-caps offer the best of both the worlds — large and small caps.

Value Stock ETFs – 20% Weight

Given the cheaper valuation at the current level and high demand for cyclical stocks, value stocks deserve to be in one’s portfolio. For the U.S. market, SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)  should prove gainful. For the international market, investors can take note of Legg Mason International Low Volatility High Dividend ETF (LVHI - Free Report) . LVHI yields 4.32% annually.

Broad Market ETFs with Low Expense Ratio – 10% Exposure

Consider an expense ratio (ER) of 1%, a fund of $10,000 invested at 8% annual return will grow to $19,672 in 10 years, while the same fund invested at an expense ratio of 0.1% will grow by a higher amount of $21,390. This makes it clear why a dirt-cheap expense ratio is needed. In order to tap such gems, investors can follow Schwab U.S. Broad Market ETF (SCHB - Free Report) (ER – 0.03%) and SPDR Portfolio World ex-US ETF (SPDW - Free Report)  (ER – 0.04%).

Quality Exposure With 10% Weight

Investors can seek safety in high-quality stocks and related ETFs. Quality stocks are generally rich in value characteristics like strong return on equity, low earnings variability, higher free cash margins and low debt-to-equity. So, iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) and WisdomTree US Quality Dividend Growth ETF (DGRW - Free Report)  should be on investors’ agenda.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free>>

Published in